The deal is the largest-ever acquisition by a Chinese firm and will be HSBC’s biggest advisory mandate.
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Syngenta said Wednesday that the agreed offer by the Chinese company, commonly known as ChemChina, amounted to $465 a share, plus a special dividend of 5 Swiss francs($4.91) a share to be paid immediately before the deal’s closing.
Syngenta’s existing management will continue to run the company but completion would see ChemChina’s chairman also become chairman of Syngenta, with four of the existing Syngenta board members remaining.
The acquisition will “minimize operational disruption” and “enable long-term investment in innovation”, Syngenta Chairman Michel Demaré said in a statement. In January it had said that it would purchase KraussMaffei Group, the German equipment-maker as part of a consortium of investors for about $1bn, in March 2015 ChemChina agreed to buy Pirelli, the Italian tire maker for $7.7bn.
One person familiar with the deal added that if issues cropped up, the companies were prepared to take steps to address potential problems. ChemChina will commence a Swiss and US tender offer in the coming weeks and the transaction is expected to conclude by the end of the year. It said it would also consider an initial public offering of the business “in the years to come”. Ren has hired professional managers to operate his companies, winning ChemChina a reputation as China’s most global and market oriented state-owned enterprise.
In addition, the company offers flower genetics and pesticides, such as flower seeds, cuttings, and young plants; ornamental controls; and home and garden pesticides, as well as chemical and biological crop protection solutions for a range of ornamentals in pot and bedding plants, bulbs, and cut flowers. So it’s possible that the board of the Committee on Foreign Investment in the United States, which monitors foreign investment from the perspective of national security, might yet scotch it.
However, talk of the ChemChina-Syngenta deal caused Syngenta stock to shoot back to yesterday’s close of $78.57, a 6.2% move up in the day’s trading. Before the Syngenta acquisition he orchestrated more than 100 other deals involving both foreign and Chinese companies.
Syngenta will not have to pay a considerable breakup fee if the buyout fails, the two sources said. “Over the last few years the company has failed to demonstrate it can generate reasonable earnings on its own”, Patrick Huber, a fund manager at Mirabaud Asset Management told Reuters.
Syngenta’s Board of Directors unanimously recommends the offer to its shareholders as it considers that the proposed transaction respects their interests.
In addition to regulator concerns, ChemChina has opened Syngenta up to opposing bids.
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The realignment of the global chemical industry has been accelerating since US powerhouses Dow Chemical and DuPont announced a megamerger late past year.
