(Reuters) – Chinese authorities nudged Swiss agrichemicals and seeds group Syngenta to withdraw its application for a long-delayed $9 billion IPO in Shanghai on concerns about the impact a sizeable new offering would have on a volatile market, four people said.
The Chinese state-owned pesticide giant last Friday withdrew its bid for the initial public offering (IPO) saying the decision was taken “after careful consideration of (the) industry environment and the company’s own development strategy”.
Syngenta filed to list on the main board of the Shanghai Stock Exchange last May seeking to raise 65 billion yuan ($8.98 billion) and passed a review by the bourse’s listing committee a month later. Its executives said as recently as last November that Syngenta planned to list in 2024.
The company, however, did not secure a green light from China’s securities regulator or top leaders at the State Council, a prerequisite for blockbuster IPOs to go ahead, said the four people familiar with the matter.
The planned flotation finally came unstuck after Syngenta, owned by Sinochem, in March received informal instructions from the China Securities Regulatory Commission (CSRC) to pull its bid for the mega listing, said one of the people.
The State Council Information Office and the CSRC did not respond to a request for comment. Syngenta said it would not comment beyond the statement it issued on Friday.
The reason for Syngenta’s IPO withdrawal and the way it was managed, which have not been reported previously, underscore how Beijing is prioritising boosting investor confidence in the secondary market over the launch of new equity offerings.
The government’s request for Syngenta to scrap its IPO came despite the company’s seeds being essential to food security and China’s self-reliance in grain production, which the country’s leaders, especially President Xi Jinping, have strongly promoted.
The withdrawal resulted from Chinese authorities’ concerns over the potential impact of a sizeable IPO on the frail stock market which had a wretched start to the year, said the four people with knowledge of the matter.
Large IPOs have often been cited by analysts as a reason for triggering the plunge of domestic stock markets, as large amounts of money are frozen when subscriptions are taken, sapping liquidity in the secondary market.
China’s stock market rout at the beginning of the year came after mainland shares lagged global stocks for three years and with deflation at levels not seen since the global financial crisis of 2008-09.
TIGHTER SCRUTINY
China’s securities watchdog has sharply tightened scrutiny of IPOs this year, leading to companies scrapping domestic listing plans in droves, with some turning to offshore markets such as Hong Kong and New York.
The stricter reviews came after the CSRC in August last year announced plans to slow the pace of IPOs and equity follow-on offerings in an attempt to bolster the secondary market in the world’s second-largest economy.
During January-March 2024, proceeds raised via mainland China IPOs plunged 82% from a year earlier to just $2.4 billion, the smallest quarterly fundraising since the last quarter of 2018, LSEG data showed.
The sudden chill in China’s IPO market, which was the world’s biggest in 2022 and 2023, comes after the securities watchdog, under new chairman Wu Qing, last month vowed to step up scrutiny of listing candidates and crack down on any lapses.
The listing of Syngenta, which was bought by ChemChina in 2017 for $43 billion and folded into Sinochem in 2021, would have been China’s largest and one of the world’s biggest flotations this year.
The offering has been postponed repeatedly by various issues since first being filed in 2021.
The company initially aimed to float on Shanghai’s tech-focused STAR Market which generally offers high valuations and filed the application in June 2021. Two years later, it shifted to the main board for listing.
Syngenta said in its statement last Friday that it would look to restart the listing process either in China or on a different exchange, when conditions are right, as well as explore alternative sources of funding.
Market analysts have previously cited Hong Kong, Zurich and London as potential alternatives for a Syngenta listing.
($1 = 7.2357 Chinese yuan)
(Reporting by Reuters staff; Editing by Sumeet Chatterjee and Sonali Paul)
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