So today, I see this piece about the sale of Syngenta to the Chinese. It is easy to understand why the Chinese would want to own a company with a proven track record of increasing crop yields. What makes this deal so jaw-dropping is that their $43billion offer was for a cash sale. That is a serious pile of money for a seed company but compared to most transactions on Wall Street, this one actually makes sense. What Syngenta does is so valuable it borders on priceless.
Which is why this "done deal" faces some serious hurdles. The USA could easily say that plant genetics is a strategic asset—or at least as strategic as the tools used to build chip-fab equipment and deals for things like that have been blocked. It should also be noted that Monsanto has bought a lot of clout in Washington over the past 25 years or so. It is likely they still covet Syngenta and could pull strings to block the deal to their own advantage.
ChemChina agrees to buy Syngenta in record $43 bn dealThe offer of $465 a share in cash, endorsed by Syngenta’s board, is about 20% higher than the stock’s last close
Sarah Chen, Alice Baghdjian, Sheenagh Matthews 03FEB16
Beijing/Zurich/Frankfurt: China National Chemical Corp. agreed to buy Swiss pesticide and seeds maker Syngenta AG for more than $43 billion in cash as the state-backed company extends its shopping spree with what would be the biggest acquisition by a Chinese firm.
ChemChina, as the closely held company is known, offered $465 a share in cash, according to a statement on Wednesday. The offer, endorsed by Syngenta’s board, is about 20% higher than the stock’s last close.
Shares rose as much as 7% and were trading 6% higher at 415.90 francs at 9.06am in Zurich.
If completed, the deal would help chairman Ren Jianxin transform ChemChina into the world’s biggest supplier of pesticides and agrochemicals, while snatching an asset coveted by St. Louis-based Monsanto Co. It also underscores the importance China attaches to owning seed and cropcare technology that can boost agricultural output and help feed the world’s biggest population.
Syngenta had sales of $13.4 billion in 2015, mainly from crop protection such as pesticides and the seeds business. Bolstering agrochemicals would help ChemChina reduce its reliance on petrochemical and petroleum products, which accounted for almost half of the 256.4 billion yuan ($39 billion) in revenue it had in 2014, the latest annual figures available for the company.
Behind the Chinese company’s pursuit are national interests. Chinese President Xi Jinping is trying to boost agricultural output to maintain self-sufficiency as a growing middle class consumes more grain-intensive meat and farmland is converted to housing and golf courses. The World Bank estimates that China’s arable land declined 6% in the past decade as economic growth boomed.
As well as domination of the Chinese market, Syngenta will provide global access to farmers from Brazil to the UK. Helping execute that vision is Ren, a 58-year-old executive who started China’s first professional cleaning company with a 10,000 yuan loan and is now emerging as one of the country’s most active dealmakers.
Syngenta would trump all past deals in a country whose appetite for foreign assets is surging. ChemChina’s latest purchase follows other Chinese overseas transactions this year including Haier Group Corp.’s $5.4 billion purchase of General Electric Co.’s home-appliance business to Dalian Wanda Group Co.’s deal to buy control of Legendary Entertainment. This year’s tally is on pace to exceed 2015’s record $123.9 billion, according to data compiled by Bloomberg.
In 2016 alone, ChemChina, whose holdings include storied Italian tyre maker Pirelli & C. SpA, led a group that agreed to buy German machinery maker KraussMaffei Group for €925 million ($1 billion) and it acquired 12% of Swiss commodity trader Mercuria Energy Group Ltd.
Prior to that, purchases have included Adisseo Group in France to Australia’s Qenos Holdings Ptyand Norway’s Elkem AS. The company has announced more than $15 billion of deals in the past decade, excluding Syngenta, according to data compiled by Bloomberg.
For Syngenta, led by CEO John Ramsay and chairman Michel Demare, the agreement caps months of discussions and wider speculation about its future. ChemChina was said to have previously offered about 449 francs a share and Syngenta last year rejected a 470-franc-a-share offer from Monsanto. Strategically, the Swiss company will get improved access to emerging markets at a time when the planned combination of Dow Chemical Co. and DuPont Co. threatens to create a new powerhouse in agricultural products.
“We will help the Chinese government to learn,” Ramsay said in a phone interview. There’s a lot of potential to “improve the quality and technology for Chinese farmers”, he said.
Pressure is also building on Monsanto. Its market-leading position in genetically-modified seeds is threatened by the creation of a Dow-DuPont giant when the merger is completed in the second half of this year. As recently as November, Monsanto said it was discussing internally the merits of a new offer for the Swiss company as well as opportunities to acquire crop-chemical assets from other companies.
“Monsanto are likely to struggle to match the price and cash component of ChemChina’s bid, despite the deal creating significant synergies,” Bernstein analyst Jeremy Redenius wrote in a note on Wednesday. “Monsanto and BASF may look to combine in some way.”
A ChemChina deal would be the easiest transaction to get by antitrust regulators as the combination with the Chinese company’s existing agrochemical business, Adama, would still only result in 19% market share, Andrew Benson, an analyst at Citigroup Inc., said in a note on Monday. Some disposals of fungicides and herbicides may be required.
The takeover would likely need to win clearance from the Committee on Foreign Investment in the US (CFIUS), which would review whether the deal would compromise American food security and whether the combined company’s locations would be too close to US military bases, according to several lawyers who deal with security reviews for such cross-border transactions. Even though Syngenta isn’t based in the US it does have North American operations that generated $3.6 billion in sales last year.
CFIUS pays particular attention to acquisitions by Chinese investors, especially deals involving US technology. But all industries are subject to scrutiny, including agriculture. more