Issue Date: February 8, 2016 | Web Date: February 4, 2016
ChemChina Swoops In To Buy Syngenta For $43 Billion
Syngenta, the world’s largest producer of agricultural chemicals, has accepted an offer to be acquired by ChemChina, one of China’s largest chemical companies, for $43.3 billion. After the planned merger of Dow Chemical and DuPont, the deal continues consolidation in the agrochemicals sector.
Syngenta’s board has unanimously accepted the offer, something it did not do when Monsanto tried to acquire Syngenta last year. The firms expect to conclude the deal by year-end. Syngenta will continue to have headquarters in Switzerland.
Syngenta has more than 28,000 employees and annual sales of $13.4 billion, mostly from patented chemical pesticides. It had a 15% share of the global agrochemicals market in 2014, according to analysts at Phillips McDougall.
ChemChina, which is owned by the Chinese state, has agrochemical sales of more than $3 billion via its generic pesticides subsidiary Adama, much of which is the former Makhteshim Agan Industries, an Israeli firm that ChemChina acquired in 2011. After the acquisition, Syngenta will continue to be run by its existing management team, the Swiss firm says. Four of its current board members will be part of a new 10-member Syngenta board.
Syngenta and ChemChina maintain that the acquisition will lead to expansion and enhanced innovation, rather than job cuts and consolidation. “Our vision for Syngenta is all about growth,” says ChemChina Chairman Ren Jianxin.
Given the professed focus on expansion and not cost-cutting, “the deal is good news for both Syngenta’s shareholders as well as its employees,” says Kamel Mellahi, a professor and China expert at England’s University of Warwick. Access to Syngenta’s leading technologies in seeds and pesticides will have a transformative effect on ChemChina, Mellahi says. “The deal is going to take ChemChina to a whole new level.”
Media reports suggest the deal could lead to intellectual property and food security concerns among Western governments, including in the U.S. where Syngenta has significant business activity. Mellahi plays down intellectual property concerns but says he expects U.S. authorities to ascertain whether the deal poses any risks to national security ahead of regulatory approval.
In 2015, Monsanto offered to buy Syngenta for $47 billion, but its bid was rejected. Syngenta had said the Monsanto offer “significantly undervalued the company and was fraught with execution risk.”
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