ChemChina to make $62b bid for Syngenta

Syngenta's position as the world's largest pesticide maker and its yield-boosting modified crops are expected to help China increase the amount of food it produces per hectare.
Syngenta's position as the world's largest pesticide maker and its yield-boosting modified crops are expected to help China increase the amount of food it produces per hectare. PHOTO: REUTERS

If completed, takeover deal will be largest overseas acquisition by a Chinese firm

BASEL (Switzerland) • China's state-owned ChemChina will make an agreed-on US$43 billion (S$62 billion) bid for Swiss seeds and pesticides group Syngenta, the companies said yesterday, marking the largest overseas acquisition by a Chinese firm.

The deal accelerates a shake-up in the global agrochemicals industry and is a setback for United States seed company Monsanto, which made an unsuccessful US$45 billion move for Syngenta last year. If completed, it would be China's biggest outbound takeover deal, more than double China National Offshore Oil Corporation's US$17.7 billion purchase of Canada's Nexen in 2012.

Syngenta's position as the world's largest pesticide maker and its yield-boosting modified crops are also expected to help China increase the amount of food it produces per hectare. Its shares rose more than 6 per cent yesterday but, at around 418 Swiss francs (S$587), traded some way below the agreed offer price of US$465 per share, equivalent to 480 francs.

Syngenta chief executive John Ramsay said he sees no major regulatory hurdles, noting that ChemChina had secure financing in place for the deal. "I think the overall regulatory approvals will not be very challenging," he said, adding that he expected anti-trust regulators to acknowledge the limited overlap in the two firms' markets.

He said the deal was "very appropriate and attractive" to Syngenta shareholders but its board would have to consider any rival offers.

ChemChina, short for China National Chemical Corp, has agreed to pay about US$3 billion in fees to Syngenta if it fails to meet all requirements for the deal. Syngenta will owe ChemChina about US$1.5 billion if the deal falls through for any reasons the Swiss group is accountable for, Mr Ramsay said.

ChemChina chairman Ren Jianxin said: "The discussions between our two companies have been friendly, constructive and cooperative, and we are delighted that this collaboration has led to the agreement announced today. We will continue to work alongside the management and employees of Syngenta to maintain the company's leading competitive edge (in agricultural technology)."

This is the latest move in China's quest for Western technology and distribution networks. Similar deals include last year's buyout of Italian tyre maker Pirelli by ChemChina, which also announced the acquisition of German industrial machinery maker KraussMaffei Group for about US$1 billion last month.

  • Latest chapter in chemical firm's rise

  • BEIJING • State-owned China National Chemical Corp, also known as ChemChina, has offered a takeover of Swiss pesticide giant Syngenta in what will be by far the biggest overseas acquisition by a Chinese firm.

    ChemChina is the country's biggest chemical firm and is among more than 100 state-owned enterprises that report directly to the central government. Fortune magazine ranked it No. 265 on its list of Global 500 companies for 2015.

    Created out of assets under the former ministry of chemical industry in 2004, the company has grown to include speciality chemicals, oil refining, agricultural chemicals, tyre and rubber products and chemical processing equipment.

    According to the most recent figures on its website, it had assets of 272.5 billion yuan (S$58 billion) and annual revenue of 244 billion yuan in 2013. Chairman Ren Jianxin is credited with building the company through an aggressive string of foreign investments.

    Mr Ren, 58, has been chairman since 2014, but he has been with the company in various executive positions since its formation. A native of the north-western province of Gansu, he and seven others started a cleaning company called BlueStar, which washed boilers and tea urns in the 1980s, shortly after China launched economic reforms.

    BlueStar grew through mergers and acquisitions before joining with companies under the chemical ministry.

    A glowing portrait in the state-run China Daily newspaper described him as "the undisputed king of mergers and acquisitions" in the chemical industry.

    The logic behind his acquisition comes down to the growing gap between two numbers - China's population and available agricultural land. China has 21 per cent of the world's population with just 9 per cent of its arable land, according to the Jefferies Group.

    Syngenta's position as the world's largest pesticide maker and its yield-boosting genetically modified crops are expected to help increase the amount of food China produces per hectare and give ChemChina the muscle to take on rivals, including US firm Monsanto.

    AGENCE FRANCE-PRESSE, BLOOMBERG

China 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 soya beans has depressed grain prices for the past three years, prompting US farmers to reduce spending. This, along with investor pressure and a desire to bolster profit, have sent many of the world's largest agricultural firms scrambling to cut deals.

The ChemChina offer will allow for dividend payments to Syngenta shareholders of up to 16 Swiss francs per share, including a special dividend of 5 francs to be paid conditional on closing.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on February 04, 2016, with the headline 'ChemChina to make $62b bid for Syngenta'. Print Edition | Subscribe