By: Jonathan Browning
China National Chemical Corp. moved one step closer to the biggest-ever purchase by a Chinese company after the board of Swiss pesticide and seeds maker Syngenta AG threw its support behind a potential sale, according to people familiar with the matter.
Syngenta’s board met this week and voted in favor of pursuing advanced takeover talks, said the people, who asked not to be identified because discussions are private. Their approval could pave the way for a formal agreement to be reached by the Chinese New Year holiday in early February, they said. While negotiations continue, talks could still fall apart and it can’t be ruled out that counter bids appear, they said.
Syngenta shares rose as much as 3 percent to 380.60 Swiss francs at 9:07 a.m. in Zurich, giving the company a market capitalization of 35.4 billion francs ($35.2 billion).
ChemChina offered about 470 Swiss francs a share in cash for Syngenta, a person familiar with the matter said last month, which would give the company a market value of about 44 billion francs ($43.8 billion). A Beijing-based spokeswoman for ChemChina said she couldn’t immediately comment, while a spokeswoman based in Basel for Syngenta didn’t immediately return a phone message and e-mail seeking comment.
Syngenta Chairman Michel Demare said on Wednesday it’s too early to call the next move in the consolidating agricultural chemical and seeds industry. Syngenta itself is looking at multiple opportunities, Demare said at a conference in Zug, Switzerland. In addition to established market leaders such as BASF SE, Bayer AG and seedmaker Monsanto Co., “you have to consider ChemChina as a potential bidder too,” he said.
Speculation is mounting that Syngenta will do a deal following last month’s merger agreement between Dow Chemical Co. and DuPont Co., which will create a company with a market value of more than $100 billion and the world’s largest agriculture business. That deal may trigger a wave of consolidation in the industry as competitors dash to reposition themselves. Syngenta last year rebuffed a takeover attempt by Monsanto.
Monsanto is discussing internally the merits of a new offer, as well as opportunities to acquire crop-chemical assets from other companies, Chief Operating Officer Brett Begemann told reporters in Novermber.
Buying Syngenta would transform ChemChina into a maker of genetically modified seeds, putting it in competition with Monsanto. Lack of seed technology is a key reason that China’s corn yields are half those in the U.S., according to Jason Miner, an analyst at Bloomberg Intelligence.
A combination of ChemChina and Syngenta would mean fewer assets would have to be sold to satisfy antitrust regulators than in a Monsanto-Syngenta deal, because the Chinese company only has a 5 percent market share, Christian Faitz, an analyst for Kepler Cheuvreux, wrote in a report last month.
Originally Published: Bloomberg