Valence Group News
Partner Anton Ticktin quoted in Bloomberg
- Created on Friday, 21 September 2012 14:09
Syngenta to Buy Biotech Seedmaker Devgen for $523 Million
Investors of the Belgian hybrid-rice seedmaker will get 16 euros a share, Basel-based Syngenta said. The price is 70 percent higher than Devgen’s closing price yesterday. The asset will have a “very significant impact” on Syngenta’s $500 million rice business, Chief Operating Officer Davor Pisk said in an interview today.
Syngenta, the world’s largest agrochemical maker, is matching BASF SE (BAS) and Bayer AG (BAYN) with the purchase of a biotechnology company. Devgen offers rice traits that have been engineered to resist disease, as well as other formulas for crop protection. For Syngenta Chief Executive Officer Mike Mack, it’s a bet that Devgen’s technology can be rolled out to eclipse research costs that have so far erased profit.
The Swiss manufacturer is paying a “hefty premium” of 14 times estimated 2013 sales, and “the payback will take many years,” Patrick Rafaisz, an analyst at Bank Vontobel AG in Zurich, said in a note.
Syngenta rose as much as 0.9 percent to 347.50 Swiss francs and was trading up 0.4 percent at 3:25 p.m. in Zurich. The stock has gained 26 percent this year, valuing the company at 32.2 billion francs ($34.6 billion). Devgen soared as much as 68 percent to 15.88 euros and was 67 percent higher in Brussels.
“Biopesticides and seeds are flavor of the month,” and “if you don’t have a position in a certain technology, you are going to be locked out,” Anton Ticktin, a partner with the Valence Group investment bank in London, said in a phone interview. “We definitely see there is M&A going forward in this area.”
Syngenta management will give an overview of its strategy and outlook to investors and analysts on Sept. 24 at a capital markets day to be held in India. Devgen already has a presence in that Asian country, as well as in Indonesia and the Philippines.
The deal follows BASF’s announcement yesterday that it plans to buy Becker Underwood Inc. for $1.02 billion as Kurt Bock makes his first major acquisition as chief executive officer with a move into biological seed treatments.
Bayer, which this year purchased AgraQuest for $425 million, has “gotten serious” about investing in rice and wheat, Sandra Peterson, head of the Leverkusen, Germany-based company’s crop-protection unit, said in an interview yesterday.
Syngenta’s offer for Devgen is at a “very attractive and fair price,” and the Swiss company isn’t aware of competing bids, Pisk said.
Major shareholders with about 48 percent of the Ghent-based Devgen’s stock support the deal, Syngenta said. Credit Suisse advised Syngenta on the transaction.
Devgen’s RNAi crop protection business, in which Syngenta invested 22 million euros in May, is still at the research and development stage and has no commercial revenue, Pisk said. The business makes sprays which kill worms that attack carrots and potatoes.
Sales at Devgen totaled 25.5 million euros last year. The operating loss amounted to 6.3 million euros as earnings were burdened by research and development costs.
“We don’t expect in the next couple of years for Devgen to have a high share of our total rice business, but it will grow significantly over the mid-term,” Pisk said.