Chinese firm offers record $43bn for agrochemicals giant Syngenta

The offer marks an 18.5% premium to the company’s closing CHF392.3 ($385.3) share valuation on February 2 and compares well against the CHF288.50 to CHF435.20 range that the shares have traded in over the past year.

Syngenta’s board recommended the offer of $465 a share, plus a special dividend, to its shareholders, saying “the proposed transaction respects the interests of all stakeholders”.

Last month, Monsanto’s CEO said attempts to re-engage Syngenta about a potential takeover had been hard but that he believed there was still “a significant opportunity” for integration between the companies.

ChemChina has secured financing commitments from HSBC, China Citic and other Chinese banks sufficient to acquire 100 percent of Syngenta, a source with direct knowledge of the deal has said. On Tuesday, talks about ChemChina’s takeover of Syngenta sent Swiss firm’s shares surging in the stock market.

One company that is unlikely to take the news well is Monsanto, which is being left behind by the deal.

The deal is part of a global acquisition spree by Chinese companies, which are diversifying overseas to counter a slowdown at home.

The companies use the patented seed varieties – overwhelmingly biotech crops with accompanying pesticides and agrichemicals – to control not only what farmers plant, but how they cultivate their crops, what chemicals they use on their fields and how they can manage their farms.

United States rivals DuPont and Dow Chemical December struck a US$130 billion agreement to merge, stoking speculation of another merger approach from Monsanto to Syngenta. “Over the last few years the company has failed to demonstrate it can generate reasonable earnings on its own”, Patrick Huber, a fund manager at Mirabaud Asset Management told Reuters. In January, ChemChina announced the acquisition of German industrial machinery maker KraussMaffei Group for about $1 billion.

Overseas purchases are also a way for Chinese firms to expand quickly globally.

ChemChina will maintain Syngenta’s operations, management and employees, and retain its headquarters in Basel, Switzerland. “Personally, I think a lot of them have been quite disappointing”, said Terry Torrison, managing director at Monaco-based McLaren Securities. Monsanto offered a similar $43 billion takeover in August, but the proposal included cash and a portion of its own shares.

Dyalco, JP Morgan, Goldman Sachs and UBS served as financial advisors to Syngenta on the transaction, with Bar & Karrer and Davis Polk as legal advisors.

In March, ChemChina agreed to buy Italian tire maker Pirelli & C SpA, underscoring the Chinese company’s interest in investing in Europe. “Syngenta is the world leader in crop protection”, he said.