ZURICH (Reuters) - Syngenta's (>> Syngenta AG) shares jumped on Tuesday after a media report the Swiss crop chemicals maker had been in talks about a $40 billion (23.55 billion pounds) takeover by U.S. rival Monsanto Co. (>> Monsanto Company) to create the world's largest agrochemicals company.

Monsanto, the world's largest seed company, and 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, the report said.

A Syngenta spokesman declined to comment on the report and Monsanto was not immediately available for comment.

Syngenta shares were 5.9 percent higher at 346.5 Swiss francs(229.56 pounds) in midday trade, the biggest gainers on the pan-European FTSEurofirst 300 index <.FTEU3>.

Analysts are expecting more deals in the sector, as larger players like Monsanto, Bayer (>> Bayer AG) and BASF (>> BASF SE) look to bulk up and broaden into crop protection or seeds.

In April, Chemtura Corp (>> Chemtura Corp) agreed to sell its agrochemicals business to rival Platform Specialty Products Corp (>> Platform Specialty Products Corp) for about $1 billion.

Firms in Asia are also looking for more expertise in agrochemicals and seeds, in part due to governments such as China's wanting to increase domestic production and safeguard food security.

The reported talks with Monsanto put pressure on Syngenta Chief Executive Mike Mack to bolster the company's performance and to give money back to shareholders, several analysts including those at 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.

A number of chemical companies in the United States, including DuPont (>> E I Du Pont De Nemours And Co) and Dow Chemical Co (>> The Dow Chemical Company), have come under investor pressure to separate less stable businesses and raise shareholder returns.

"Dow Chemicals' agro segment might also be available as management is under pressure to increase shareholder value," analysts at German brokerage MainFirst wrote in a note to clients.

Deutsche Bank said this shareholder activism was likely to spread to Europe, raising the stakes for Syngenta and peers such as Germany's BASF.

Syngenta's shares have lagged European rivals, falling 1.2 percent over the past year compared with a nearly 21 percent rise in the wider European chemicals sector <.SX4P>.

The company is aiming to increase cost cuts to $1 billion a year by 2018 after disappointing investors with an 11 percent fall in 2013 profit.

CEO Mack has changed Syngenta's sales model so that a single account manager sells farmers everything from seeds and pesticides to fertilisers and support services, and he aims to boost sales to $25 billion by 2025 from $14.69 billion in 2013.

TAX TREATMENT

The tax aspect of Monsanto's potential deal with Syngenta appears to have been similar to that of U.S. drugmaker Pfizer's (>> Pfizer Inc.) failed attempt to buy rival AstraZeneca (>> AstraZeneca plc) for nearly 70 billion pounds last month.

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.

While Switzerland has long competed against its European neighbours to attract big corporations, it has recently moved towards more cooperation with the European Union after disagreements over corporate taxation have strained relations with the bloc for almost a decade.

Last week, Switzerland said it would abolish some corporate tax regimes, such as different treatment of domestic and foreign revenues.

(Reporting by Katharina Bart; Additional reporting by Alice Baghdjian and Rupert Pretterklieber; Editing by Erica Billingham)