China National Chemical Corp is nearing an agreement to buy Swiss pesticide-and-seeds-maker Syngenta for about 43.7bn francs ($42.8bn) as the state-backed company extends its buying spree with what would be the biggest-ever acquisition by a Chinese firm, said people familiar with the matter.
ChemChina, as the state-owned company is known, offered about 470 francs a share in cash and a deal could be announced as early as today when the Swiss company reports earnings, the people said, asking not to be named as the details aren’t public. That’s 24% higher than Syngenta’s last close of 378.40 francs on February 1. Its shares rose 6.3% to 402.3 francs as of 1:46 pm in Zurich.
The deal would help chairman Ren Jianxin transform ChemChina into the world’s biggest supplier of pesticides and agrochemicals, while snatching an asset coveted by St Louis-based Monsanto Co. It also underscores the importance China attaches to owning seed and cropcare technology that can boost agricultural output and help feed the world’s biggest population.
A spokesman for ChemChina declined to comment, as did officials at Syngenta. Final talks are ongoing and could still fall apart or be delayed, the people said.
At $43bn, a successful purchase would be the largest acquisition by a Chinese firm, surpassing China Unicom Hong Kong Ltd’s $29bn purchase of China Netcom Group Corp in 2008, according to data compiled by Bloomberg.
Analysts expect Syngenta to report an 11% decline in annual sales to $13.5bn today. The company in 2014 generated 75% of its revenue from crop protection such as pesticides, followed by its seed business, markets that would help ChemChina reduce its reliance on petrochemical and petroleum products, which accounted for almost half of the 256.4bn yuan ($39bn) in revenue it had in 2014, the latest annual figures available for the company.
Behind the Chinese company’s pursuit are national interests. 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% in the last decade as economic growth boomed.
As well as domination of the Chinese market, Syngenta will provide access to global marketplaces, from Brazil to the UK. Helping execute that vision is Ren, a 58-year-old executive who started China’s first professional cleaning company with a 10,000 yuan loan and is now emerging as one of the country’s most active dealmakers.
Syngenta would trump all past deals in a country whose appetite for foreign assets is surging. ChemChina’s latest purchase follows other Chinese outbound deals this year including Haier Group Corp’s $5.4bn purchase of General Electric Co’s home-appliance business to Dalian Wanda Group Co’s deal to buy control of Legendary Entertainment. This year’s tally is on pace to exceed 2015’s record $123.9bn, according to data compiled by Bloomberg.
In 2016 alone, ChemChina, whose holdings include most of Italian tyremaker Pirelli & C SpA, led a group that agreed to buy German machinery maker KraussMaffei Group for €925mn ($1bn) and it acquired 12% of Swiss commodity trader Mercuria Energy Group. Prior to that, purchases have included Adisseo Group in France to Australia’s Qenos Holdings Pty and Norway’s Elkem AS. The company has announced more than $15bn of deals in the past decade, excluding Syngenta, according to data compiled by
Bloomberg.
For Syngenta, led by interim chief executive officer John Ramsay, the agreement caps months of discussions and wider speculation surrounding its future. ChemChina was said to have previously offered about 449 francs a share and Syngenta last year rejected a 470-franc-a-share offer from Monsanto. Strategically, the Swiss company will get improved access to emerging markets at a time when the planned combination of Dow Chemical Co and DuPont Co threatens to create a new powerhouse in agricultural
products.
A ChemChina deal would be the easiest transaction to get by antitrust regulators as the combination with the Chinese company’s existing agrochemical business, Adama, would still only result in 19% market share, Andrew Benson, an analyst at Citigroup, said in a note on Monday. Some disposals of fungicides and herbicides may be required. Andrew Liveris, chief executive of Dow, said he’s not surprised by the ChemChina deal with Syngenta given the nation views genetically modified crops as a strategic area and the Chinese company previously expressed an interest in Dow’s agricultural unit.
Pressure is also building on Monsanto. Its market-leading position in genetically-modified seeds is threatened by the creation of a Dow-DuPont giant when the merger closes in the second half of this year. As recently as November, Monsanto said it was discussing internally the merits of a new offer for the Swiss company as well as opportunities to acquire crop-chemical assets from other companies.
ChemChina offered Syngenta about 470 francs a share in cash and the deal could be announced today when the Swiss company reports earnings, sources said yesterday.
