ChemChina-Syngenta Deal Has 35% Chance of Success, CLSA Says

  • Deal could face hurdles in U.S. over security concerns
  • Syngenta should have been a buyer, not a seller, CLSA says

China National Chemical Corp.’s chances of getting regulatory approval for its planned $43 billion takeover of Swiss agrochemical and seed supplier Syngenta AG is no greater than 35 percent, according to a report by CLSA.

The offer from ChemChina, as the company is known, is facing scrutiny in the U.S. due to concerns the deal could compromise food security and affect farm interests.

“We believe that the probability of gaining approval to merge is no higher than
35 percent - at best,” CLSA analyst Mark Connelly wrote in the report, adding the deal would undercut the U.S. farm industry. “The U.S. has the most to lose strategically from the acquisition.”

The deal values each of Syngenta’s Swiss-traded shares at $465 in cash, and shareholders also will receive a special dividend of 5 francs a share. Together, that’s worth about 454 francs now. The stock is trading well below that, at about 404 francs, indicating skepticism that the deal will close anytime soon.

Still, that 50 franc-a-share gap has narrowed from as much as 73 francs since the deal was announced Feb. 3. A Syngenta spokesperson wasn’t immediately available for comment.

Along with Syngenta, other top suppliers of herbicides and genetically modified seeds have tried to strengthen their positions amid consolidation in the agricultural chemicals market. St Louis-based Monsanto Co. withdrew in August its cash-and-stock offer for Syngenta, while U.S. companies Dow Chemical Co. and DuPont Co. struck a deal in December to merge.

Syngenta “should obviously have been a buyer, not a seller” in the round of tie-ups, Connelly said. In a better part of the agricultural cycle, “all Syngenta really would need to make a credible case to remain independent, is a respected industry leader from outside the company, as its next CEO”, according to Connelly.

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