Syngenta releases its fairness opinion related to its proposed acquisition by ChemChina. ChemChina has offered to acquire 100% of the outstanding share capital of Syngenta at a price of USD 465 per ordinary share plus a special dividend of CHF 5 to be paid conditional upon, and prior to, closing. The intended offer values Syngenta’s total outstanding share capital at around USD 43 billion. The acquisition is subject to regulatory approvals and other conditions.
Highlights of the opinion include the following:
- The global market for seed is pegged at $40.6 billion in 2014, having grown almost $10 billion since 2010 – a 7% per annum increase. The study puts the global market shares at the following: Monsanto (26%), DuPont (20%), Syngenta (8%), Dow (4%), and Bayer (3%).
- The opinion established a weighted average cost of capital for Syngenta (hurdle rate for all stake holders) at 8.2%, based on a 9.5% cost of equity, and 1.4% after-tax cost of debt. The low cost of equity reflects the historically lower volatility of Syngenta stock vÍs-a-vÍs the overall market.
- The opinion looked at the following methodologies to derive value: discounted cash flow analysis, comparable company analysis (using Bayer, DuPont, FMC, KWS, Monsanto, NuFarm, and Vilmorin in the data set), comparable transaction analysis (including going all the way back to the 1999 merger of Novartis Ag and Zeneca Ag to create Syngenta), and analyses of takeover premiums.
The total valuation range of all methodologies was: CHF 261.96 to CHF 500.45 per share. The ChemChina offer of CHF 488.95 per share was deemed fair.
