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Will BASF be the White Knight for Syngenta?

August 3, 2015
Chemical Value Chain
BASF, the third largest agricultural chemicals player behind Syngenta and Bayer, is eyeing a possible acquisition of Syngenta, according to Reuters, citing people familiar with the situation. BASF has lined up a loan package from large multinational banks for a potential offer, Reuters says, adding that the German company will only decide to enter the contest if and when Monsanto makes a formal offer to Syngenta shareholders. If no offer is forthcoming, Reuters says, BASF would stand pat, being quite comfortable with the present structure of the industry.
 
Syngenta’s management continues to oppose the initial $45-billion approach from Monsanto,saying that this sum significantly undervalues Syngenta’s prospects and fails to reflect the risk to Syngenta shareholders and its ongoing business that such an offer would create a long period of uncertainty due to near-insurmountable antitrust problems. Monsanto, however, has guaranteed Syngenta a $2 billion breakup fee if any deal were blocked on antitrust grounds.
 
Meanwhile, in a blow to Syngenta management, Bernstein Research (London) says that an anonymous poll of nearly 100 investment institutions, of whom 64% are current and 20% are former Syngenta shareholders, has shown overwhelming investor support for the idea that Syngenta should negotiate with Monsanto to try to secure a higher offer. Both Syngenta management and Monsanto have been conducting intensive investor roadshows in recent weeks to argue their respective cases. Bernstein says that its poll shows that Syngenta investors are in favor of negotiating with Monsanto with an average acceptable offer price of 473 Swiss francs per share, only 5% or so above the US company’s informal offer to Syngenta of SF449 per share. Syngenta management’s lack of engagement with Monsanto was decried as “incredible” or “not appropriate.”
 
Bernstein adds that investors are deeply skeptical of Syngenta’s current strategy and targets primarily due to management/execution issues and an unfavorable agricultural cycle. Only 3% of the investors polled by Bernstein unequivocally support the present strategy and management team. If Syngenta were to continue as an independent company, Bernstein says, its poll shows that many investors would press for a dramatic change in strategy, including an increased focus on costs and a possible divestiture of the underperforming seeds/biotechnology operations. Failing that, Syngenta could seek a merger with another major international agchem company, such as Dow AgroSciences.
 
BASF declined to comment on the report. In 2014 it reported sales of €5.446 billion ($5.97 billion) in its agchems business, accounting for 7% of group sales. Ebitda was €1.297 billion. Fungicides accounted for 44% of agchems sales, insecticides 15% and herbicides 35%. BASF is the world’s third largest producer of fungicides, and fifth largest player in each herbicides and insecticides.
 
By Natasha Alperowicz
 

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