Sinochem exploring ways to salvage Syngenta IPO plan

SINOCHEM Holdings is exploring ways to salvage a planned Shanghai listing of its unit Syngenta Group, including a smaller initial public offering (IPO) for the agrochemical giant, people with knowledge of the matter said.

State-owned Sinochem has been discussing a potential reduction in the fundraising size with Chinese authorities as it seeks to mollify their concerns that a large offering could put pressure on liquidity in the domestic stock market, the sources said. Delaying the IPO to later this year or even next year is also among Sinochem’s proposals, the sources added, asking not to be identified as the information is private.

The stalling of the IPO approval comes as the Chinese government set up a new super financial watchdog this year to help maintain stability. Regulators are spending more time reviewing the IPO and scrutinising areas including Syngenta’s debt levels and the potential use of proceeds before deciding whether it is a good time for the company to list, the sources noted.

Sinochem is still negotiating with Chinese authorities, and it is unclear whether the regulator will accept any of the proposals, the sources said. While ChemChina is open to the idea of shrinking the size of the listing to get the green light from regulators, the company is also keen to raise as much money as possible to help pay down debt, some of the sources added.

A representative for Syngenta declined to comment, while representatives for China Securities Regulatory Commission, the Shanghai Stock Exchange and Sinochem did not immediately respond to requests for comment.

The Shanghai stock exchange last month called off a hearing for Syngenta’s proposed 65 billion yuan (S$12.5 billion) IPO a day before the meeting was scheduled. Having spent about four years preparing for the listing, executives and advisers at the agrochemical giant were shocked by the last minute cancellation, Bloomberg News reported. The company at that time contacted exchange authorities to seek clarity but did not receive a detailed response.

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A Swiss agricultural chemicals and seeds outfit, Syngenta was acquired by China National Chemical Corp, or ChemChina, in 2017 for US$43 billion, a record-breaking overseas acquisition for the country, and one that spoke to Beijing’s growing concerns around food security. Syngenta products such as genetically-modified seeds are also crucial to meeting official goals of improving the quality and quantity of China’s agricultural production.

Sinochem Holdings absorbed ChemChina in 2021. Since then, Syngenta has also incorporated the agricultural business of Sinochem.

ChemChina started internal work to prepare Syngenta for a listing in 2019, Bloomberg News reported at that time. The preparations have been ongoing since then, with the parent company holding talks with potential backers prior to the public offering. Syngenta filed its prospectus to list on Shanghai’s Nasdaq-style Star Board about more than a year ago.

Syngenta’s sales rose to US$9.2 billion in the three months ending in March, a 3 per cent increase from the same period in 2022. The company said the growth of its crop protection businesses was slower after exceptionally strong quarters in the prior two years. Its China operations were robust, with sales jumping 26 per cent from a year ago to US$3 billion.

“Had it conducted the IPO elsewhere, it may have already successfully listed and achieved optimal valuation when industry earnings were growing strongly,” Bloomberg Intelligence analysts Andrew Chan and Hui Yen Tay said in a note on Thursday (Apr 27). “An IPO delay in a weaker environment, possibly combined with a smaller stake sale, could lead to much lower debt reduction for Sinochem or ChemChina.” BLOOMBERG