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Syngenta - The management rules the world

Monday 31 August 2015

I would really prefer it, if people leave companies alone. Joint-stock companies with a top quality team and a promising business field will, over the decades to come, only do better.

It still pains me, that we had to surrender our holding of Hilti AG (listed on the Swiss Stock Exchange) from our Value Fund “ME Fund-Special Values” as well as the world market leader in chewing gum WRIGLEY (listed on the US stock exchange) as part of Going-Private takeover bids. While we recorded a nice profit, this was a one-time event. In the long term we would no doubt have achieved a far higher appreciation in market value. As far as the failed take-over attempt by Syngenta Monsanto I am not so sure.

Let's look at the Syngenta case in Basel: One can only wonder. Here we have a share which has been lagging the market for years. Management has really not distinguished itself, when looked at from the shareholders' point of view. Here is a takeover offer from the US giant Monsanto at CHF 449, - per share, the market price is around CHF 350, -.

The management of Syngenta refuses to speak with Monsanto. The takeover negotiations begin. The weeks go by. Finally, Monsanto recently increased the bid to CHF 470, - per share for Syngenta. The management of Syngenta still refuses to enter into negotiations. The Syngenta shareholders are not asked for their input.



A frustrated Monsanto throws in the towel. Today the Syngenta shares are priced at CHF 350,0 instead of CHF 470,-.  A competing bidder, such as BASF also representing agricultural interests, also fails to make a bid.


We are dealing with a creeping phenomenon. Just like in politics the electorate, has less and less to say, this also happens with joint-stock companies where shareholders are ignored. This is understandable in normal every-day business. But with such fundamental decisions where huge amounts are involved , the shareholder should be consulted. Instead, top management is arbitrarily making decisions.


The President of Syngenta, Mr. M. Demare, who is in his eighties, was my colleague in the finance department at Dow Chemical. I have always respected him. Without causing offense, I wonder if he might simply have been overburdened in his key role at Syngenta. Otherwise, the question arises, was this is not purely for the benefit of management? since the very favorable takeover for shareholders was "sabotaged". To the detriment of owners, who are the shareholders.


What does this mean for the investor:


Against an engagement with Syngenta the management has posed some questions. Therefore, we stayed away from investing in Syngenta shares for the "ME Fund Special Values". On the other hand, the top managers, showed a lot of chutzpah, not just by doing business as usual. Shareholders were presented with an offer of at least CHF 470, -per share.. How do we explain, after all this, a market price below CHF 300 today?


A difficult decision for the investor.


But who knows: Maybe Syngenta with M. Demare at the helm still has an ace up his sleeve and will surprise us with the price of Syngenta shares moving to CHF 500, - or even to CHF 700, -?