Swiss Syngenta’s acquisition by ChemChina almost certain - banks

20 April 2016 10:38 Source:ICIS News

Swiss SyngentaLONDON (ICIS)--Chemical analysts said on Wednesday the acquisitions of Swiss agrochemicals major Syngenta by state-owned ChemChina is likely to go through getting approvals from anti-trust authorities, including those in the US.

Syngenta published earlier its sales in the first quarter of 2016 which had fallen 7% year on year, although the company attributed most of that to unfavourable exchange rates due to a depreciated Swiss franc.

On 3 February, state-owned conglomerate ChemChina announced a $43bn offer to acquire the Swiss agrochemicals major, although analysts had showed scepticism about the deal going through in the US, where around 25% of the company’s sales come from.

“Process of regular approval is on track with the timelines Syngenta gave in February, according to Syngenta’s CEO [John Ramsey]. Syngenta [is] confident to get approvals from anti-trust and other government authorities,” said German investment bank Baader Bank.

Analysts had specified the US’ Committee on Foreign Investment (CFIUS) could object to the transaction on the back of reluctance to give entrance in the country’s agricultural industry to a state-owned company from China.

However, chemical analysts at Bernstein Research said the ongoing electoral process in the US would make the transaction even more sensitive to anti-trust authorities, who could still raise objections.

“We put a 90% probability on the deal going through. However, risks remain: CFIUS could block sales of genetically modified seeds in the US (perhaps more likely in an election year), and there may be a few antitrust issues with ChemChina's Adama business,” said Bernstein.

Acquired by ChemChina in 2011, Adama is an Israeli manufacturer and distributor of generic crop protection products including herbicides, insecticides and fungicides. It was formerly known as Makhteshim Agan.

Nevertheless, on the back of ChemChina’s offer of Swiss francs (Swfr) 491 (€450) per share, both analysts were upbeat on the company’s stock predicting notable upside potential and both recommended a  ‘Buy’ – ‘Outperform’ in Bernstein’s terminology.

Baader Bank’s share price target forecast stands at Swfr449 and Bernstein’s at Swfr470.

(€1 = Swfr1.09)

By Jonathan Lopez