December 22, 2015

ChemChina raises bid in potential buyout of Syngenta


Following a meeting between Syngenta executives and the chairman of China National Chemical Corp (ChemChina) this month, ChemChina had upped its bid with an offer to acquire 70% of the Swiss corporation, Bloomberg reported.


The Chinese company previously proposed 449 Swiss francs per share which was rejected before increasing its offer to about 470 Swiss francs per share in cash for the 70% stake in Syngenta. That would value the corporation at US$43.7 billion francs (US$44 billion) in the market.


The deal, if successful, would be the biggest purchase made by a Chinese company, according to sources. ChemChina would also be granted an option to buy the remaining 30% of Syngenta. In addition, its two-step proposal provides a gradual process to merge both companies before placing Syngenta under the total ownership of ChemChina, sources said.


Another alternative plan - proposed by the Chinese firm - will involve a complete buyout of the pesticide and seed developer.


The execution of the ChemChina-Syngenta deal positions ChemChina as a developer of genetically modified (GM) seeds and a competitor with another major producer, Monsanto. The potential agreement may also have emerge due to a lack of seed technology in China; as a result, the country's corn output is only half of US levels, Jason Miner, an analyst with Bloomberg Intelligence, explained.


No agreement has so far been reached although talks are in the advanced stages. Syngenta is also engaging Monsanto, a past bidder which is discussing internally the advantages of a new offer as well as opportunities to buy crop-chemical businesses from other organisations, according to Brett Begemann, Monsanto's chief operating officer.


Observers expect that Syngenta could struck a merger deal with another corporation in the aftermath of the landmark merger between DuPont and Dow in December this year.


However, since ChemChina only possesses a 5% market share, a merger with Syngenta would result in fewer assets sold – to mitigate antitrust issues – as compared to the Dow-DuPont union, said Christian Faitz, an analyst for Kepler Cheuvreux.


Syngenta's shares had increased 20% this year.

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