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February 9, 2017

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Syngenta sees deal closure in Q2 this year

SWISS pesticides and seeds group Syngenta pushed back the expected closure of its agreed US$43 billion takeover by ChemChina to the second quarter of this year, but said it was making progress in winning regulatory approval for the deal.

The transaction is important for China, the world’s largest agricultural market, which is looking to Syngenta’s portfolio of chemicals and patent-protected seeds to help bolster food supplies for its huge population.

“ChemChina and Syngenta have made significant progress towards achieving the necessary regulatory approvals and closing the transaction,” Syngenta said yesterday, as it reported slightly better-than-expected core earnings for 2016 that signaled the yearlong takeover saga has not affected business.

The company said it did not plan to pay a dividend on 2016 earnings. Analysts had expected a payout of 11.60 Swiss francs (US$11.64) a share, up from 11 francs last year, but any such payout would have been offset by a deduction from the offer price anyway, according to the public tender offer.

“We still see very high odds (90 percent) of the deal’s successful closure,” Bernstein Research analyst Jeremy Redenius said in a note.

Potential antitrust hurdles have gripped investors’ attention as two other major tie-ups in the pesticides and seeds industry are being scrutinized by regulators across the globe: Bayer’s acquisition of Monsanto and the merger of Dow Chemical and DuPont.

Agrochemicals firms are racing to consolidate amid pressure on farm incomes and improvements in technology that are linking pesticides and seeds more closely together.

The target closure date for Syngenta’s takeover was last year postponed to the first quarter of 2017, but EU antitrust regulators in January extended the deadline for their decision to April 12.

Approvals from 13 regulatory authorities have been won but the go-ahead from Brazil, Canada, China, the European Union, India, Mexico and the United States is still outstanding.

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

Chief Executive Erik Fyrwald said he was confident the deal would win approval from China’s Ministry of Commerce without causing any delay. The deal was making good progress with US and EU regulators as well, he said.

ChemChina is expected to secure conditional EU antitrust approval for its bid, the largest foreign acquisition by a Chinese company, according to two people familiar with the matter last week.


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