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Syngenta agrees to ChemChina $43 billion takeover

February 3, 2016
Energy & Chemical Value Chain

Syngenta on Wednesday confirmed that it received a formal takeover bid from state-owned China National Chemical Corp., ending months of speculation over the future of the world’s largest agricultural chemicals company.

ChemChina has offered to acquire Syngenta for $465 per ordinary share in cash plus a special dividend of 5 Swiss francs to be paid conditional upon and prior to closing. The offer is equivalent to SF480 per Syngenta share, valuing the deal at $43.28 billion (SF44.16 billion) and making it the biggest-ever Chinese takeover of a foreign company. Syngenta shareholders will also receive the proposed ordinary dividend of SF11 in May 2016. It is planned to make a facility available for the conversion of US dollar sales proceeds into Swiss francs on closing, the company says. The deal is expected to close by the end of 2016 and requires acceptance by 67% of shareholders.

Syngenta’s board has unanimously recommended the offer, stating that the proposed transaction respects the interests of all stakeholders. “There is committed financing for the deal and a strong commitment to pursue regulatory clearances. A Swiss and US tender offer will commence in the coming weeks and the transaction is expected to conclude by the end of the year,” the company says. Dyalco, J.P. Morgan, Goldman Sachs and UBS served as financial advisors to Syngenta. Bär & Karrer and Davis Polk served as legal advisors. HSBC was ChemChina’s sole financial advisor.

Syngenta’s existing management will continue to run the company. After closing, a ten member board of directors will be chaired by Ren Jianxin, chairman of ChemChina, and will include four of the existing Syngenta board members. ChemChina is committed to maintaining the highest governance standards with a view to an IPO in the future. Michel Demaré, chairman of Syngenta, said, “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.”

John Ramsay, CEO said, “Syngenta is the world leader in crop protection having significantly increased its global market share over the last ten years. This deal will enable us to maintain and expand this position, while at the same time significantly increasing the potential for our seeds business. It will ensure continuing choice for growers and ongoing R&D investment across technology platforms and across crops. Our commitment to cost and capital efficiency will remain unchanged.”

Ren Jianxin, chairman of ChemChina, said, “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 announced today. 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. Our vision is not confined to our mutual interests, but will also respond to and maximize the interests of farmers and consumers around the world. We look forward to Michel Demaré remaining on the board as vice chairman and lead independent director, and to working with John Ramsay and the management and employees of Syngenta to deliver safe and reliable solutions for the continued growth in global food demand.”

The transaction will enable further expansion of Syngenta’s presence in emerging markets, particularly in China. It will also contribute to efforts to modernize and improve Chinese agriculture. Syngenta will also contribute its experience and know-how in promoting the highest environmental standards and in nurturing thriving rural communities. These objectives are reflected in the commitments contained in The Good Growth Plan, which have been endorsed by ChemChina and which – together with the Syngenta Foundation for Sustainable Agriculture – will continue to form an integral part of the company’s strategy.

Syngenta management has been under pressure to participate in the consolidation of the agchems industry since the collapse of the Monsanto part-share, part-cash offer in August 2015, which valued the Swiss company at $43.3 billion at the time. The Monsanto offer had been worth as much as $47 billion when it was first announced, but the slide in global share prices, including Monsanto’s, reduced its value to the lower figure.

The ChemChina deal has still to be approved by Syngenta shareholders, a minority of whom have already expressed their opposition to a takeover of Syngenta by a state-owned company from a communist country. The deal is also likely to face scrutiny from antitrust authorities in major agricultural regions, although analysts believe the potential concerns are relatively minor and can be easily resolved. It will also likely be examined by the US Committee on Foreign Investment (CFIUS). The committee could recommend that the US president block the deal if it decides that vital US food security or defence interests are compromised.

ChemChina already owns a 60% stake in Adama (Airport City, Israel) formerly Makhteshim Agan Industries, the world’s largest generic crop protection producer. Adama has 5% of the world agchems market compared with Syngenta’s 19%, which is predominantly composed of branded and/or patented pesticides. The deal would therefore give ChemChina control of nearly a quarter of the global agchems market. Chemical pesticides represent around 75% of Syngenta’s sales, with seeds making up the vast majority of the remainder. The deal is the latest in the consolidation of the industry, after the expected DuPont-Dow merger. It would mean the end of independence for Syngenta, which was founded in 2000 by the merger of the agchem operations of Novartis and the former Zeneca.

By Natasha Alperowicz in Basel

Source: Chemical Week

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