Syngenta, Monsanto Sunflower-Seed Deal Faces Extended EU Investigation

Syngenta AG, the world’s biggest maker of agricultural chemicals, faces an in-depth European Union antitrust investigation of its plan to buy Monsanto Co.’s hybrid sunflower-seed business.

The European Commission, the EU’s executive arm, plans to rule on the transaction by Oct. 26 after looking into how the proposed combination would affect the market for the seeds’ development and sales in the region, the Brussels-based regulator said today in a statement.

“The sunflower-seed industry has undergone important consolidation over the past years and the commission needs to ensure that effective competition is preserved, to maintain innovation and prevent that input prices for farmers rise,” EU Competition Commissioner Joaquin Almunia said in the statement.

Syngenta agreed in August 2009 to buy the unit from St. Louis-based Monsanto for $160 million to extend its leading position in the $700 million market. Revenue at Syngenta’s sunflower-seed business exceeded $200 million in 2008 while the Monsanto division, which includes germplasm and development and breeding of hybrid sunflower seeds, had sales of $75 million, the Basel, Switzerland-based company said at the time.

“This is surprising as, so far, there weren’t any significant signals that there will be an accentuation of the investigation after willingness to cooperate was offered” by Syngenta, said Martin Flueckiger, a Zurich-based analyst with Helvea AG with an “accumulate” recommendation on the stock. The extended investigation will only have a “marginal” effect on Syngenta’s valuation, he added.

Stock Declines

Syngenta fell as much as 3.20 Swiss francs, or 1.2 percent, to 264.80 francs and was down 1 percent as of 12:08 p.m. in Zurich trading. The stock has declined 8.5 percent this year.

Syngenta and Monsanto first notified Spanish and Hungarian competition authorities about the deal, and Spain’s regulator referred the case to the commission, the EU said today. The initial EU probe was scheduled to end yesterday, according to the commission’s website. Neither the EU regulator nor the companies have specified proposed remedies.

“This process is proving to be a long and difficult one for the parties,” Tony Reeves, an antitrust lawyer with Clifford Chance LLP in Brussels who isn’t involved in the case, said today in an interview. “It is quite a saga, but the business is not unaccustomed to regulatory review.”

EU’s ‘Concerns’

The EU’s initial investigation “indicated potential competition concerns with respect to the breeding and commercialization of sunflower seeds and sunflower-seed treatment products in Europe,” Almunia said in the statement.

Sunflower oil is low in saturated fats and is mostly used in food applications. Globally, sunflowers are grown on about 24 million hectares (59 million acres), according to Syngenta’s estimates. Major sunflower-producing countries include Russia, Ukraine, Argentina and France.

“We will continue to work closely with authorities to obtain approval,” Medard Schoenmaeckers, a Syngenta spokesman, said today in an interview, declining to comment further on the commission’s statement.

To contact the reporters on this story: Peter Chapman in Brussels at Pchapman10@bloomberg.net; Antonio Ligi in Zurich at aligi@bloomberg.net.

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