Monsanto, the US seed and agrochemicals group known for its genetically modified crops, wants to switch its headquarters from the US to the UK as part of a complex merger deal designed to unlock tax savings for shareholders.
The group, which was founded in St Louis, Missouri in 1901, is circling Swiss rival Syngenta with a so-called “corporate inversion” proposal that would involve setting up a new UK company.
Such inversions have been closely associated with aggressive tax planning, although sources close to Monsanto claimed tax was not the company’s main motivation.
Syngenta on Monday rejected the proposal — which it values at $45bn (£30bn) — claiming Monsanto was offering “the same inadequate price” as it had done in an approach in April.
Under the terms of Monsanto’s plan, investors in the Swiss company would end up with a holding of about 30% in the new company, with the US firm’s shareholders taking the rest. Syngenta shareholders would also receive some cash.
Monsanto has been talking about a deal with Syngenta since April, but correspondence released by the Swiss company on Monday set out details of the US firm’s proposal for a new company, registered in the UK.
“A new parent company, domiciled in the UK, would demonstrate that our merger will create a new global enterprise … [and] provide additional synergies,” wrote Monsanto chief executive, Hugh Grant. “We would also propose a new name for the combined company to reflect its unique global nature.”
The UK has seen an influx of multinationals — among them Aon, Fiat Industrial, and Starbuck’s European operations — seeking tax advantages through the optimal location of the often small number of headquarters staff.
The wave of companies establishing an HQ in the UK follows the move by George Osborne to cut the headline corporation tax rate to 20% and establish generous rules on the taxation of the often complex overseas subsidiary structures of UK-headquartered groups.
A rush of tax-motivated inversion deals in 2014 prompted the US president, Barack Obama, to set out measures last September to crack down on what he has called the “unpatriotic” trend. Monsanto is confident its proposals to join forces with Syngenta would not be captured by Obama’s new rules.
Last year, there was a spate of inversion deals under discussion in the drugs industry, with America’s Pfizer targeting the UK’s AstraZeneca and US rival AbbVie exploring a deal with Ireland’s Shire. Neither materialised, but other tax-driven deals were successful, such as the $43bn takeover of Covidien by fellow medical device maker Medtronic.
The commercial difference between Monsanto’s latest proposal to Syngenta and the plan put forward in April is a promise to pay the Swiss firm $2bn should the deal be blocked by competition regulators.
This article was written by Simon Bowers, for theguardian.com on Monday 8th June 2015 19.51 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010