China improve domestic food production with $43-bn bid Syngenta

China to improve domestic food production with $43-bn bid for Syngenta

12:18 PM, 4th February 2016
China to improve domestic food production with $43-bn bid for Syngenta
Swiss agrochemicals maker Syngenta's logo at the company's headquarters in Basel, Switzerland. © Reuters (File photo)

BASEL, SWITZERLAND: China has taken a gigantic leap onto the global M&A stage, with the announcement of state-owned company ChemChina acquiring Swiss agribusiness giant Syngenta AG for more than $43 billion (£30 billion), aiming to improve domestic food production.

Shares in Syngenta rose on news of the deal, but at around 412 Swiss francs, were some way below the agreed offer price of $465 per share, equivalent to 480 francs, reflecting market concerns that the deal could yet stumble over regulatory hurdles and limited expectations of a counter-offer.

This deal will be the largest ever foreign purchase by a Chinese firm and the second-biggest takeover in the chemicals industry after the $130 billion Dow Chemical/DuPont merger, which will accelerate a shake-up in global agrochemicals and marks a setback for US firm Monsanto, which failed to buy Syngenta last year.

China, the world’s largest agricultural market, is looking to secure food supply for its population. Syngenta’s portfolio of top-tier chemicals and patent-protected seeds will represent a major upgrade of its potential output.

Years of intensive farming combined with overuse of chemicals has degraded land and poisoned water supplies, leaving China vulnerable to crop shortages. The deal fits into Beijing's plans to modernise agriculture over the next five years.

With growth slowing at home, Chinese companies are increasingly looking abroad for deals that can boost their business and help them diversify. If completed, ChemChina's Syngenta purchase would be more than double China National Offshore Oil Corporation’s (CNOOC) $17.7 billion buy of Canadian energy company Nexen in 2012.

The board of directors of Syngenta considers that the proposed transaction respects the interests of all stakeholders and is unanimously recommending the offer to shareholders. There is committed financing for the deal and a strong commitment to pursue regulatory clearances. A Swiss and US tender offer will commence in the coming weeks and the transaction is expected to conclude by the end of the year.

Syngenta’s existing management will continue to run the company. After closing, a ten member board of directors will be chaired by Ren Jianxin, chairman of ChemChina, and will include four of the existing Syngenta board members. ChemChina is committed to maintaining the highest governance standards with a view to an IPO of the business in the years to come.

“In making this offer, ChemChina is recognizing the quality and potential of Syngenta’s business. This includes industry-leading R&D and manufacturing and the quality of our people worldwide. The transaction minimizes operational disruption; it is focused on growth globally, specifically in China and other emerging markets, and enables long-term investment in innovation. Syngenta will remain Syngenta and will continue to be headquartered in Switzerland, reflecting this country’s attractiveness as a corporate location,” said Michel Demare, chairman of Syngenta.

John Ramsay, chief executive officer, said: “Syngenta is the world leader in crop protection having significantly increased its global market share over the last ten years. This deal will enable us to maintain and expand this position, while at the same time significantly increasing the potential for our seeds business. It will ensure continuing choice for growers and ongoing R&D investment across technology platforms and across crops. Our commitment to cost and capital efficiency will remain unchanged.”

“The discussions between our two companies have been friendly, constructive and co-operative, 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 the global agricultural technology field,” said Jianxin.

“Our vision is not confined to our mutual interests, but will also respond to and maximize the interests of farmers and consumers around the world. We look forward to Michel Demare remaining on the board as vice chairman and lead independent director, and to working with John Ramsay and the management and employees of Syngenta to deliver safe and reliable solutions for the continued growth in global food demand,” he said.

The transaction will enable further expansion of Syngenta’s presence in emerging markets and notably in China. In addition to its array of modern chemistry, Syngenta will contribute its experience and know-how in promoting the highest environmental standards and in nurturing thriving rural communities.

Dyalco, J P Morgan, Goldman Sachs and UBS served as financial advisors to Syngenta on the transaction. Bar & Karrer and Davis Polk served as legal advisors.

© Worldofchemicals News

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