Syngenta (SYT) Stock Gains on $43 Billion ChemChina Deal

Equity investors have also expressed an interest, the Chinese national said, declining to provide names or give more detail.

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.

“Syngenta is the world leader in crop protection having significantly increased its global market share over the last ten years”.

“Only around 10 percent of Chinese farmland is efficient. This is a government attempting to address a real problem”, a source close to the deal said.

Years of intensive farming combined with overuse of chemicals has degraded land and poisoned water supplies, leaving China increasingly vulnerable to crop shortages. “It’s likely we’ll see further deals of a similar magnitude in the next few years”.

The offer far outstrips China’s biggest overseas acquisition to date, CNOOC’s purchase of Canadian oil firm Nexen for $15.1 billion in 2013.

“In making this offer, ChemChina is recognizing the quality and potential of Syngenta’s business”, said Michel Demaré, chairman of Syngenta.

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”, he had said.

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

They could share spoils of between US$65 to US$95 million in fees, according to the estimates.

The company’s board of directors said that it has unanimously recommended the offer to shareholders as the deal is respectful of stakeholders’ interests.

Ren Jianxin, chairman of the state-owned ChemChina said it would maintain Syngenta’s operations and retain its headquarters in Basel, in Switzerland.

ChemChina offered to buy Syngenta for more than $43 billion, offering $465 cash a share, according to a statement on Wednesday.

US-based seed company Monsanto previously made an unsuccessful bid to buy Syngenta, reports the Wall Street Journal. In January, ChemChina announced the acquisition of German industrial machinery maker KraussMaffei Group for about $1 billion.

Beijing wants to boost food productivity to cut reliance on imports amid limited farm land, a growing population and higher meat consumption.

A global glut of corn and soya beans has depressed grain prices for the past three years, prompting USA farmers to reduce spending.

ChemChina also plans to invest in Syngenta’s agricultural solutions and innovation capabilities, and support its initiatives, including Good Growth Plan and the Syngenta Foundation for Sustainable Agriculture.