Syngenta shares rebound as management seen under pressure to act
FRANKFURT - Shares in pesticides maker Syngenta <SYNN.VX> bounced back on Thursday from their worst ever slump in the previous session as the market speculated on management being pressured into quickly boosting the shares after suitor Mons...
FRANKFURT - Shares in pesticides maker Syngenta <SYNN.VX> bounced back on Thursday from their worst ever slump in the previous session as the market speculated on management being pressured into quickly boosting the shares after suitor Monsanto walked away.
U.S. seeds giant Monsanto Co. <MON.N> on Wednesday abandoned its pursuit of its Swiss rival, which had rejected a recently sweetened $47 billion offer. Syngenta shares fell more than 18 percent on the news.
Shares were up 5.5 percent at 326.8 Swiss francs ($343) at 0837 GMT on Thursday from Wednesday's close at 309.9 francs.
"If Syngenta's share price remains at current levels of 310 Swiss francs, that is 40 percent below Monsanto's most recent bid proposal, the pressure from Syngenta shareholders will arguably build up quickly to pursue changes that increase value. These could be announced soon," analysts at Zuercher Kantonalbank wrote in a note.
Bank of America Merrill Lynch analysts said there was room for share buybacks at Syngenta. "Syngenta management are likely to be under pressure to make the situation more palatable with shareholders," the brokerage said, pointing to the group saying it was committed to accelerate shareholder value creation.
Syngenta's management, which has rebuffed Monsanto's repeated approaches, has said it can create value under its own steam and that product development and cost-cutting efforts will bear more fruit than in the past.
The company last month reaffirmed its target for a 24-26 percent margin on earnings before interest, taxes, depreciation and amortization (EBITDA) over sales for 2018.
That is seen by many analysts and investors as a challenge amid weak agricultural markets in the United Statesand Brazil, coming from just 19.3 percent in 2014 and a projected 20 percent for this year.
Syngenta is trying to catch up with rivals, mainly through cost cuts in its underperforming seeds business. Its closest peer in pesticides, Bayer's <BAYGn.DE> CropScience unit, had an EBITDA margin of 24.8 percent last year and Monsanto's was 29 percent.