The business includes the brands Stork and Flora, the latter of which is sold under the name Becel in Canada and several European countries, and as Promise in the U.S.

The sale of the business officially kicked off in late September, with Unilever’s banks sending out confidential information to a series of heavyweight buyout funds which have been working on this deal since the start of the summer, the sources said.

The auction has been dominated by private equity firms which have been lured by the unit’s strong profit margins. But the valuation might prove difficult, as Western consumers cut back on bread and margarine, the sources said.

International investors have teamed up in three rival consortiums consisting of Bain Capital and Clayton Dubilier + Rice (CD+R) as part of one group, Blackstone and CVC Capital Partners as part of a rival group, and KKR joining forces with Singapore’s sovereign wealth fund GIC.

U.S. investment fund Apollo was instead looking to bid alone, the sources said.

Industry players including U.S. agricultural trader Archer Daniels Midland have decided against bidding, the sources added.

Blackstone, CD+R, Bain, CVC, KKR and Apollo declined to comment, while Unilever and GIC were not immediately available for comment.

The sale, which is led by Morgan Stanley and Goldman Sachs, could fetch as much as six billion pounds (C$9.9 billion/US$7.8 billion) and was expected to wrap up toward the end of 2017, the sources said.

In its bid to exit from the shrinking margarine business, Unilever agreed last month to exchange its spreads unit in South Africa for Remgro’s 26 per cent stake in Unilever’s South African subsidiary, a deal worth US$900 million.

The consumer giant has been working hard to boost its margins and performance after rebuffing a surprise US$143 billion takeover bid from Kraft Heinz this year.

Unilever’s underlying operating margin improved 180 basis points to 17.8 per cent in the last six months, helped by an acceleration of cost-savings programmes, and a 130-basis point drop in brand and marketing spending.

On Sept. 25, Unilever made a 2.27 billion-euro (C$3.3 billion) swoop on fast-growing cosmetics company Carver Korea in a bid to build a global beauty business.

— Reporting for Reuters by Pamela Barbaglia, Dasha Afanasieva and Clara Denina.

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The 84-year-old business could fetch at least 1.5 billion pounds (C$2.48 billion), based on a valuation of more than 11 times Weetabix’s core earnings, the sources said.

Weetabix, majority-owned by China’s Bright Food, has also attracted interest from Cereal Partners Worldwide (CPW), a joint venture between Nestle and General Mills, and Italian pasta maker Barilla, the sources said.

The parties are working to put the finishing touches to their offers which are due in next week, said the sources, who declined to be identified as the matter is private.

Weetabix, ABF and Nestle declined to comment, while Bright Foods, Post, Barilla and General Mills were not immediately available.

Weetabix, which has marketed its products in Canada since 1967, today has significant Canadian assets, mainly in the production plant it’s operated since 1978 at Cobourg, Ont., on Lake Ontario south of Peterborough.

The Cobourg plant today makes breakfast cereals under the Weetabix, Alpen and Barbara’s brands for sale in the North American market, as well as GrainShop, a high-fibre cereal sold only in Canada since 2003.

Reuters exclusively reported on Dec. 20 that state-owned Bright Food had hired Goldman Sachs to run an auction for the well-known British brand, which had earnings before interest, tax, depreciation and amortization (EBITDA) of 130 million pounds (C$214.5 million) in 2016.

The bidders have been asked to submit non-binding offers ahead of a deadline of next week, the sources said, adding that private equity investors had not been invited to the process as they would struggle to compete against industry players who can reap synergies from the combination.

Post’s cereal brands include Cocoa Pebbles, Raisin Bran and Grape Nuts. ABF — which trades on a multiple of 10.75 times its EV/EBITDA — owns Jordans and Dorset cereals in the U.K. as well as Kingsmill bread and Mazola corn oil.

Barilla is best known for its pastas and sauces, but also makes Wasa crispbread. Cereal Partners Worldwide sells General Mills brands, such as Cheerios.

Bright Food bought a controlling stake in Weetabix from private equity firm Lion Capital in 2012.

The cereal industry has continued to struggle since then from mounting competition from other breakfast options like yogurts and smoothies and a shift away from gluten and wheat.

— Reporting for Reuters by Martinne Geller and Pamela Barbaglia. Includes files from AGCanada.com Network staff.

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The deal, for roughly 470 Swiss francs (C$649) per share, would be the biggest cross-border deal involving a Chinese buyer and mark an acceleration of a shakeup in the global agrochemicals industry. Negotiations are in final stages but nothing has been signed, the two sources said.

It will likely be announced on Wednesday, when Syngenta is scheduled to release 2015 results, the people said.

One source said minor adjustments to the price were still being discussed.

Syngenta shares closed 3.7 per cent higher at 392.30 francs in European trade on Tuesday.

ChemChina’s offer would be at a premium of about 24 per cent to Syngenta’s Monday close of 378.40 francs.

Syngenta will not have to pay a considerable breakup fee if the buyout fails, the two sources said.

While this potentially leaves the door open for peers including U.S. seed company Monsanto or BASF to top ChemChina’s offer, the people said that Syngenta was not actively soliciting counterbids.

Syngenta last year spurned takeover approaches from Monsanto, arguing it can create value on its own.

Last month, Monsanto’s CEO said attempts to re-engage Syngenta about a potential takeover had been difficult but that he believed there was still “a significant opportunity” for integration between the companies.

Syngenta declined to comment. ChemChina was not immediately available for comment outside regular business hours. Bloomberg had reported earlier on Tuesday that the deal was near.

Any deal would likely be reviewed by the U.S. Committee on Foreign Investment, which probes transactions with potential national security implications, but two CFIUS experts said they doubted that the inter-agency group would stop it.

“It looks like they (Syngenta) have a lot of U.S. operations but it doesn’t look like they are sensitive,” said one CFIUS expert, adding that he would be “very surprised” if the company failed to register the merger with the agency.

It is rare for CFIUS to stop a deal, although it did block Philips’ sale of high-end lights to China’s GO Scale Capital just last month.

Given other mergers in agricultural chemicals, such as DuPont’s and Dow Chemical’s agreement to combine, Syngenta chairman Michel Demare recently conceded that “going it alone is hardly possible,” given what shareholders were expecting.

The likely takeover price would nominally match Monsanto’s revised cash-and-stock bid made last August but the value of that offer would have fallen along with Monsanto’s share price.

ChemChina’s move marks another instance of the country’s quest for Western technology and distribution networks.

Similar transactions include last year’s buyout of Italian tire maker Pirelli by ChemChina. In January, ChemChina announced the acquisition of German industrial machinery maker KraussMaffei Group for about US$1 billion.

The Chinese government is keen to boost farming productivity as it seeks to cut reliance on food imports amid limited farm land, a growing population and higher meat consumption.

A global glut of corn and soybeans has depressed grain prices for the past three years, prompting U.S. farmers to reduce spending on everything from equipment to seeds and pesticides. The cutbacks, along with pressure from investors and a desire to bolster profit, have sent many of the world’s largest agricultural companies scrambling to cut deals.

The U.S. Department of Agriculture has estimated that net farm income sank to $55.9 billion last year, down nearly 55 per cent from an all-time high in 2013. Prices for U.S. corn have halved from three years ago. ($1 = 1.0194 Swiss francs)

— Reporting for Reuters by Arno Schuetze and Pamela Barbaglia. Additional reporting for Reuters by Amrutha Gayathri in Bangalore, Sue-Lin Wong in Hong Kong, Diane Bartz in Washington and Tom Polansek in Chicago.

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Monsanto is expected to tap German chemicals group BASF, an existing joint venture partner, as it seeks a buyer for the U.S. seeds business of Syngenta, which can’t be part of its proposed takeover, sources said.

The St. Louis-based group is after Syngenta for its industry-leading crop chemicals, driven by the idea that seeds and pesticides will be better sold and developed together.

Monsanto produces glyphosate, the world’s most widely used broad-spectrum herbicide, and has engineered a range of proprietary crops that resist it.

Syngenta closely integrated its seeds and crop chemicals operations in 2011 and Monsanto is expected to unravel some of the main strategic decisions that shaped the group over the last four years — selling off seeds and merging Syngenta’s crop chemicals with Monsanto’s seeds.

Global antitrust authorities are expected to demand remedies to reshape the balance of power in the crop protection industry before any combination is allowed.

Syngenta’s management will not want to be seen backing a deal that is then shot down by antitrust watchdogs, two industry sources said.

Monsanto commands about a quarter of the $40 billion global seeds market while Syngenta’s own seeds business has a global market share of eight per cent (all figures US$).

The Swiss group’s seeds business could be worth between $6 billion and more than $8 billion, according to analysts. It will have to be sold because authorities are expected to block Monsanto from entrenching its dominance of the U.S. soy and corn seeds market.

Monsanto has worked closely with BASF since 2007 when the two companies established a joint venture to develop higher-yielding and stress-tolerant versions of corn, soy, cotton and canola.

But Monsanto could also sound out Chinese companies such as China National Chemical Corp. (ChemChina) for Syngenta’s glyphosate-based herbicides, a sector banker said, pointing to products containing glyphosate as likely to raise antitrust concerns.

“What Monsanto needs is a stronger antitrust case,” said another source, who is close to a rival chemicals group monitoring the situation and asked not to be named.

The U.S. group has so far been unable to get a firm commitment from prospective buyers which include German pharmaceutical and chemical company Bayer, another banker familiar with the industry said.

The bankers said some suitors will likely demand chunks of Monsanto’s seeds business as part of any deal.

Zuercher Kantonalbank analyst Martin Schreiber said Dow Chemical could be another possible bidder for Syngenta’s assets.

Liberum analyst Sophie Jourdier said antitrust issues would not be insurmountable but highlighted the risk that U.S. farmers might lobby authorities to consider the combined group’s dominance of the broader agricultural inputs market and not look at seeds and chemicals separately, which would put the entire deal at a risk.

Monsanto is looking to a new generation of compounds, such as Syngenta’s Acuron herbicide to replicate the success of the glyphosate-centred seeds franchise.

Spokesmen at Monsanto, Syngenta, BASF and Bayer declined to comment while representatives at Dow Chemical and ChemChina were not immediately available for comment.

— Reporting for Reuters by Pamela Barbaglia in London and Arno Schuetze and Ludwig Burger in Frankfurt. Additional reporting by Greg Roumeliotis and Mike Stone in New York.

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Swiss crop chemicals maker Syngenta is working with Goldman Sachs to assess the merits of a sale to the world’s largest seeds company Monsanto, which is being advised by Morgan Stanley, the sources said.

Rumours of talks between the two companies gained momentum at the end of April, sending shares in Syngenta to a record high of 351 Swiss francs (C$461) on May 4 before easing amid a broad decline in equity markets.

Spokesmen at Monsanto, Syngenta, Goldman Sachs and Morgan Stanley declined to comment.

U.S. company Monsanto, which initially approached Syngenta last year, has long been interested in its Swiss rival and the potential to base itself in Switzerland and benefit from lower taxes, one of the sources said.

Following attempts by the U.S. Treasury to clamp down on such moves, known as tax inversion, Monsanto may have to buy Syngenta in a cash rather than stock transaction and would be unable to redomicile in Switzerland, an industry source said.

The St Louis-based group, however, might struggle to finance such a deal, which could cost up to $40 billion, and may need to find a partner to take on Syngenta’s U.S. seeds business before launching a takeover bid, another person familiar with industry said (all figures US$).

Monsanto foresees strong benefits from a takeover of Syngenta, which makes heavy research and development (R+D) investments in crop technology to increase the average productivity of crops such as corn, soybeans, sugar cane and cereals.

Monsanto, meanwhile, is focused on conventional and biotech seeds and last year raised its R&D spending to $1.7 billion from $1.5 billion in 2013.

“There is a clear strategic logic to a deal,” one of the industry sources said. “Syngenta is the only available target in crop protection. It’s no wonder Monsanto continues to circle the company.”

A deal would come as prospects for genetically modified (GM) crops are improving in the European Union after a change in its legislation unlocked a stalled approval process. Monsanto owns the only GM product approved for cultivation in the EU, a modified maize.

Despite the two companies’ cultural affinity, a merger may be challenged by antitrust regulators, primarily in North America, where the two groups are already seen as market leaders in the seeds industry.

Syngenta would need to go through a portfolio clean-up and carve out its U.S. corn and soybean businesses, said a banker close to other potential bidders weighing their options, hoping to derail a deal that would reshape the industry.

Rival suitors?

German chemicals company BASF and U.S. petrochemicals group Dow Chemical could be among possible bidders for all or parts of Syngenta, one of the sources said.

He mentioned Chinese state-owned firm, China National Chemical Corp. (ChemChina), as another possible buyer with strong appetite to bulk up its European presence, though Syngenta may be reluctant to cede control to an Asian rival.

“No one wants to make the first move,” the source said. “Everyone is waiting to see the level of the first bid before reacting.”

Syngenta has not been open for any deal, another source said. “They are a proud Swiss company. They see themselves as market leader and wouldn’t agree to anything without a fight.”

Spokesmen at BASF and Dow Chemical declined to comment, while representatives of ChemChina were not immediately available for comment.

Syngenta, which was formed in 2000 by the merger of Novartis Agribusiness and Zeneca Agrochemicals, also competes with Bayer CropScience and DuPont Pioneer.

— Pamela Barbaglia and Arno Schuetze are Reuters correspondents covering mergers and acquisitions (M+A) from London and the banking sector from Frankfurt respectively. Additional reporting for Reuters by Greg Roumeliotis and Mike Stone in New York and Sybille de La Hamaide in Paris.

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