ZURICH (Reuters) - Syngenta's (VX:SYNN) shares surged on Tuesday after a media report it had been in merger talks with its largest rival, raising the pressure on the Swiss crop chemicals maker to bolster profits and beef up shareholder returns.
Monsanto Co. (N:MON), the world's largest seed company, and Basel-based Syngenta had held preliminary talks about combining, partly to allow the U.S. company to benefit from lower Swiss holding taxes, according to a report from Bloomberg. The talks were later abandoned.
A Syngenta spokesman declined to comment on the report and Monsanto was not immediately available for comment.
Syngenta shares were 4.6 percent higher at 342.1 Swiss francs(223.61 pounds) in morning trade, the biggest gainers on the pan-European FTSEurofirst 300 index <.FTEU3>.
The reported talks put more pressure on Syngenta Chief Executive Mike Mack to bolster the company's performance and to give money back to shareholders, several analysts including Deutsche Bank and MainFirst said.
"This steadily increasing M&A story plus the activism theme we are seeing in U.S. chemicals mean that management teams in Europe are under more pressure to improve balance sheet efficiency and/or share prices," said Deutsche Bank analyst Virginie Boucher-Ferte. She rates the stock a "buy" with a 400 franc target price.
Syngenta is aiming to increase cost cuts to $1 billion (0.59 billion pounds) a year by 2018 after disappointing investors with an 11 percent fall in 2013 profit. It also aims to boost sales to $25 billion by 2025 from $14.69 billion in 2013.
The tax aspect of Syngenta's potential deal with Monsanto appears to have been similar to drugmaker Pfizer's (N:PFE), failed attempt to buy rival AstraZeneca (L:AZN) for nearly 70 billion pounds.
That deal would have allowed Pfizer to reincorporate in Britain and pay a significantly lower corporate tax. The U.S. company would also have been able to use tens of billions of dollars it has parked overseas, avoiding high U.S. taxes for repatriating the huge cash pile.
(Reporting by Katharina Bart; Additional reporting by Alice Baghdjian and Rupert Pretterklieber; Editing by Erica Billingham)