December 16, 2015

 

Syngenta, ChemChina meeting raise possibility of merger
 

 

The recent Dow-DuPont merger deal had effected tremors in the market, with Syngenta AG now finding itself again in discussion with China National Chemical Corp (ChemChina) for a possible takeover of the former.

 

According to a Bloomberg report, ChemChina's chairman, Ren Jiaxin, met with executives from the Swiss corporation over a new proposal to buy Syngenta. ChemChina's previous offer of 449 Swiss francs a share (US$457) was rejected by Syngenta.

 

However, no deal has been finalised, and a new ChemChina offer may not materialise, according to unnamed sources familiar with the matter.

 

An agreement would expand business opportunities, with Syngenta as a gateway to drive Chinese agrochemical exports and raise the "sophistication" of agrochemicals in the domestic market, a JPMorgan Chase & Co. report stated. But like the Dow-DuPont union, a merger would require ChemChina and Syngenta to divest businesses - with revenues worth US$300 million to US$400 million - in order to assuage antitrust concerns in the Americas and Europe, the report added.

 

In addition, some parties questioned ChemChina's ability to finance the potential Syngenta takeover. The company had requested aid from sovereign wealth funds to support its buy-over of the Swiss corporation, according to sources.

 

Syngenta is also in informal talks with Monsanto about a possible consolidation. The latter perceives itself an "ideal partner" and maintains faith that there is room for "additional consolidation", said its spokeswoman, Sara Miller.

 

"In our view, any option needs to hit three critical objectives: it must be a strong, strategic fit; it must provide synergistic value; and it must be additive to our current plan, providing additional growth opportunity," Miller added.

 

Monsanto is discussing internally the advantages of a new offer, said COO Brett Begemann, with the opportunities to buy crop-chemical assets from other companies also drawn into consideration.

 

It had dropped plans to buy over the Syngenta this year following months-long of intense bidding efforts which failed to persuade Syngenta.

 

In the meantime, the Swiss agribusiness - along with BASF which is also coping with consolidation pressures - is eyeing assets from the Dow-DuPont merger, sources said.

 

Syngenta's shares spiked as much as 4.3% and closed up 2.2% at 373.40 Swiss francs (US$377.17), Bloomberg reported. The increase elevated the company's market value to about 34.7 billion Swiss francs (US$35 billion).