ChemChina to acquire Syngenta in $43-bn friendly deal
04 February 2016
State-owned China National Chemical Corporation (ChemChina) yesterday struck a friendly $43-billion deal with Swiss seeds and pesticides giant Syngenta AG to become the world's biggest supplier of pesticides and agrochemicals.
The Beijing-based company has offered to pay 480 francs ($465) per share in cash, a premium of 20 per cent to Syngenta' last closing price.
Syngenta, based in Basel,has net debt of $2.6 billion.
Although it is not the largest acquisition to date (Vodafone paid $180 billion in 1999 to buy Germany's Mannesmann), it is the biggest overseas acquisition by a Chinese company. It surpasses the 2008 purchase of China Netcom Group by China Unicom Hong Kong Ltd for $29 billion.
The deal is also the second-biggest in the chemicals industry in two months, after Dow Chemical and Dupont agreed in December to a $130-billion merger.
The potential deal comes eight months after Syngenta spurned a $45-billion unsolicited takeover offer from US rival Monsanto Co, saying that the offer undervalued the company and posed execution risks. (See: Syngenta rejects $45 billion Monsanto takeover offer)
Syngenta, which has a market cap of $36.3 billion and annual revenues of $15.3 billion, was formed through the 2000 merger of Novartis Agribusiness and Zeneca Agrochemicals and has since grown through 13 acquisitions.
It is the world's largest crop chemical producer, and the third-largest in seeds and biotechnology by sales.
The company deals in herbicides, insecticides and fungicides for crop protection, field crops, vegetables and flower seeds, seed-care products and turf, garden, home care and public health products.
Listed on the Swiss and New York stock exchanges, Syngenta employs over 28,000 people in over 90 countries and has 12 production facilities across Switzerland, the US, the UK, Brazil, India, France and China.
Its main competitors are Monsanto Company, BASF, Dow AgroSciences, Bayer CropScience and DuPont Pioneer.
For ChemChina, the Syngenta transaction would be the biggest overseas acquisition after it purchased Italian tyremaker Pirelli in August 2015 in a $7.7-billion deal.
ChemChina was created in 2005 by putting together several chemical firms under China's erstwhile ministry of chemical industry and grew into a $36.5-billion business with 140,000 employees under chief executive Aye Ren Jianxin, a former communist youth league leader.
The company's main businesses include materials science, life science, high-end manufacturing and basic chemicals, among others.
ChemChina, whose recent overseas acquisitions include Italian tyre maker Pirelli & C. SpA, German machinery maker KraussMaffei Groupa, and a 12 per cent of Swiss commodity trader Mercuria Energy Group/
Its earlier purchases include Adisseo Group of France, Australia's Qenos Holdings and Norway's Elkem.
The company has invested more than $15 billion in overseas deals in the past decade prior to Syngenta.
However, it is still overshadowed by state-owned behemoths Sinopec Corp and PetroChina Co Ltd.
But a deal would need to pass antitrust regulators in Europe, the US, the UK, India, Brazil and China, where Syngenta operates.
The deal would also have to be approved by the US Committee on Foreign Investment (CFIUS), which last month blocked the $3.3 billion sale of Royal Philips NV's lightning business to Chinese private equity firm Go Scale Capital. (See: Philips terminates $3.3-bn Lumileds sale to Chinese PE firm on US regulatory concern)
But CFIUS approved the 2013 acquisition of Smithfield Foods Inc, the world's largest hog and pork producer by China's Shuanghui International Holdings for $7.1 billion.
Both companies do not see any hurdle in obtaining approval from CFIUS and intend to voluntarily put the deal before it to forestall a possible detailed investigation by the US government.
The deal may not face antitrust hurdles in other countries since the merger with ChemChina's existing agrochemical subsidiary Adama would result in only a 19 per cent market share for the combined entity.
ChemChina has secured $30 billion and $20 billion loans from China's Citic Securities and HSBC respectively to fund the cash deal, but would later raise financing for the deal by selling an equity stake in the company and also by issuing long-term debt.
Once the deal is completed, Demaré and three other Syngenta representatives will join a 10-person board of the company, and ChemChina may look to relist Syngenta at a future date.