By John Revill in Basel and Brian Spegele in Beijing
Government-owned China National Chemical Corp. capped a string of acquisitions with a $43 billion cash offer to buy Swiss pesticide and seed company Syngenta AG, in the most ambitious foreign takeover attempt by a Chinese company to date.
Syngenta said Wednesday that the agreed offer by the Chinese company, commonly known as ChemChina, amounted to $465 a share, plus a special dividend of 5 Swiss francs ($4.91) a share to be paid immediately before the deal’s closing.
Syngenta shares jumped, rising 6% on the Zurich bourse by early afternoon on the news of the offer, worth 480 francs a share.
“We have a very attractive offer on the table and we are putting it to
our shareholders,” Syngenta’s interim Chief Executive John Ramsay said in an interview with The Wall Street Journal.
The proposed deal, which requires approval from Syngenta shareholders, sends a signal that despite sharp drops in global equity markets driven by concerns over economic growth, particularly in China, companies still see opportunities for expansion through acquisitions.
The initial reaction from shareholders was positive.
“We think the offer is fair and would be inclined to tender our shares,” said Mark Evans, a fund manager at London-based THS Partners.
Markus Baechtold, at Luzerner Kantonalbank, said the ChemChina deal was better because it was all cash and there were no job cuts, with Syngenta’s headquarters staying in Switzerland. “The price is attractive, I would probably offer my shares,” he said.
The takeover would help ChemChina grow Syngenta’s business in China and other emerging markets, and help to gain a foothold in the U.S. Acquiring Syngenta’s intellectual property is also attractive as the Swiss company develops genetically engineered seeds that may help further open the tightly-regulated Chinese market for biotech crops.
Behind the recent wave of Chinese outbound investment is strong support for deals by the central government. While ChemChina Chairman Ren Jianxin says he is motivated by profit and not politics, his company has tapped government funds to support its deal-making across Europe.
Last year when ChemChina announced an agreement to buy Italian
premium-tire maker Pirelli for around $7.7 billion, it quietly secured funding from an overseas investment vehicle championed by Chinese President Xi Jinping.
Greater overseas deal-making with support of the central government is part of a broader effort under way to export vast domestic overcapacity in industry. Mr. Xi’s signature “One Belt, One Road” initiative aims to open up new markets from Central Asia to Europe for Chinese companies that previously focused at home.
At a packed news conference at Syngenta headquarters in Basel, Mr. Ren began a charm offensive by saying how much he admired Switzerland and the products made there.
To seal the deal, the companies now have to cross potentially high
regulatory hurdles in the U.S.–about a quarter of Syngenta’s sales come from North America–and elsewhere.
As well as antitrust authorities, a U.S. interagency committee known as CFIUS has the power to block deals that pose a threat to U.S. national security. Last month, Philips NV said it was terminating its $2.8 billion deal to sell its lighting-components and automotive-lighting business to Go Scale Capital, an investment fund led by Chinese venture-capital firm GSR Ventures.
Syngenta Chairman Michel Demar said the company wasn’t obliged to file an application with CFIUS, but decided to do so because it thought this was good corporate governance. He said he didn’t expect any major obstacles there or in the European Union or Switzerland.
“I believe it is important to emphasize, not like 99% of deals announced today which are about synergies, this is a deal about growth and innovation. I believe there is enough to convince the EU regulator and the Swiss political world that this is an excellent deal,” he said.
The offer comes after months of uncertainty over the future of Syngenta, which was earlier pursued by U.S. seed giant Monsanto Co.
After Monsanto’s failed, unsolicited approach to the Swiss company, ChemChina decided it would only pursue a deal with Syngenta on a friendly and agreed basis, according to a person familiar with the situation.
The management teams of ChemChina and Syngenta first met in Germany nearly a year ago, according to the person. The discussions between ChemChina and Syngenta accelerated in December. Syngenta’s board gave the go-ahead for Syngenta’s management to begin negotiating a deal with ChemChina in early January and the two sides proceeded with a rapid due-diligence process afterward, according to the person.
For Syngenta, the deal holds the prospect of new capital and greater
access to the huge China market, while for ChemChina, it gives the company access to Syngenta’s advanced biotechnology for developing seeds.
Syngenta would remain based in Switzerland while the existing management team would continue to run the company. Mr. Demar is set to be replaced by ChemChina chief Ren Jianxin upon the deal’s completion. Mr. Demare, who has been at Syngenta since 2012, will stay on as vice chairman.
The global seed and pesticide sector already in has faced consolidation after DuPont Co. and Dow Chemical Co. announced plans to merge in December.
Syngenta said it expected to conclude the deal with ChemChina by the end of 2016. Dyalco, J.P. Morgan, Goldman Sachs and UBS advised Syngenta on the transaction. HSBC Holdings served as the adviser to ChemChina.
Write to John Revill at firstname.lastname@example.org and Brian Spegele at