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Western Banks' Participation in Syngenta's Shanghai IPO Uncertain Amidst Geopolitical Tensions

Goldman Sachs, JPMorgan, and other western banks have been engaged in months of lobbying to secure roles in one of China's largest-ever stock market listings.

Western Banks' Participation in Syngenta's Shanghai IPO Uncertain Amidst Geopolitical Tensions

The $9 billion initial public offering (IPO) of Syngenta, a Swiss agricultural chemicals company, appears to be a highly desirable opportunity for these banks, given the company's international presence and existing relationships with global institutions.

However, the escalating geopolitical tensions between the United States and China may prevent these banks from participating in the IPO, reflecting the rapidly changing business landscape in the world's second-largest economy. One Asia-based banker at a global firm expressed their desire to be part of the Syngenta IPO but raised concerns about their ability to eventually work on the deal.

The issue stems from Syngenta's owner for the past six years, state-owned ChemChina, which is on a US government watchlist of companies with close ties to China's military. As a result, global banks are seeking legal and political advice to determine if they can or should be involved in the listing. However, most banks currently lack a clear answer to this question.

Han Lin, China country head at advisory firm The Asia Group, remarked that the Syngenta IPO exemplifies the challenges faced by financial services companies seeking success in China. The limited involvement of foreign banks in China's new listings this year supports this notion. According to data from Dealogic, foreign banks have only been involved in $297 million worth of new listings in China in 2023, representing 1.2% of the total. If this trend continues, it would mark the smallest share of the annual total since these banks entered China's securities sector in 2009. US banks, in particular, have been hit hard, failing to secure positions in any mainland Chinese IPO this year, despite a total fundraising amount of $26 billion.

The Syngenta IPO has been years in the making. ChemChina, having completed the largest-ever outbound takeover by a Chinese company with its acquisition of Syngenta in 2017, had previously attempted to list the company but faced delays due to the pandemic. This year, Syngenta abandoned its plans to list on Shanghai's tech-focused Star board after the exchange rejected the application without providing an explanation.

However, this month, Syngenta obtained approval from a Shanghai Stock Exchange listing committee to list 20% of the company on the exchange's main board. If the company achieves its goal of raising RMB 65 billion ($9.1 billion), the Syngenta IPO would rank as one of the largest listings in China's history, according to data from Dealogic.

Bankers at Goldman Sachs, JPMorgan, Morgan Stanley, UBS, and HSBC, all of which have mainland investment banking businesses, have been actively lobbying for roles in the Syngenta IPO, as confirmed by multiple sources familiar with the process. Despite the challenging US-China relationship, an executive at one of the banks stated that they continue to adhere to their strategy of attracting international investors to China.

Western banks are particularly interested in the listing because it would position them favorably for potential secondary listings in London, Zurich, or New York. According to individuals close to the company, a secondary listing in one of these global financial centers is still under consideration.

The main selling point for global banks is their ability to attract international investors, including hedge funds and sovereign wealth funds. A banker familiar with the process highlighted the importance of foreign investment in a Swiss company like Syngenta, as it would provide Chinese investors with more confidence.

Although banks such as Citi, Morgan Stanley, JPMorgan, and HSBC advised Syngenta on a $500 million bond issuance in Hong Kong as recently as October, the Syngenta IPO prospectus is currently only available in Mandarin. Furthermore, no western banks have been publicly appointed, not even to junior roles. Both Syngenta and the banks declined to comment on the matter.

One of the concerns for western banks is the potential complications arising from widening US sanctions. While ChemChina is on a US Office of Foreign Assets Control list, which prohibits US investors from buying or selling public securities in listed companies associated with China's military-industrial complex, Syngenta itself is not on the list. This means that banks are not legally prohibited from advising Syngenta. However, it could attract scrutiny from policymakers in Washington who aim to prevent US companies from supporting Chinese military-associated firms.

It remains uncertain whether western banks, especially those from the US, will be able to progress far enough in the process to face such questions. Executives from two US firms stated that they would make final decisions about their involvement once they secure mandates from Syngenta. In the meantime, bankers based in Asia find themselves in a state of limbo, contemplating the extent of their commitment and whether they should pursue the opportunity with full force.



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