Agrochemicals firm Syngenta on Friday rejected a $45 billion takeover offer from Monsanto, saying the offer undervalued the Swiss firm and did not fully take into account regulatory risks.

Sources had told Reuters overnight that the two agricultural companies were working with investment banks on a takeover deal that would create an industry behemoth with combined sales of more than $31 billion.

But on Friday Syngenta said its board had unanimously rejected a 45-percent cash offer by Monsanto that would value Syngenta at 449 Swiss francs ($486.35) per share.

"The offer fundamentally undervalues Syngenta's prospects and underestimates the significant execution risks, including regulatory and public scrutiny at multiple levels in many countries," Syngenta said in a statement.

Syngenta shares rose 17 percent to 390 Swiss francs by 0715 GMT on Friday after the bid approach was confirmed.

Swiss company Syngenta had been working with Goldman Sachs to assess the merits of a sale to the world's largest seeds company Monsanto, which is being advised by Morgan Stanley, the sources had earlier told Reuters.

Rumors of talks between the two companies gained pace at the end of April, sending shares in Syngenta to a record high of 351 Swiss francs on May 4.

Monsanto, which initially approached Syngenta last year, has long been interested in its Swiss rival and the potential to base itself in Switzerland and benefit from lower taxes, one of the sources told Reuters.

Following attempts by the U.S. Treasury to clamp down on such moves, known as tax inversion, Monsanto may have to buy Syngenta in a cash rather than stock transaction and would be unable to redomicile in Switzerland, an industry source said.


Monsanto foresees strong benefits from a takeover of Syngenta, which makes heavy research and development (R&D) investments in crop technology to increase the average productivity of crops such as corn, soybeans, sugar cane and cereals.

Monsanto, meanwhile, is focused on conventional and biotech seeds and last year raised its R&D spending to $1.7 billion from $1.5 billion in 2013.

"There is a clear strategic logic to a deal," one of the industry sources said. "Syngenta is the only available target in crop protection. It's no wonder Monsanto continues to circle the company."

A deal would come as prospects for genetically modified (GM) crops are improving in the European Union after a change in its legislation unlocked a stalled approval process. Monsanto owns the only GM product approved for cultivation in the EU, a modified maize.

Despite the two companies' cultural affinity, a merger may be challenged by antitrust regulators, primarily in North America, where the two groups are already seen as market leaders in the seeds industry.

German chemicals company BASF and U.S. petrochemicals group Dow Chemical could be among possible bidders for all or parts of Syngenta, one of the sources said.

He mentioned Chinese state-owned firm, China National Chemical Corp (ChemChina), as another possible buyer with strong appetite to bulk up its European presence, though Syngenta may be reluctant to cede control to an Asian rival.

Spokesmen at BASF and Dow Chemical declined to comment, while representatives of ChemChina were not immediately available for comment.

Syngenta, which was formed in 2000 by the merger of Novartis Agribusiness and Zeneca Agrochemicals, also competes with Bayer CropScience and DuPont Pioneer.