Industrials

James Boxell is an editor with Bloomberg Gadfly. He worked previously at the Financial Times in a variety of writing and editing jobs. Before becoming a journalist, he helped launch a legal technology startup.

Duncan Mavin is a former Bloomberg Gadfly columnist.

For Syngenta's interim CEO John Ramsay, the task at hand seems clear: work yourself out of the top job. Ramsay's mandate since taking the hot seat a few weeks ago appears to be to strike a deal with a rival against the backdrop of a big shake-up in the agri-chemicals sector. China National Chemical, known as ChemChina, may soon hand Ramsay an attractive exit route.

Merger Mover
Syngenta shares have gained on bid speculation
Source: Bloomberg data

The Chinese company is preparing an all-cash offer of 473 Swiss francs a share, or $44.6 billion, which could land as soon as this week, according to a report on the Benzinga news website. That's about 5 percent more than the ChemChina offer Syngenta rejected in November. It's also a little higher than Monsanto's earlier 470 franc-a-share approach, also rejected.

Shares in the Swiss company jumped Thursday by about 5 percent, although at about 385 francs they're well short of the potential offer price.

Yet, if it happens, an all-cash offer from ChemChina that includes committed financing could hold appeal. The mooted offer, which values Syngenta at about 17 times this year's expected Ebitda, is well above the average for similar deals over the past decade. ChemChina's successful takeover of Israel-based Adama Agricultural Solutions, might help allay concerns about a Chinese-Western culture clash. A bid that's high enough to reopen talks but which also leaves room for Ramsay to negotiate a sweetener from a motivated Chinese buyer would also help the CEO prove his mettle.

Regulators may of course hold up a deal -- Syngenta gets about a quarter of its revenue from North America and the U.S. authorities could raise questions about food security. But antitrust hurdles should be low: outside Adama, there's little overlap between ChemChina's mainly domestic presence and Syngenta's international operations. Monsanto, meanwhile, might find it difficult to fund a better alternative. Bernstein analyst Jeremy Redenius estimates that Monsanto could only afford to offer as much as 75 percent cash and 25 percent stock to match a potential ChemChina offer before net debt reaches four times Ebitda. That's even after some significant synergies and allowing for proceeds from selling parts of the combined businesses.

Ramsay, previously Syngenta's CFO, has been open about his main aim since taking over. The sector is on the lookout for ways to cut costs amid falling commodity prices, with M&A top of the agenda. The emergence this week of a potential Dow-Dupont tie up would create the biggest agritech company by revenue and increase the pressure on others to find a partner. A solid offer from China would certainly be tempting for the interim boss.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the authors of this story:
James Boxell in London at jboxell@bloomberg.net
Duncan Mavin in London at dmavin@bloomberg.net

To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net