After withdrawing its application for an IPO on the main board of the Shanghai Stock Exchange, Syngenta issued a statement saying that this was mainly based on a comprehensive consideration of its own development strategy and the global industry environment.
Syngenta Group Co., Ltd., which planned to raise 65 billion yuan through its IPO (Initial Public Offering), has pressed the pause button on its path to going public.
On March 29, 2024, the Shanghai Stock Exchange decided to terminate the review of Syngenta's IPO and listing on the main board. The reason is that recently, Syngenta and its sponsor separately submitted applications to withdraw the IPO to the Shanghai Stock Exchange.
From the acceptance of the application for listing on the STAR Market, to the transfer to the main board and passing the review, and then to the withdrawal of the application for listing on the main board, Syngenta's A-share IPO, which lasted for more than two years, ultimately did not come to fruition. During this period, one of the four IPO sponsor representatives of the company was replaced.
On the day the IPO was terminated, Syngenta issued a statement saying that, based on a comprehensive consideration of its own development strategy and the global industry environment, after careful study, the company decided to withdraw its application for the first listing on the main board.
An investment banking insider said that the large amount of funds planned to be raised may be the main reason for Syngenta's withdrawal of the listing application. Data from Eastmoney Choice shows that Syngenta's planned fundraising amount for the IPO is 65 billion yuan, setting a new high for A-shares in 13 years.
Senior investment banking insider Hou Dawei told Caijing that the current A-share market is still relatively weak and cannot support such a large-scale IPO. Syngenta's approval time was in June 2023, and the validity period of the approval document is one year, which is a psychological impact on the secondary market. "Currently, there is no actual arrangement for issuance in the short term, and withdrawing the application is also a helpless move."
Looking at the direction of the use of the raised funds, according to the prospectus, the two "big heads" of Syngenta's fundraising are global merger and acquisition projects and the repayment of long-term debt, with a planned investment of 20.8 billion yuan and 19.5 billion yuan respectively.
As one of the largest agricultural technology companies in the world, Syngenta ushered in a period of rapid growth in performance from 2020 to 2022. However, in 2023, affected by factors such as the continuous destocking of the plant protection industry channel, the company's operating income and EBITDA (earnings before interest, taxes, depreciation, and amortization) both experienced a slight decline."Syngenta is unlikely to consider going public overseas. In terms of industry policy, valuation, and market activity, the A-share market is the most suitable for Syngenta," Hou Dawei believes. He anticipates that Syngenta will reapply for an A-share IPO and, once market conditions improve, the company will quickly pass the review and issue shares.
In its statement, Syngenta also expressed, "The company will continue to pay attention to China's capital market and is willing to contribute to its healthy development, resuming the listing process at the right time in the future."
Looking back at Syngenta's journey to go public, from applying for an IPO in 2021 to voluntarily withdrawing the application in 2024, its path has been quite bumpy.
On June 30, 2021, Syngenta's IPO application to list on the STAR Market was accepted. By March 2023, the company had undergone three rounds of inquiries. At that time, in its draft for the March meeting, Syngenta stated that it met and applied the listing standards of the "STAR Market Listing Rules," which are "an expected market value of no less than 3 billion yuan, and operating income of no less than 300 million yuan in the most recent year." In 2022, the company's operating income exceeded 200 billion yuan.
However, on May 18, 2023, Syngenta and its sponsors, CICC and Bank of China International Securities, respectively submitted applications to withdraw the STAR Market IPO to the Shanghai Stock Exchange (SSE), which decided to terminate the review of the company's STAR Market IPO.
The next day, Syngenta shifted its focus to the main board, and its application for listing on the SSE main board was accepted. After one round of inquiry, on June 16, 2023, the SSE Listing Review Committee deemed the company to meet the issuance conditions, listing conditions, and information disclosure requirements, and the company's IPO application was reviewed and passed.
In May 2023, regarding the updated listing plan, Syngenta stated that as a global leader in agricultural technology, it is more suitable to list on the SSE main board under the full registration system. This would also help the company reach a more diverse group of investors and be beneficial to the company's long-term value. Therefore, Syngenta Group decided to withdraw its application for listing on the STAR Market and submitted a listing application to the SSE main board.
Regarding the reason for applying for listing, Syngenta stated in its prospectus for the June 2023 meeting that the company is not yet listed, and the lack of a public market equity financing channel has become a significant constraint on the company's further development. Compared to large international listed agricultural technology companies, its financing methods are relatively limited. "After the company's stock is issued and listed, the financing structure will be significantly optimized, and the market competitiveness and risk resistance will be significantly enhanced."
However, history repeated itself. After passing the SSE main board review, on March 29, 2024, the SSE decided to terminate the review of the company's initial public offering of shares and listing on the main board, as Syngenta and its aforementioned sponsors once again withdrew the listing application. Syngenta's path to an A-share listing has been put on hold.
Syngenta issued a statement saying that the company will use a diversified combination of methods to continue to consolidate and enhance its leading position in the global agricultural technology field and will resume the listing process at the appropriate time in the future.Previously, Syngenta's proposed IPO fundraising amount of up to 65 billion yuan has been a focal point of market attention.
Data from Dongfang Fortune Choice shows that, as of March 30, 2024, the top three companies in terms of total A-share IPO fundraising are Agricultural Bank of China (601288.SH), PetroChina (601857.SH), and China Shenhua (601088.SH), with total fundraising amounts of 68.5 billion yuan, 66.8 billion yuan, and 66.6 billion yuan, respectively.
If Syngenta successfully goes public with a fundraising amount of 65 billion yuan, it would become the fourth-largest IPO in the history of A-shares and the largest since the Agricultural Bank of China's listing in July 2010, marking 13 years.
"For primary market issuance, under the current trend of strict review, large-scale issuances should probably wait until confidence in the secondary market has been restored to a certain extent," Hou Dawei told Caijing.
Proposed fundraising of 65 billion yuan
According to the prospectus, Syngenta originally planned to raise 65 billion yuan, and such a large-scale fundraising has attracted the attention of many investors.
Looking at the direction of the raised funds, as disclosed in the prospectus, 20.8 billion yuan is intended for global merger and acquisition projects, 19.5 billion yuan for the repayment of long-term debt, 13 billion yuan for the cost and reserve of cutting-edge agricultural technology research and development, 7.8 billion yuan for the expansion of modern agricultural technology service platforms, and 3.9 billion yuan for the expansion, upgrade, and maintenance of production assets as well as other capital expenditures.
That is to say, the two "big heads" that truly account for Syngenta's fundraising direction are global merger and acquisition projects and the repayment of long-term debt, with the repayment of debt alone requiring 19.5 billion yuan, accounting for 30%.
Regarding the specific details of fundraising for debt repayment, Syngenta stated in the prospectus that the company's overseas subsidiaries used financing methods such as issuing perpetual bonds to bondholders to acquire Swiss Syngenta. As of December 31, 2022, the company has gradually reduced the outstanding balance of the aforementioned perpetual bonds through changing debt terms, rearranging external debt financing, and using its own funds for early redemption. Among these perpetual bonds, only the perpetual bonds issued by Syngenta Hong Kong Investment to Global Chem have not been fully repaid, with an outstanding balance of about 37.9 billion yuan. The existence of such perpetual bonds dilutes the equity attributable to Syngenta's shareholders, and the funds planned for the repayment of long-term debt will be entirely used to redeem the perpetual bonds issued to Global Chem.
According to the prospectus, from 2020 to 2022, Syngenta's asset-liability ratio (consolidated statement) rose from 40.58% to 52.99%.For planned merger and acquisition targets, Syngenta has stated that it includes plant protection companies with complementary product portfolios or high-quality production capacity, companies with strong production and supply capabilities, agricultural equipment and precision agriculture providers, and biocontrol companies with differentiated products and technologies.
"Syngenta Group's strategy is to continuously expand existing core businesses through complementary acquisitions and other investments in the core business, while also looking for potential acquisition opportunities in emerging potential transformation areas, thereby enhancing R&D capabilities, technological innovation capabilities, and supporting business capabilities in various fields," Syngenta has said.
During the review by the Shanghai Stock Exchange's (SSE) Listing Committee, the focus was on whether Syngenta aligns with the mainboard positioning, goodwill impairment testing, and the specific circumstances of the fundraising projects.
The Listing Committee had requested Syngenta to: analyze from the perspectives of business model, operating performance, scale, and industry representativeness whether it meets the relevant requirements for mainboard positioning; explain whether the existing corporate governance and internal controls can reasonably ensure that the management risks of transnational operations and merger and acquisition implementation are overall controllable, in light of the integration and operation of mergers and acquisitions, and the global merger and acquisition plan; and clarify the specific details of the fundraising projects and whether the related information disclosure is adequate.
Performance Rises and Falls
As one of the world's largest agricultural technology companies, Syngenta has experienced some fluctuations in performance in recent years. From 2020 to 2022, the company's operating income and EBITDA continued to grow, while in 2023, both financial indicators for Syngenta declined.
While withdrawing its IPO application, Syngenta announced its financial performance for the full year of 2023 on March 29: the company's operating income for the year was $32.2 billion (approximately 232.5 billion RMB), a decrease of 4% (a decrease of 1% at constant exchange rates); the full-year EBITDA (which excludes other one-time or non-cash/non-operating items that have no impact on subsequent operations, and excludes the impact of the leadership's long-term incentive plan) was $4.6 billion (approximately 33.2 billion RMB), a decrease of 18% compared to the historical high in 2022 (a decrease of 14% at constant exchange rates).
Syngenta stated that the company's operating income in 2023 was affected by the continuous destocking in the plant protection industry channels. Distributors and retailers, on the one hand, actively digested the inventory accumulated in previous years to counteract supply chain turbulence, and on the other hand, they had to face the pressure of reducing working capital due to the continuous rise in interest rates.
Globally, due to the inventory backlog in previous years and the significant increase in interest rates, the global plant protection market in 2023 faced tremendous destocking pressure. The resulting market demand contraction led to a decline in global sales and prices, which was more evident in the Latin American region and the commodity product division. The above factors affected Syngenta's year-on-year performance in 2023, while in the same period of 2022, the company's operating income and profits both reached historical highs.
Plant protection, seeds, crop nutrition, and modern agricultural services are Syngenta's main business operations. From 2020 to 2022, the combined revenue from plant protection and seeds accounted for about 80% of the main business revenue.Divided by business units, Syngenta Crop Protection, Syngenta Seeds, Syngenta Group China, and Adama constitute the company's business segments. From 2020 to 2022, Syngenta Crop Protection's revenue accounted for more than 47%.
Looking at the business units, in 2023, both Syngenta Seeds and Syngenta Group China saw year-on-year revenue growth, but during the same period, Syngenta Crop Protection and Adama experienced a decline in revenue, which dragged down the company's performance.
Compared to the robust growth in 2022, Syngenta Crop Protection's operating income decreased by 5% to $15.5 billion (approximately 111.9 billion RMB) in 2023. Within this business segment, the company's revenue in Europe, Africa, and the Middle East, Asia-Pacific (excluding the Chinese market), and Latin America all declined, with Latin America's revenue drop reaching as high as 11%, while the North American region and the Chinese market both achieved growth. Calculated at constant exchange rates, operating income in all regions except Latin America increased.
Affected by a significant destocking of channels (especially in the American region), Adama's operating revenue in 2023 declined by 17% year-on-year to $5.6 billion (approximately 40.4 billion RMB). During this period, within this business segment, revenue in Europe, Africa, and the Middle East fell by 8%; in North America and Latin America, the decline exceeded 18%; due to pricing pressure and high inventory in the commodity channels, revenue in the Chinese market fell by 25%.
In terms of revenue regions, Syngenta's foreign income accounts for a higher proportion. Taking 2022 as an example, the company's revenue in Latin America and China accounted for 27.83% and 26.07% respectively, ranking first and second, while Europe, Africa, and the Middle East, North America, and Asia-Pacific (excluding China) ranked third to fifth.
From 2020 to 2022, Syngenta ushered in a period of rapid performance growth. During this time, the company's operating income increased by 42%, and its net profit attributable to the parent company after deducting non-recurring gains and losses increased by approximately 1.33 times, with EBITDA rising from 27.6 billion RMB to 36.6 billion RMB.
Data from Eastmoney Choice shows that, based on 2022 figures, Syngenta's operating income of over 220 billion RMB ranks just behind Shanghai Pharmaceuticals (601607.SH), the 49th ranked A-share company, and its net profit attributable to the parent company of 7.864 billion RMB ranks just behind GF Securities (000776.SZ), which is in the 97th position.
According to the company's prospectus, in 2021, Syngenta ranked first in the global crop protection industry, third in the seed industry, and was in a leading position in the field of digital agriculture; in China, it ranked first in the crop protection industry, seed industry, and crop nutrition industry.
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