February 2, 2016
China National Chemical Corp's (ChemChina) attempted acquisition of Swiss pesticides producer Syngenta is finally coming to an end.
A staggering offer of more than US$43 billion is accepted by ChemChina and possibly put to rest Syngenta shareholders' frustrations after the company rejected a US$47 billion offer from Monsanto last year.
Once concluded, the agreement would make ChemChina the biggest pesticides and agrochemicals supplier in the world. It also spells benefits for China's agricultural production and self-sufficiency as it copes with rising meat demand and the challenges of obtaining land for farming purposes.
Syngenta will "help the Chinese government to learn" about improving the quality and technology for Chinese farmers, John Ramsay, the company's chief executive, commented.
The deal marks the rewarding outcome for ChemChina's patience as the company has been "following" Syngenta since its founding and seeking co-operation projects and joint venture opportunities, according to one ChemChina executive.
ChemChina's head, Ren Jianxin, is described as having a very amicable relationship with Mike Mack, Syngenta's former chief executive, a key factor believed to boost prospects for the recent deal.
In addition, the acquisition is happening against the backdrop of major corporate mergers in the last several months, particularly the landmark consolidation between Dow and DuPont.
Previously, an initial plan was to buy over Syngenta through a two-stage process. ChemChina would acquire 70% of the company, and settle the remaining 30% at a later date. The plan had proven to be too difficult for its execution and so was never carried out.
Both corporations eventually agreed to a full cash payout of US$43 billion as ChemChina is reported to have secured 100% of its funding requirements.
In the meantime, Syngenta's shares rose 3.8% to 407 Swiss francs ($560) in Zurich, a percentage still below the offer price as concerns linger over US regulators' response to the deal. Ute Haibach, an analyst at J. Safra Sarasin, pointed to "political headwinds" from the US which might complicate the takeover.
"The Committee for Foreign Investment in the US will likely watch the transaction closely as China's domestic seed market is broadly closed to US companies," Haibach said.
However, the ChemChina deal could still be the more convenient way in navigating antitrust concerns. By merging Adama, the company's agrochemical business, with Syngenta, a 19% market share could be produced, a Citigroup analyst said.
Syngenta's North American operations amounted to US$3.6 billion in 2015.