|
 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, the world's largest agricultural market, is looking for ways
to secure food supply for its population. Syngenta's portfolio of
top-tier chemicals, fertilizers and patent-protected seed varieties
will represent a major upgrade of its potential output.
"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
told Reuters.
Years of intensive farming combined with overuse of chemicals has
degraded land and poisoned water supplies, leaving China
increasingly vulnerable to crop shortages. The deal fits into
Chinese government plans to modernize its agriculture over the next
five years.
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.
Shares in Syngenta 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 and limited
expectations of a counter-offer.
REGULATORY ISSUES
Syngenta CEO John Ramsay, who described the ChemChina offer 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
International.
"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.
Swiss regulators said their conditions were largely met by the terms
of the deal, although they want Swiss retail investors to receive
the ChemChina offer in Swiss francs and warnings to be given on
foreign exchange risks.
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.
[to top of second column] |
"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
Jianxin said.
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.
"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.
CHINA CALLING
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. China's combined consumption
of pork, beef and poultry has grown by an average 1.7 million tonnes
a year for the past decade, placing further stress on feed grain
supplies.
Meanwhile, 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.
Syngenta was advised by Dyalco, the one-man business of former
Goldman Sachs M&A head Gordon Dyal, alongside JP Morgan, Goldman
Sachs and UBS while HSBC and China CITIC Bank International advised
ChemChina.
(Additional reporting by Michael Shields, Freya Berry, Lisa Jucca,
Lawrence White, Elzio Barreto, Aizhu Chen and Gavin Maguire; Writing
by Alexander Smith; Editing by Ian Geoghegan and Keith Weir)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
