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UPDATE 1-Syngenta poised to launch sale of veg seeds business - sources

Published 17/09/2015, 01:21 am
© Reuters.  UPDATE 1-Syngenta poised to launch sale of veg seeds business - sources

* Vegetable seeds business could fetch around $2 bln - sources

* Syngenta has announced plans to buy back over $2 bln of shares

* Firm under pressure to reward investors after snubbing Monsanto (NYSE:MON) (Adds possible buyers, valuation data, context)

By Arno Schuetze

FRANKFURT, Sept 16 (Reuters) - Swiss agricultural chemicals group Syngenta SYNN.VX is about to launch the sale of its vegetable seeds business as it seeks to raise money for a share buyback, according to sources familiar with the matter.

The company, whose main business is making pesticides, is under pressure to offer tangible rewards to shareholders after it turned its back on a $47 billion bid from Monsanto MON.N . It said this month it plans to buy back more than $2 billion worth of stock to boost investor returns.

It has asked JP Morgan JPM.N to organise the sale of the vegetable seeds business and it could fetch around $2 billion, the sources said. The unit had sales of $663 million last year, representing about 4 percent of group sales.

Information packages on the unit, which includes a strong tomato-seeds business, are expected to be sent to prospective buyers as early as this month and tentative bids are likely to be due before Christmas, they added.

Syngenta and JP Morgan declined to comment.

The vegetable seeds business is likely to appeal to other large agricultural chemicals groups, some of who may however shy away due to antitrust concerns, the sources said.

Smaller players seeking to expand their product range may also bid, they added.

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In the seeds business, Syngenta competes with big groups like DuPont (NYSE:DD) DD.N , Dow DOW.N , Bayer BAYGn.DE and Monsanto. Smaller peers include companies like Israel's Adama ADAM.N , majority-owned by ChemChina CNNCC.UL , Australia's Nufarm NUF.AX , Germany's KWS Saat KWSG.DE , France's Vilmorin VILM.PA and Limagrain.

Some smaller firms may tie up for a potential bid, due to the size of the asset, one of the sources said.

KWS and Limagrain have partnered in the past, merging their North American corn seeds businesses in 2000 to form the third-largest player in corn seeds in the United States, AgReliant.

KWS, a supplier of conventionally bred seeds, said in June that it would look at vegetable seed assets if they were put for sale by Syngenta or Monsanto.

While the vegetable seeds unit represents a relatively small proportion of Syngenta's revenue, it is the most profitable of its seeds businesses. It has gross profit margins of well above 60 percent compared with about 45 percent for all seeds last year.

But the need to raise cash for the share buyback has persuaded Syngenta to part with it, according to the sources.

Valuation multiples in vegetable seeds are "quite easily" in the 3-6 times sales range, Syngenta's finance chief said earlier this month, although industry bankers said the business was more likely to fetch a multiple of around 3.

Syngenta has not released a figure for earnings before interest, taxes, depreciation and amortisation (EBITDA) for the business. But bankers said they estimate it having a margin of roughly 20 percent - which would imply an annual EBITDA of around $130 million.

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"I can imagine the unit fetching a multiple of more than 15 (times EBITDA) in a sale," one of the sources said. (Editing by Georgina Prodhan and Pravin Char)

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