EU Opens In-Depth Probe Into ChemChina's Bid for Syngenta -- Update
October 28 2016 - 2:33PM
Dow Jones News
By Natalia Drozdiak and Jacob Bunge
BRUSSELS -- The European Union's antitrust watchdog will launch
an in-depth probe into China National Chemical Corp.'s plan to buy
Syngenta AG to determine if the deal would lower competition for
crop-protection products.
The investigation will focus on whether combining Swiss-based
Syngenta, which sells about one-fifth of the world's pesticides,
with a ChemChina-owned company that supplies generic alternatives
would leave farmers with higher chemical costs or fewer available
products, according to the EU.
The move was expected after Syngenta signaled earlier this week
that its sale would likely be delayed until early 2017. It reflects
the level of scrutiny by antitrust authorities for farm-sector
deals at a time when farmers in Europe and the U.S. grapple with
low grain prices following consecutive bumper crops that swelled
global supplies.
The European Commission, the EU's executive arm, said Friday
that Syngenta and Adama Agricultural Solutions Ltd., an Israeli
maker of generic pesticides that is controlled by ChemChina, had
"strong overlapping portfolios" of crop-protection products such as
herbicides and insecticides. The commission set a deadline for
March 15 to complete its review.
"We need to carefully assess whether the proposed merger would
lead to higher prices or a reduced choice for farmers," said EU
Antitrust Chief Margrethe Vestager.
The ChemChina-Syngenta deal would ratchet up consolidation in
"an industry that is already relatively concentrated," EU officials
added.
Antitrust officials in the bloc are cooperating with
counterparts in the U.S., Brazil and Canada as part of the
investigation, according to the EU.
Syngenta and ChemChina "intend to continue constructive
discussions with the EU authorities in order to conclude the review
as early as possible, " Sygenta officials said.
Syngenta agreed to sell itself to ChemChina for $43 billion in
February, a deal that would be the biggest-ever foreign purchase by
a Chinese company and a way for China to modernize its agricultural
sector.
European Union officials on Friday highlighted Syngenta and
Adama's "relatively high combined market shares" in pesticides used
to grow grain, cotton, fruits and vegetables, and whether a
combined company would limit access to chemical compounds needed by
competitors to make rival products. In many products, Adama may
represent "an important generic competitor" to Syngenta, EU
officials said.
The deal isn't the only one in the sector that regulators are
keeping an eye on. Rivals DuPont Co. and Dow Chemical Co. are
pursuing their own combination, and Bayer AG agreed in September to
purchase U.S. biotech seed giant Monsanto Co. for $57 billion. The
planned farm-sector deals would reduce the number of large players
to four from six.
Ms. Vestager, the bloc's antitrust chief, has signaled that the
review would take into account that several mergers in the sector
were taking place at the same time.
Syngenta this week said the announcement of the Bayer-Monsanto
deal prompted more requests for information from regulators about
its combination with ChemChina.
Syngenta earlier this week said if regulators asked for
antitrust remedies, the company would work to "resolve these as
quickly as possible."
Syngenta shares in European trading closed 1.2% higher Friday
but finished the week down 5.2% after sliding on the company's
announcement of the longer review. Despite the delay, analysts
remain confident in the deal, with Sanford C. Bernstein telling
clients in a research note this week that the firm estimates a 95%
likelihood it will go through.
Write to Natalia Drozdiak at natalia.drozdiak@wsj.com and Jacob
Bunge at jacob.bunge@wsj.com
(END) Dow Jones Newswires
October 28, 2016 14:18 ET (18:18 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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