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Huge Chinese market beckons as ChemChina acquires Syngenta

Posted in Investments, Finance & Economy

SWITZERLAND – The long and protracted sale of Syngenta has finally been sealed after China National Chemical Corporation (ChemChina) and Syngenta announced a definitive deal for ChemChina to acquire the Swiss agrochemicals and seed giant for an all-cash US$43 billion.

In the deal, ChemChina will acquire Syngenta at US$465 per ordinary share plus a special dividend of CHF 5 to be paid conditional upon and prior to closing.

The offer is equivalent to a Swiss franc value of CHF 480 per share. Syngenta shareholders will in addition receive the proposed ordinary dividend of CHF 11 in May 2016.

The state-owned ChemChina-Syngenta deal, if approved, will be the biggest foreign acquisition by a Chinese company, and comes after the Chinese company’s recent acquisition of the German equipment maker KraussMaffei.

In announcing the deal, Syngenta Chairman Michel Demaré is confident the ChemChina deal offers Syngenta shareholders the best alternative and “respects the interests of all stakeholders.”

“In making this offer, ChemChina is recognizing the quality and potential of Syngenta’s business. This includes industry-leading R&D and manufacturing and the quality of our people worldwide.

The transaction minimizes operational disruption; it is focused on growth globally, specifically in China and other emerging markets, and enables long-term investment in innovation.

Syngenta will remain Syngenta and will continue to be headquartered in Switzerland, reflecting this country’s attractiveness as a corporate location,” Demaré said during the announcement.

The ChemChina deal provides current Syngenta management with the opportunity to continue to run the company, with Ren Jianxin, Chairman of ChemChina becoming Chairman of the company, and Michel Demaré, Vice Chairman and lead independent director.

John Ramsay, the current CEO will continue in the interim in his position.

A new Board will include four independent directors of Syngenta, and ChemChina has committed to float the company’s shares in an IPO in a few years time, further sweetening the deal for Syngenta shareholders.

The deal comes at a time of industry consolidation as low commodity prices and tough environment force the agro giants to look at ways to cut costs while increasing output and profit to their shareholders.

It follows the recent announcement by Dow and DuPont to merge their operations, creating a US$130 billion agrochemicals, materials and specialty giant called DowDuPont.

Syngenta had last year refused to sign a deal with Monsanto, the world’s leader in seed technology and sales worldwide, in a deal that could have given Syngenta shareholders US$46 billion, more than the ChemChina offer.

However, Monsanto’s deal was in a combination of both cash and stock as opposed to ChemChina’s all-cash transaction. Further, the level of flexibility and control that ChemChina has provided to the Syngenta management and shareholders seemed to have made all the difference.

“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.

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 transaction will enable further expansion of Syngenta’s presence in emerging markets and notably in China, the companies note in their statement. The deal is expected to close by end of this year.