Syngenta Says Deeper EU Probe Won’t Derail ChemChina Deal (3)

(Bloomberg) -- Syngenta AG sought to allay investor concern about a drawn-out regulatory process for its $43 billion takeover by China National Chemical Corp., saying it’s confident the deal will get done even as scrutiny by the European Union pushes the transaction into next year.

“We are highly confident that our deal will get passed,” Chief Executive Officer Erik Fyrwald said after publishing earnings on Tuesday. “There may be some regulatory remedies, and we are prepared with regulators to resolve that quickly, but there’s nothing to stand in the way of our deal getting done.”

Financing for the acquisition is in place and there’s little overlap between the two businesses, the CEO said. The Swiss maker of herbicide and pesticides expects the approval process to extend into the first quarter of 2017, having previously said the transaction would be completed by the end of this year.

Syngenta shares have been trading well below the value of the ChemChina takeover offer on concern that regulators could significantly delay or even block the combination. The stock slumped 5.8 percent Monday after the EU said ChemChina didn’t propose concessions by the deadline of the end of last week. Companies often decide to put off making commitments -- such as asset sales to allay competition concerns -- if they know a deal is likely to get deeper scrutiny.

“As we feared,” the ChemChina review is delayed, Jeremy Redenius, an analyst at Bernstein, said in a note to investors. However, it’s “still highly likely to close,” he said.

The shares gained 1.7 percent to 404.20 Swiss francs by 10:41 a.m. in Zurich. That compares with a value of 467.30 francs in the sale to ChemChina.

The Chinese state-owned company agreed to buy Basel-based Syngenta in February. The transaction has already received backing from a U.S. national security panel and has 11 antitrust approvals including South Africa, Israel and Japan, Syngenta said.

EU antitrust regulators have until Friday to decide whether to approve the deal without any strings attached or open an extended probe that could add at least another four months before Brussels-based regulators give their final word. Syngenta doesn’t expect the EU to grant approval by the end of this week, Fyrwald said.

Bayer AG’s agreed acquisition of Monsanto Co. has led to “a huge demand by the EU and U.S. for additional data information about crops, markets and products,” the CEO said. The number of requests has been “unprecedented,” he said.

Adama Assets

The EU could ask for the sale of assets controlled by Adama Agricultural Solutions, the Israeli maker of farming chemicals that’s owned by ChemChina, Fyrwald said.

“We haven’t had feedback from the regulators yet, but we are prepared to act if necessary,” the CEO said. “We are ready to engage with the regulators on any concerns they might have.”

The CEO isn’t aware of ChemChina being in merger talks with Sinochem, he said. A combination of the two Chinese state-owned companies reported this month had been seen as a possible distraction to the Syngenta transaction.

Syngenta third-quarter sales declined 3 percent to $2.5 billion at constant exchange rates, the company said in its earnings statement. That’s lower than an average analyst estimate of $2.61 billion.

(Updates with analyst comment in fifth paragraph.)

--With assistance from Sheenagh Matthews William Canny and Mara Bernath To contact the reporter on this story: Alice Baghdjian in Zurich at abaghdjian@bloomberg.net. To contact the editors responsible for this story: Tara Patel at tpatel2@bloomberg.net, John Bowker, Phil Serafino

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