FRANKFURT, Germany (Reuters) —Syngenta plans to sell 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. It said this month it plans to buy back more than $2 billion worth of stock to boost investor returns.
The company has asked JP Morgan to organize the sale of the vegetable seeds business, which could fetch around $2 billion, the sources said. The unit had sales of $663 million last year, representing four percent of group sales.
Information packages on the unit, which includes a strong tomato seed 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.
The vegetable seeds business is likely to appeal to other large agricultural chemicals groups, although sources said some of them may shy away because of antitrust concerns.
Smaller players seeking to expand their product range may also bid, they added.
In the seeds business, Syngenta competes with big companies such as DuPont, Dow, Bayer and Monsanto. Smaller competitors include Israel’s Adama, majority-owned by ChemChina, Australia’s Nufarm, Germany’s KWS Saat, France’s Vilmorin and Limagrain.
Some smaller firms may join forces in a potential bid because of 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 AgReliant, the third largest player in corn seeds in the United States.
KWS, a supplier of conventionally bred seeds, said in June that it would look at vegetable seed assets if Syngenta or Monsanto planned to sell them.
The vegetable seeds unit represents a small proportion of Syngenta’s revenue, but it is the most profitable of its seeds businesses. It has gross profit margins of much more than 60 percent compared with 45 percent for all seeds last year.
However, 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 three to six 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 three.