Mergers & Acquisitions

ChemChina close to striking deal to buy Syngenta - report

PUBLISHED : Tuesday, 02 February, 2016, 10:11pm
UPDATED : Tuesday, 02 February, 2016, 10:27pm

China’s state-owned ChemChina is nearing a deal to take over Swiss seeds and pesticides group Syngenta for around 43 billion Swiss francs (US$42 billion), two people familiar with the matter told Reuters on Tuesday.

The deal, for roughly 470 Swiss francs per share, will likely be announced on Wednesday, when Syngenta is scheduled to release its 2015 results, the people said.

One source said minor adjustments to the price were still being discussed.

The seeds and crop industry is undergoing a major shake-up, with DuPont and Dow Chemical Co announcing an all-stock merger in December.

ChemChina’s offer would be at a premium of 24 per cent to Syngenta’s Monday close of 378.40 francs.

Syngenta’s shares rose 6.5 per cent to 403.2 francs in afternoon trading in Zurich. Its US-listed shares were up 5.5 per cent in premarket trading.

Syngenta declined to comment. ChemChina was not immediately available for comment.

Syngenta Chairman Michel Demare said in December the company was in talks with Monsanto Co, ChemChina and other rivals.

Demare said Syngenta’s board, which rebuffed a takeover offer from Monsanto last year, was considering making an acquisition, merging with a rival or selling the company.

However, a group of Syngenta shareholders expressed opposition to a sale of the company to ChemChina in January.

A takeover of Syngenta by ChemChina would underpin an effort by the Chinese government to boost farming productivity as it seeks to cut reliance on food imports amid limited farm land, a growing population and higher meat consumption.

China is one of the largest international market for food and agricultural products, as the country accounts for about 20 per cent of all US farm exports, the US Agriculture Department said.

Since China joined the World Trade Organization in late 2001, US agricultural exports to the country have grown exponentially and the USDA’ believes the long-term growth will continue.

US farm exports to China and including Hong Kong reached a record US$29.9 billion in fiscal year 2014, with top products including soybeans, distillers’ grains, hides and skins, tree nuts, coarse grains, cotton and beef.

“China’s agricultural imports reflect its relative scarcity of land resources, and its most prominent imports are oilseeds, oils, and cotton—products that have high land requirements per unit of output,” a report by the USDA said.

Agricultural experts believe the purchase of Syngenta would help China in securing technology for genetically modified (GMO) seeds that are becoming increasingly vital in expanding production of major oilseeds such as soybeans and cotton.

China is already a major importer of soybeans from the United States, with forecast purchases of around 80 million tonnes in the 2015/16 season. The country is the biggest producer of cotton in the world but is also the biggest cotton importer as well, mainly from the US.