Syngenta Squeeze Out of Minority Shareholders Could Yield 6-12% Annualized or More
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A Special Situation Squeeze-Out in Syngenta Stock could Yield 6-12%
- A Squeeze-out is a type of special situation, which includes:
- Tender Offers
- Small Lots
- ChemChina owns 98% of Syngenta and is forcing the deal terms on the remaining 2% of shareholders
- ChemChina is offering $93.00 per share and the stock is trading at $92.00 for a %1.08 return.
- The squeeze out can occur at any moment, with a high probability of completion by the end of September for a 13% annualized return.
- A mid-September close could push the annualized return up to 26%.
- Since the transaction itself has already completed, there is almost no risk at all.
The SYT American Depository Shares or “ADS” is equal to 1/5 of a share.
How to calculate your break even investment for this squeeze-out
The deal price was for $465 per share or $93 per ADS.
With the stock selling at $92.00, you get $1.00 profit per share. Many brokerages will charge a fee for the transaction that will occur in the squeeze out. Somewhere in the $25 to $35 range. For this deal to be profitable, you have to cover your costs first. To cover your $35 fee, and your commission ($7), you will need to buy at least 42 shares for a total investment of $4,864 just to realize a profit before costs of $42 break even.
There is the least risk in this type of special situation out of all of them, so you could up-size your usual position size if you have the capital. What kind of profit is really possible?
What kind of profits are possible?
If my position size is $100,000 and I am able to acquire a full position in this very illiquid stock, my profit would be $100,000 x .0108 or $1,080, less commissions and the $35 fee. As you can see, this type of lowest risk investment does not generate oodles of cash unless you are working with a ton of capital. It IS a better use of cash than most savings accounts in terms of yield, however.
What kind of liquidity does the stock have?
Keep in mind that only 2% of all of the original outstanding shares are still floated, so this is a very illiquid stock and the only way to achieve a profit of any kind is to keep buying until the transaction closes. You should not expect to get your money back for a few months.
Will there be Swiss Witholding tax of 35%?
On July 13, 2017, Chemchina announced that buy buying in some of the remaining shares, it had reached 98% ownership. This ownership level is key because if the Swiss tax that could have been levied on shareholders if the squeeze-out represents more than 2% of the outstanding shareholders. In this fantastic article by Seeking Alpha contributor An Arb and Leg’s Blog published on May 23, 2017 about the Syngenta acquisition by ChemChina, the author describes this Swiss Withholding Tax dilemma.
Personally, I did not get involved in this idea until AFTER this July 13 announcement. I wish avoid as many taxes as possible.
How long will it take for the Basel Appellate Court to approve the squeeze-out and for the transaction to take place in brokerage accounts?
This is the magic question. Courts have calendars
Here are the documents and key information from the history of this transaction in reverse chronological order.
July 13, 2017
“Following the purchase of additional Syngenta shares, ChemChina's participation in Syngenta has exceeded 98% of Syngenta's share capital.
As a consequence, ChemChina has filed a petition with the Basel Appellate Court to cancel the remaining Syngenta shares that are not held by ChemChina or any of its affiliates. Holders of these Syngenta shares will receive the offer price of USD 465 per Syngenta share following completion of the court proceedings.”
On June 7, 2017
China National Chemical Corporation (ChemChina) today announced the successful completion of the Second Settlement of ChemChina’s tender offers for Syngenta. Shareholders who tendered their shares after 4 May 2017 received the consideration of US$465 per share, and holders of American Depositary Shares ("ADSs") who tendered their ADSs received US$93 per ADS, on June 7, 2017. In the First and the Second Settlement, ChemChina acquired 94.7 percent of Syngenta shares in aggregate.
As soon as permitted by law and applicable regulation, it is intended to de-list the shares from the SIX and to de-list the ADSs from the NYSE.
On May 31, 2017
ChemChina and Purchaser announced the definitive end results of the Offers. Based on finalized numbers, a total of 87,455,312 Common Shares (including those represented by ADSs) (approximately 94.7% of the Common Shares (including those represented by ADSs)) have been tendered. The Second Settlement will occur on June 7, 2017.
April 5th, 2017
ChemChina and Syngenta today announced that they have received approval from the US Federal Trade Commission (FTC) for the proposed acquisition of Syngenta by ChemChina. This represents a major step towards the closing of the transaction, which is expected to take place in the second quarter of 2017.
March 23, 2016
Tender Offer on Form SC TO-T
As of March 23, 2016, CNAC Saturn (NL) B.V. (“the Offeror”), a subsidiary of China National Chemical Corporation (ChemChina), a state-owned enterprise of the People’s Republic of China, launched public tender offers in Switzerland and in the United States to acquire all the publicly held Ordinary Shares and, in the U.S. offer, also all American Depositary Shares (ADSs) of Syngenta AG (“the ChemChina Tender Offer”) for $465 per Ordinary Share in cash. On May 10, 2017, it was announced that, as of the end of the Main Offer Period, 76,128,826 Syngenta AG Ordinary Shares (including those represented by ADSs), corresponding to 82.23% of the voting rights, had been tendered in the ChemChina Tender Offer and that the Offer had been successful. On May 31, 2017, it was further announced that, as of the end of the Additional Acceptance Period, the definitive end result of the ChemChina Tender Offer was that the Offeror’s participation was 87,650,988 Syngenta AG Ordinary Shares (including those represented by ADSs), corresponding to 94.68% of the voting rights. Consequently, Syngenta AG’s parent company is now CNAC Saturn (NL) B.V. and its ultimate parent company is ChemChina.
Syngenta AG is a global Swiss agribusiness that produces agrochemicals and seeds. Syngenta is a leading agriculture company helping to improve global food security by enabling millions of farmers to make better use of available resources. Through world class science and innovative crop solutions, our 28,000 people in over 90 countries are working to transform how crops are grown. We are committed to rescuing land from degradation, enhancing biodiversity and revitalizing rural communities. To learn more visit www.syngenta.com
China National Chemical Corporation is a Chinese state-owned chemical company in the product segments of agrochemicals, rubber products, chemical materials and specialty chemicals, industrial equipment, and petrochemical processing.
DISCLOSURE: Long SYT
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