Syngenta Reports 'Constructive' Talks With Regulators as First Half Lags Forecasts

Results from the ChemChina bid target come on the heels of disappointing figures from former suitor Monsanto.
By Laura Board ,

Swiss agricultural chemical giant Syngenta (SYT) on Friday highlighted the travails of the sector when it announced first-half results below analysts' expectations as it reported "constructive" discussions with regulators about its Sfr44 billion ($44.7 billion) takeover by ChemChina.

Syngenta said sales fell 7% to $7.1 billion, below the S7.22 billion predicted in a Reuters poll.

Ebitda slipped 12% to $1.78 billion, worse than the decline of about 5% that analysts had anticipated, as its profit margin dropped to 24.9% from 26.2%. Syngenta said savings from an efficiency program should come through ahead of target this year.

The results follow weak third-quarter figures last month from erstwhile bidder Monsanto (MON) , whose earnings per share came in 10% below expectations with sales 6.7% under forecast.

"In the short term, the industry continues to experience tough market conditions, with low commodity prices and economic and currency challenges," said CEO Erik Fywald, who took the helm in June to steer the through the company's takeover.

"The transaction with ChemChina will ensure continuing choice for growers at a time of industry consolidation," he added in the statement. "We are having constructive discussions with all regulatory authorities which reinforce our confidence in closing the transaction by the end of the year. ChemChina's long term commitment to the business will underpin our ongoing investment in innovation, so that growers will continue to benefit from our broad technology platforms for decades to come."

The Committee on Foreign Investment in the U.S. is seen as the sticking point in the regulatory passage of the deal as the transaction has implications for American food security.

The review  also comes at a politically charged time ahead of presidential elections. CFIUS has in the past blocked innocuous-looking Chinese deals, including its January veto of the $2.8 billion sale of a Philips lighting components business to a Sino-American consortium.

Agricultural chemicals companies worldwide are looking to tie up to mitigate against short-term difficulties while positioning themselves for long-term growth underpinned by a rising global population and increased urbanization. Monsanto this week rejected a sweetened $63.5 billon bid from Bayer (BAYRY) - Get Report, while DuPont (DD) - Get Report and Dow Chemical (DOW) - Get Report are in the midst of a complex, $130 billion fusion.

Of the major players only BASF (BASFY)    is without a partner for its agricultural services company though is reported to have held talks about a sale of the business to Monsanto.

Syngenta shares closed on Thursday unchanged at Sfr387.80. The ChemChina offer is worth Sfr480 per share.

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