- ChemChina said to have made $42 billion offer for Syngenta
- Syngenta said talking to other suitors as it explores options
Two and a half months after fending off a $46 billion bid from Monsanto Co., Switzerland’s Syngenta AG is back in play -- this time from China.
China National Chemical Corp. is in talks to buy the pesticide maker in what would be the largest acquisition ever by a Chinese company, people with knowledge of the matter said. Syngenta shares gained the most in six months.
ChemChina, as the state-owned company is known, offered about 449 francs a share in cash, which values Syngenta at 41.7 billion francs ($42 billion), said one of the people, who asked not to be identified because the information is private. Syngenta said the figure was too low, citing the regulatory risks to a deal such as antitrust and political concerns, but it served as a basis for discussions, the person said. The Basel-based company spurned a cash-and-stock offer at the same price this year from Monsanto, as well as a subsequent 470-franc-a-share bid from the U.S. suitor.
While a deal isn’t imminent, the two sides are still talking and an agreement could be reached in the next few weeks, said the people. Syngenta, the world’s largest pesticide producer, is also talking to other potential suitors as it explores options, the people said. Talks may fall apart and Syngenta may decide to stay independent or seek acquisitions of its own, the people said.
ChemChina said it couldn’t immediately comment in an e-mail response to questions. Syngenta spokesman Paul Barrett declined to comment by e-mail. Syngenta closed 5.3 percent higher to 364.20 francs in Zurich after advancing as much as 11 percent, the biggest intraday gain since May 8.
“A combination with ChemChina arguably would face fewer antitrust hurdles” than with Monsanto, Liberum Capital Ltd. analysts including Sophie Jourdier wrote in a note. As the seventh-biggest producer of crop chemicals, ChemChina has 5 percent of the market compared to Syngenta’s 19 percent and Monsanto’s 8 percent, she said.
As China’s economy has surged in recent years, its companies increasingly have been looking overseas for acquisitions. In one of the most recent Chinese purchases of a Swiss company, HNA Group Co., the owner of China’s fourth-largest airline, in July agreed to buy airport-cargo handler Swissport International Ltd. for 2.73 billion francs.
In March, ChemChina agreed to buy a 26.2 percent stake in Pirelli & C. SpA from the Italian tiremaker’s largest shareholder in a deal that valued the target at about $7.7 billion. ChemChina and other buyers then made a public tender offer for the rest of the company, a deal that closed this month.
Swiss Trade Deal
The Swiss government has typically abstained from commenting on takeovers, and has sought to cultivate economic ties with China. Last year, Switzerland became the second European country after Iceland to sign a free trade agreement with China, stealing a march on European and U.S. rivals.
“Large Chinese companies are looking to expand their global footprint to build up their international operations," said Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight in Singapore. "China’s State Council unveiled its ‘Made in China 2025’ policy in May 2015, which gives a high strategic priority for Chinese manufacturing firms to build their global brands and move up the global value chain in manufacturing.”
Chinese Go Global
This “Go Global” strategy led Chinese direct investment outside the country to $103 billion last year with major M&A deals part of the expansion strategy, he said.
A deal with Syngenta would give China a major position in the global agriculture industry, which is increasingly important as the nation imports more food.
Chinese President Xi Jinping is trying to boost agricultural output to maintain self-sufficiency as a growing middle class consumes more grain-intensive meat and farmland is converted to housing and golf courses. The World Bank estimates that China’s arable land declined 6 percent in the last decade as economic growth boomed.
In May, Xi gave farmers more rights to help keep them on the land and increase production. The same month, he called for the country to take the lead in development of genetically modified organisms, or GMOs, such as the herbicide-tolerant crops developed by Syngenta.
Last month, Syngenta named Chief Financial Officer John Ramsay as provisional chief executive officer to replace Mike Mack, who quit suddenly. Mack faced shareholder criticism after he refused to engage in talks with Monsanto over its takeover approach. Syngenta rejected the bids for being too low and failing to recognize fully its prospects and the threat of antitrust hurdles.
“We urge the Syngenta Board of Directors to fulfill its duties by engaging in discussions and fully consider the value created by a sale,” the Alliance of Critical Syngenta Shareholders, a group calling for a comprehensive strategic review of the company, said Friday on its website. The board should “seriously consider a formal auction process with all interested suitors to create maximum value.”
Monsanto, the world’s largest seed producer, withdrew its offer on Aug. 26 and has said it plans to seek acquisitions elsewhere.
Syngenta makes agricultural pesticides, including chemicals that kill weeds and bugs. The prospect of a Monsanto-Syngenta combination has triggered deal talks among the world’s top producers of pesticides and seeds, the CEOs of Dow Chemical Co. and DuPont Co. said last month.
The prospect of talks between ChemChina and Syngenta “will add to expectations that consolidation in the crop chemical sector is close at hand,” according to Liberum, which has a “buy” rating on Syngenta’s shares.