The largest ever foreign purchase by a Chinese firm, announced by
both companies, will accelerate a shake-up in global agrochemicals
and marks a setback for U.S. firm Monsanto, which failed to buy
Syngenta last year.
China is looking for ways to secure security of food supply for its
population and the Syngenta deal will give it access to technology
and expertise as well as global market share and Western
"Only around 10 percent of Chinese farmland is efficient. This is
more than just a company buying another. This is a government
attempting to address a real problem," a source close to the deal
With growth slowing at home, Chinese companies are looking abroad
for deals that can boost their businesses. If completed, the
Syngenta acquisition would be more than double CNOOC's $17.7 billion
purchase of Canadian energy company Nexen in 2012.
Syngenta shares 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.
However, Syngenta CEO John Ramsay , who described the deal as "very
appropriate and attractive", said he saw no major barriers and noted
that ChemChina had secure financing in place.
A source with knowledge of the deal said the funding would come from
a range of Chinese players, as well as HSBC and China CITIC Bank
"I think the overall regulatory approvals will not be very
challenging," Ramsay told Reuters, adding he expected antitrust
regulators to acknowledge the limited overlap.
The Committee on Foreign Investment in the United States (CFIUS),
whose mandate is U.S. national security, would not pose a major
hurdle, Ramsay said.
Syngenta's board would still have to consider any rival offers,
Ramsay said. But ChemChina, short for China National Chemical Corp.,
has agreed to pay about $3 billion in fees should it fail to meet
all requirements for the deal, while Syngenta will owe ChemChina
about $1.5 billion if the deal falls through for any reasons the
Swiss group is accountable for.
"The discussions between our two companies have been friendly,
constructive and cooperative, and we are delighted that this
collaboration has led to the agreement," ChemChina Chairman Ren
In a hint of what may be in store for the enlarged group, Syngenta's
chairman said ChemChina will be on the lookout for more deals as
China strives to improve its food supply.
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"ChemChina has a very ambitious vision of the industry in the
future. Obviously it is very interested in securing food supply for
1.5 billion people and as a result knows that only technology can
get them there," Michel Demare said.
ChemChina's move on Syngenta may be the biggest, but it is not the
first as Chinese corporates shift offshore.
Similar deals include last year's buyout of Italian tire maker
Pirelli by ChemChina. In January, ChemChina announced the
acquisition of German industrial machinery maker KraussMaffei Group
for about $1 billion.
Beijing is keen to boost farming productivity as it seeks to cut
reliance on food imports amid limited farm land, a growing
population and higher meat consumption.
A global glut of corn and soybeans has depressed grain prices for
the past three years, prompting U.S. farmers to reduce spending on
everything from equipment to seeds and pesticides. The cutbacks,
along with pressure from investors and a desire to bolster profit,
have sent many of the world's largest agricultural companies
scrambling to cut deals.
DuPont and Dow Chemical Co agreed in December to combine in an
all-stock merger valued at $130 billion in a first step toward
breaking up into three separate businesses, a move that was seen as
a trigger for further consolidation.
The ChemChina offer will allow for dividend payments to Syngenta
shareholders of up to 16 Swiss francs per share, including a special
dividend of 5 francs on closing.
(Additional reporting by Michael Shields, Freya Berry, Lisa Jucca,
Lawrence White, Elzio Barreto and Aizhu Chen; Writing by Alexander
Smith; Editing by Ian Geoghegan and xxx)
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