Bloomberg

(Bloomberg) -- Investors are still too negative on Syngenta AG’s deal with China National Chemical Corp.

That’s according to OFI Asset Management, a Paris-based investor who’s looking to win big betting on a successful takeover of the Swiss pesticide maker. Even after a 11 percent rally in two months, Syngenta is still around 14 percent below ChemChina’s offer price of about $470 per share, which is composed of cash and a special dividend.

The gap is comparable to Monsanto Co.’s, a similar acquisition target for Bayer AG, in a deal that’s still in its early stages and has most regulatory hurdles to clear.

“It’s trading too wide for a deal that’s very likely to close soon,” said Fabienne Cretin, head of merger arbitrage strategies at OFI Asset Management, which oversees about $72 billion and owns Syngenta shares. “That spread makes little sense. They’ve already made some divestment commitments and the overlap is minimal.”

Syngenta said this week that it submitted remedies -- which can typically include selling certain assets to address competition concerns -- in order to get approval from the European Union for the deal by a April 12 provisional deadline. The $43 billion acquisition has already received clearance in 13 jurisdictions.

The deal still needs anti-trust clearance in the U.S., Europe, Brazil, Canada, China, India and Mexico, according to a media representative at Syngenta.

OFI’s Cretin says the problem is that some investors got burned last year. By November, Syngenta had dropped as much as 13 percent in just over two months amid speculation that regulators could significantly delay or even block the deal. Concerns over ChemChina’s ability to finance the acquisition and its own merger with another state-owned entity also added to pessimism.

Foreign exchange is another factor. With the deal priced in dollars but the shares trading in Swiss francs, any drop in the U.S. currency makes the offer price less valuable. The Bloomberg Dollar Spot Index is heading for a third week of declines after incoming President Donald Trump disappointed investors hoping for details on fiscal stimulus in the U.S.

To contact the reporters on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net, William Canny in London at wcanny3@bloomberg.net.

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Gaurav Panchal, James Cone

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