FOCUS: Syngenta Seen Possible Bidder For Dow Agriscience Operations

Swiss crop science company Syngenta AG (SYT) is seen as a potential bidder for Dow Chemical Co.'s (DOW) agricultural sciences business, should the company decide to put the operations on the block.

Syngenta has said it's preserving cash this year to be ready to make acquisitions, and that it would look at the Dow agrosciences unit if it came up for sale. Dow may sell the business to get the cash needed to complete its purchase of Rohm & Haas Co. (ROH).

"Such a potential deal would make sense for Syngenta, the combination would free significant cost synergies in crop protection," said Martin Flueckiger of independent brokerage Helvea.

"According to first estimates, such a deal would be value-accretive for Syngenta by around 10%," he said. Flueckiger rates Syngenta buy, with a CHF300 price target.

Analysts expect merger and acquisition activity in the agrochemical sector to intensify in 2009 as chemicals companies streamline portfolios.

Bidders for Dow's agrosciences unit - which makes products that combat insects and plant diseases - would be aiming to reduce their cyclicality by increasing their exposure to the agrochemical business, which in the past has proven to be relatively immune to economic downturn.

"We don't know whether the operations are for sale, but if the opportunity were there, it would be an opportunity we would look at," Syngenta spokesman Medard Schoenmaeckers told Dow Jones Newswires.

Analysts' valuations for the unit vary between $4.5 billion and $6.8 billion.

Other companies potentially interested in the business include Germany's BASF SE (BAS.XE) and Bayer AG (BAY.XE), as well as E.I. DuPont de Nemours & Co. (DD) of the U.S.

Bayer, BASF and DuPont all declined to comment on whether they would be interested in buying the unit.

Syngenta's Chief Executive Mike Mack said in early February the company would look at acquisition opportunities, should they arise, while there won't be a new round of last year's share buyback program.

"We will rather use the cash to grow our business," he said in an interview with Dow Jones Newswires.

The statements come at a time when Dow Chemical finds itself in a tight spot.

In December, a Kuwait joint venture fell apart, depriving Dow of $9 billion in cash it was planning to use to buy Rohm & Haas for $15.3 billion. Rohm & Haas supplies chemicals to the construction, pharmaceutical and electronics industries, as well as for personal care products and paper processing.

Dow failed to close the Rohm deal as planned in January, saying it would put the combined company in financial jeopardy, and Rohm sued to force completion.

Dow Chief Executive Andrew Liveris has said the company is looking to sell about a dozen assets, though he hasn't specified which ones.

Flueckiger noted that a lot of question marks remain. Even if the operations were for sale, it's not certain Syngenta would be able to snatch them with a number of other companies also being potentially interested.

However, analysts consider it likely that Dow will put the operations up for sale. "Dow is in need for cash to finance its M&A plans and the sale of AgroSciences could provide the company with that," said Sal. Oppenheim analyst Juergen Reck, who rates Syngenta buy with a fair value of CHF285.

He added that with Dow being a chemicals company, it would be fairly easy to sell the agrochemicals business because it's less interwoven with the parent company than other divisions.

Reck also cautioned that regulatory hurdles for such a deal may be high. "If the regulatory authorities say that Syngenta is gaining too high a market share for one of its products through such a deal, it'll have to sell another product," he added.

Regulatory hurdles would be much lower for U.S. rival DuPont or Germany's BASF, Reck said. "But BASF is still integrating recently acquired Ciba Holding," he said.

DuPont already works with Dow in the seeds business, and could be potentially interested too.

"DuPont could then become an integrated seeds and agrochemicals business, like Syngenta or Bayer," he said.

Company Web sites: www.syngenta.com

www.dow.com

-By Julia Mengewein, Dow Jones Newswires, [phone], [e-mail]