Syngenta takeover talks constructive, CEO says

Bloomberg

Sat, Jul 23, 2016 - Page 10

Syngenta AG, which has agreed to be taken over by China National Chemical Corp (ChemChina, 中國化工) for US$43 billion, said talks with regulatory authorities to win approval for the deal have been constructive and the Swiss company is confident the transaction can be closed in time.

Talks with the Committee on Foreign Investment in the US (CFIUS) are ongoing and the goal remains to complete the deal by year’s end, CEO Erik Fyrwald said in a telephone interview yesterday.

Syngenta reported a 12 percent decline in first-half earnings before interest, taxes, depreciation and amortization to US$1.77 billion, less than an average of US$1.91 billion predicted by analysts surveyed by Bloomberg. Sales fell 7 percent to US$7.1 billion.

Fyrwald is seven weeks into the role, with the dual task of steering Syngenta through its takeover by the state-owned Chinese company and streamlining a cost base to adapt to increased competition.

ChemChina’s bid values Syngenta at about 464 francs a share, about 20 percent above the closing stock price of 387.8 francs on Thursday.

ChemChina is seeking regulatory approval for the purchase that would make it the world’s largest supplier of pesticides and other crop-care chemicals, albeit temporarily.

Dow Chemical Co’s merger with DuPont Co and Bayer AG’s possible purchase of Monsanto Co would reorder the rankings as the top six suppliers jostle for market share and financial power to drive research and new product releases.

With Syngenta, investors are focused on the process of winning approval from CFIUS in a presidential election year. The regulator can recommend a deal be blocked for reasons of national security, and this time around the panel includes the US Department of Agriculture as the planned acquisition involves food security.

ChemChina is periodically extending its offer until regulatory approval is obtained.

Political developments surrounding the forthcoming election are a “completely separate issue” to the CFIUS review, Fyrwald said.

When accepting the US Republican Party’s presidential nomination, Donald Trump accused China of stealing intellectual property rights and currency manipulation.

Trump — a frequent critic of Chinese trade policies — was being anointed as the party’s candidate in November’s presidential election, and used his acceptance speech at the convention in Cleveland, Ohio, to pledge that he would stop China’s "outrageous theft of intellectual property, along with their illegal product dumping and their devastating currency manipulation."

He also said he would renegotiate trade deals, specifically mentioning China’s WTO accession agreement.

ChemChina recently bought out its Israeli partner in generic agrochemical maker Adama, although Fyrwald does not see that as a prelude to combining the companies, as they are separate investments.

Syngenta is to remain focused on specialized products and even its mature agrochemicals are used in mixes for the latest technology it offers, he said.

“I’ve got to know ChemChina through the years, and have great respect for them,” Fyrwald said in the interview. “They are long-term investors, and that will be the case here.”

Additional reporting by AP