Syngenta says 'yes' to ChemChina bid, as farm, food groups raise concerns
By Sara Wyant
© Copyright Agri-Pulse Communications, Inc.
WASHINGTON, Feb. 3, 2016 - After months of being courted by Monsanto, Syngenta officials announced today that the global agribusiness company is best suited to marry-up with the state-owned China National Chemical Corp., known as ChemChina, in a deal valued at more than $43 billion in cash.
Under the terms of the deal, ChemChina would pay $465 a share, plus a special dividend of five Swiss francs, or about $4.90, upon closing. That would be the equivalent of 480 francs a share, representing a 22 percent premium to Syngenta's closing price on Tuesday, Syngenta reported this morning.
A prospectus will be offered in the next few weeks, followed by an opening of the tender offer to shareholders. The transaction requires acceptance of 67 percent of shareholders.
As part of the deal, Syngenta's existing management would continue to run the company and be based in Switzerland, with offices also in the U.S., explained Chief Operating Officer Davor Pisk during a telephone interview with Agri-Pulse.
“Syngenta will remain Syngenta. Our commitment to high quality innovation and serving those around the world will be unaffected. We will continue to pursue all of the opportunities to improve agricultural productivity around the world including the Good Growth Plan to address global food security,” Pisk emphasized.
Why is Syngenta's board so excited about the acquisition with ChemChina, the largest Chinese chemical company, based in the largest populated country on earth? Pisk outlined several benefits.
“The offer today values the quality of our portfolio and our businesses at a significant premium to share prices. More importantly it satisfies the needs of broader stakeholders,” Pisk said.
Syngenta has been facing increasing pressure to do a deal after rivals DuPont and Dow Chemical announced their plans to merge in December.
From a regulatory point of view, Pisk pointed out that this package does not have the same level of overlaps that could require the firm to divest part of its portfolio. In a deal with another global seed and chemical company like Monsanto, the company would likely have had to divest its seed business and some of its herbicide business.
However, there's no guarantee that the combined company still won't have to divest parts of its portfolio to satisfy regulators. In 2011, ChemChina purchased 60 percent of Israel's Makhteshim Agan - the world's largest maker of generic pesticides -- which has since been rebranded as ADAMA Agricultural Solutions.
In Washington, concerns about the scope and potential impact on food security started to mount within hours of the announcement. National Farmers Union President Roger Johnson urged a full review of the deal by the federal interagency Committee on Foreign Investment in the U.S. He said his organization will pay particularly close attention to what he said was the alarming trend of Chinese government-owned entities purchasing U.S. and other agricultural companies.
Chinese company Shuanghui International acquired U.S. pork producer Smithfield in 2013 for nearly $5 billion.
“While NFU is pleased that Syngenta will maintain its North American presence for the sake of competition in the marketplace, we will continue to review the impact this deal may have on the competitiveness in U.S. agriculture. NFU is especially concerned that yet another merger will trigger additional domestic consolidation of the remaining seed and crop protection companies.”
Wenonah Hauter, executive director of Food & Water Watch, said that “global agribusiness mega-mergers like the proposed ChemChina-Syngenta deal give a corporate cabal a stranglehold on the world's farmers and the world's eaters. When fewer firms control more of the seed and agrochemical market, both farmers and consumers lose out.”
But Pisk argued that the pending deal “preserves choice for customers around the world."
And even though he didn't directly address ChemChina's motives for the deal, Pisk said, “They value Syngenta's broad global reach, the quality of our research, the portfolio of our scientists and our technical and commercial experts around the world. They are also attracted to the opportunity to help more significantly address the modernization of China's agriculture.”
With 1.4 billion people to feed from an agricultural area that represents less than 7 percent of the global agricultural area, Pisk said “there are big challenges there to having modern tools to increase productivity without impacting the environment. All of this is entirely consistent with everything we plan to do with our Good Growth Plan.”
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