ChemChina offers $43B for Swiss pesticide giant Syngenta

Syngenta’s decision to accept ChemChina’s offer is a setback for Monsanto, the genetically modified seed producer, which has also tried to buy the Basel-based company. Land is used for construction purposes, squeezing land for agricultural activity in the world’s largest populated country.

“Only around 10% of Chinese farmland is efficient. This is a government attempting to address a real problem”. ChemChina is also planning to relist the company over the next few years.

The agreement for Syngenta comes as China’s slowing economy has shaken global equity markets and contributed to a commodities crash that has battered company valuations world-wide and spurred intense deals activity. If completed, the Syngenta deal will be the biggest foreign acquisition by a Chinese company.

The state-owned company, also known as ChemChina, offered Syngenta a cash offer worth $US465 a share on Wednesday, approximately 20 per cent higher than the stock’s last close.

Those deals are, however, all dwarfed by the ChemChina deal, which is poised to earn a hefty fee for HSBC, even though the British bank shares the advisory role on the deal with China Citic Bank International.

“I think the overall regulatory approvals will not be very challenging”, Ramsay told Reuters, adding he expected antitrust regulators to acknowledge the limited overlap.

He said the Committee on Foreign Investment in the United States (CFIUS), whose mandate is USA national security, would not pose a major hurdle.

For shareholders, the deal offers a premium share price and opportunity for earnings multiples, he said.

Syngenta’s board would still have to consider any rival offers, Mr Ramsay said, although there are tough financial penalty clauses for both parties if they fail to deliver on the deal.

“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”, he said.

“In making this offer, ChemChina is recognising the quality and potential of Syngenta’s business”, Syngenta chairman Michel Demare said in the statement.

The price for shares would be 100% in cash, said Michel Demaré, board chairman, in a video. That’s equivalent to 60% of the value of all such deals a year ago, according to Dealogic. In January it had said that it would purchase KraussMaffei Group, the German equipment-maker as part of a consortium of investors for about $1bn, in March 2015 ChemChina agreed to buy Pirelli, the Italian tire maker for $7.7bn.

State-owned ChemChina is highly acquisitive and has bought or taken a significant stake in nine European industrial companies in recent years, including agrochemical manufacturer Adama (formerly Makhteshim Agan).

The global seed and pesticide sector already in particular has faced consolidation after DuPont Co. and Dow Chemical Co. announced plans to merge in December.