Approval Delayed of ChemChina’s $43bn Deal for Syngenta

25 Oct 2016 --- Syngenta has said regulatory approval for its $43bn takeover by China National Chemical Corp (ChemChina) will be delayed until the first quarter of next year, as regulators demand extra information to ensure they can green-light the deal.

Erik Fyrwald, Chief Executive Officer of Syngenta, said he was "confident" of the "closure" of the deal, but the delay is likely to unease investors who believed the deal would be wrapped up by the end of this year. 

Frywald said: "In a context of industry consolidation, regulators in the EU and elsewhere have recently requested a large amount of additional information, and we now expect the regulatory process to extend into the first quarter of 2017.”

“ChemChina and Syngenta remain fully committed to the transaction and are confident of its closure."

The demand for extra information about state-backed ChemChina’s purchase of Switzerland-based Syngenta, announced in February, comes amid wider consolidation in the agrochemical sector, which has seen Bayer buy Monsanto and Dow Chemical merge with DuPont. 

This has prompted regulators to demand a vast amount of information about products and crops, as they look to see if there are any competition issues.

Despite the delay, Frywald said regulatory approvals were "well underway" and the deal has received 11 antitrust approvals.

There was speculation that the deal could also be hamstrung by merger talks between ChemChina and another Chinese agrochemical giant Sinochem, announced just weeks ago.

According to Bloomberg, Frywald was not aware that ChemChina was in merger talks with Sinochem.

The delay comes as Syngenta revealed that year-on-year sales were down three percent to $2.5bn in the third quarter.

Sales in Europe, Africa and the Middle East rose by eight percent, benefiting from robust fungicides sales and seedcare campaigns. 

Growth in seeds was down to good performances from cereals in North Europe and sunflower in South East Europe. 

In North America, growth of 11 percent was driven by selective herbicides but sales in non-selective sales were down. Corn and soybean seeds sales were higher than last year.

Sales in Latin America were 21 percent lower than the year previous. In Brazil, volumes were adversely impacted by "pest pressure remaining low".

Asia Pacific reported a 22 percent sales increase, helped by the ending of El Niño and a better monsoon in South Asia. Demand for crop protection products was strong, particularly for insecticides in South Asia. 

Seeds sales were driven by high demand for conventional corn in South Asia and for GM hybrids in the Philippines.

Fyrwald added: “In a challenging year for the industry, it is encouraging to see strong uptake of our new technologies in a number of markets. This reflects the success of our R&D investments, which will continue to bring broad-based innovation to growers around the world.”

“For the fourth quarter of 2016, we expect a continuation of the recovery in Asia Pacific and an improved performance in Latin America, with no further impact from the change in sales terms in Brazil.”

“We confirm our full year guidance of slightly lower sales at constant exchange rates, with a mid-single digit decline in reported sales. The EBITDA margin is expected to be around last year’s level despite the non-recurrence of the $200 million trait revenue received in the fourth quarter of 2015.”