Spinoff Opportunities Abound Amid Ag's Mergers/Acquisitions

March 27, 2017 04:06 PM
Spinoff Opportunities Abound Amid Ag's Mergers/Acquisitions

(Bloomberg) -- Syngenta AG Chief Executive Officer Erik Fyrwald sees the imminent $43 billion Chinese takeover of the Swiss company as a timely moment to gain a powerful benefactor just as a host of antitrust reviews triggers an abundance of acquisition opportunities.

The next few years will see billions of dollars of potential deals in the agrochemical and seed industries, and Fyrwald said he’s interested in looking at assets that could come to market as part of a planned tie-up between Bayer AG and Monsanto Co.

“The majors will have consolidated, so I think in the future there’ll be more bolt-on-type deals of smaller companies that fill gaps where there are fewer overlaps and competitive concerns,” he said in an interview in Brussels on Monday. China National Chemical Corp. is in the final stages of acquiring Syngenta.

Mergers and acquisitions are reshaping the agrochemical and genetically-modified seeds industry, with Dow Chemical Co.’s planned merger with DuPont Co. on Monday getting the go-ahead from European regulators in return for asset sales. Bayer plans to take over Monsanto, and Syngenta said it’s particularly interested in any seeds assets that the German company may have to sell, Fyrwald said.

Deals Firepower

“We’ll have the firepower, the financial strength to continue to invest in our business and make acquisitions that make sense,” Fyrwald said, adding the company would have an investment grade balance sheet after the takeover. “If you look in the next one to five years, there’ll be billions of dollars of opportunity for us.”

BASF SE is also considering making a bid for any Bayer assets, which could be worth as much as $2.5 billion. Bayer is expected to sell canola, cottonseed and herbicide businesses, as well as a genetically modified crop technology, to get the green light for its $66 billion combination with Monsanto. Bayer hasn’t confirmed any sale and declined to comment on Monday.

Bolt-on acquisitions in the agrochemical space will probably target companies with a few active ingredients to complement the broader portfolios of larger players, according to analysts at Bloomberg Intelligence.

Remedies Sufficient

Repeated delays in the examination of the deal, which has involved authorities on four continents, have pushed back the expected closing date, keeping investors on tenterhooks. Remedies supplied to the European Union in the case of ChemChina’s takeover of Syngenta should be sufficient and the deal should close by the end of June, Fyrwald said.

“From a remedy standpoint, we’re going through the specifics of those issues and we expect approval” in the near term, Fyrwald said. Shares in the Basel, Switzerland-based company fell 0.9 percent to trade at 433.30 francs in Zurich.

ChemChina is planning to sell $10 billion of preferred shares of a unit to help fund its record acquisition of Syngenta, people familiar with the matter said in July. ChemChina’s financing will be finalized by the close of the deal, and Syngenta has been told the equity portion is currently being worked on, Fyrwald said.

“I have been reassured, we have been reassured, our chairman has been reassured that it will be in place after the close, that it’s being worked out,” Fyrwald said, declining to give further details. A representative for ChemChina could not immediately be reached for comment outside of business hours.

--With assistance from Daniela Wei

To contact the reporters on this story: Alice Baghdjian in Zurich at abaghdjian@bloomberg.net, Stephanie Bodoni in Brussels at sbodoni@bloomberg.net, Nikos Chrysoloras in Brussels at nchrysoloras@bloomberg.net.

To contact the editors responsible for this story: Tara Patel at tpatel2@bloomberg.net, Andrew Noël, John Bowker

©2017 Bloomberg L.P.

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