ChemChina makes $43b agreed bid for Switzer­land’s Syn­genta

The Pak Banker - - COMPANIES/BOSS -

China's state-owned ChemChina will make an agreed $43 bil­lion bid for Swiss seeds and pes­ti­cides group Syn­genta, the com­pa­nies said on Wed­nes­day, mark­ing the largest ever over­seas ac­qui­si­tion by a Chi­nese firm.

The deal ac­cel­er­ates a shake-up in the global agro­chem­i­cals in­dus­try and is a set­back for U.S. seed com­pany Mon­santo, which made an un­suc­cess­ful $45 bil­lion move for Syn­genta last year. If com­pleted, it would be China's big­gest out­bound takeover deal, more than dou­ble CNOOC's $17.7 bil­lion pur­chase of Canada's Nexen in 2012. Syn­genta shares rose more than 6 per­cent early on Wed­nes­day, but, at around 418 Swiss francs, traded some way below the agreed of­fer price of $465 per share, equiv­a­lent to 480 francs.

Syn­genta CEO John Ram­say said he sees no ma­jor reg­u­la­tory hur­dles, and noted that ChemChina had se­cure fi­nanc­ing in place for the deal. "I think the over­all reg­u­la­tory ap­provals will not be very chal­leng­ing," he told Reuters on Wed­nes­day, adding he ex­pected an­titrust reg­u­la­tors to ac­knowl­edge the lim­ited over­lap in the two firms' mar­kets. He said 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 the deal was "very ap­pro­pri­ate and at­trac­tive" to Syn­genta share­hold­ers, but its board would have to con­sider any ri­val of­fers. ChemChina, short for China Na­tional Chem­i­cal Corp., has agreed to pay about $3 bil­lion in fees to Syn­genta should it fail to meet all re­quire­ments for the deal. Syn­genta will owe ChemChina about $1.5 bil­lion if the deal falls through for any rea­sons the Swiss group is ac­count­able for, Ram­say said.

"The dis­cus­sions be­tween our two com­pa­nies have been friendly, con­struc­tive and co-op­er­a­tive, and we are de­lighted that this col­lab­o­ra­tion has led to the agree­ment an­nounced to­day," ChemChina Chair­man Ren Jianxin said. "We will con­tinue to work along­side the man­age­ment and em­ploy­ees of Syn­genta to main­tain the com­pany's lead­ing com­pet­i­tive edge in the global agri­cul­tural tech­nol­ogy field."

The agree­ment is the lat­est move in China's quest for Western tech­nol­ogy and dis­tri­bu­tion net­works. Sim­i­lar deals in­clude last year's buy­out of Ital­ian tyre maker Pirelli by ChemChina. In Jan­uary, ChemChina an­nounced the ac­qui­si­tion of Ger­man in­dus­trial ma­chin­ery maker KraussMaf­fei Group for about $1 bil­lion.

The Chi­nese govern­ment 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. 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 to be paid con­di­tional on clos­ing, they added.

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