China National Chemical Corp (ChemChina) offered Swiss agrochemical and seeds producer Syngenta more than $43 billion on Wednesday to acquire its entire stake. A Swiss and USA tender offer will commence in the coming weeks and the transaction is expected to conclude by the end of the year. The price represents a 22% premium to Syngenta’s closing price on Tuesday. The Swiss company market value stands almost $32 billion. “This is a government attempting to address a real problem”.
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ChemChina is a Beijing-based company founded by Ren Jiaxin in the 1980s.
“The Chinese have relied mainly on traditional ways of farming”.
Behind the biggest-ever foreign acquisition by a Chinese firm is one of the most daunting challenges the country faces: it must secure its food supply and feed 1.5 billion people despite a shortage of viable farmland. If completed, ChemChina’s Syngenta purchase would be more than double Cnooc’s $17.7bn buy of Canadian energy company Nexen in 2012.
As CNN Money reports, Chinese companies have been involved in a flurry of global acquisitions since the start of this year.
“Syngenta has never been valued so highly. Over the last few years, the company has failed to demonstrate it can generate reasonable earnings on its own”, said Patrick Huber at Mirabaud Asset Management. “I can’t imagine another bidder making a higher offer”.
Syngenta said the deal would give it more scope to expand further in pesticides and to develop its seeds business while getting greater access to emerging makets, in particular China.
Those deals are, however, all dwarfed by the ChemChina deal, which is poised to earn a hefty fee for HSBC, even though the British bank shares the advisory role on the deal with China Citic Bank International. Syngenta will owe ChemChina about $1.5 billion if the deal falls through for any reasons the Swiss group is accountable for, Ramsay said.
The Committee on Foreign Investment in the United States (CFIUS), whose mandate is US national security, would not pose a major hurdle, Ramsay said.
ChemChina said it is committed to maintaining the highest governance standards with a view to an IPO of the business in the years to come.
The company’s board of directors said that it has unanimously recommended the offer to shareholders as the deal is respectful of stakeholders’ interests. A number of Syngenta shareholders expressed their opposition to a deal with ChemChina in January, but it seems that a deal may go ahead despite them.
A global glut of corn and soybeans has depressed grain prices for the past three years, prompting USA farmers to reduce spending on everything from equipment to seeds and pesticides.
A giant Chinese chemical company is betting the farm on agriculture.
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“We are delighted that our “friendly and cooperative” principle has led to the agreement announced today”, Ren Jianxin, chairman of ChemChina, said according to a press release.
