MercoPress. South Atlantic News Agency

Swiss Syngenta accepts takeover proposal by China Chemical: US$ 43bn cash

The deal could transform ChemChina into the world's largest supplier of crop-protection products.

Government-owned agrochemical firm China National Chemical announced this week an all-cash proposal to buy Swiss rival Syngenta for $43 billion in a deal expected to improve China's food production.

 The proposed transaction marks the largest proposed foreign takeover by a Chinese company in history, and represents the latest of several recent acquisitions by the company known as ChemChina.

The deal could transform ChemChina into the world's largest supplier of crop-protection products. However, the transaction is subject to approval by Syngenta's shareholders and government regulators, including a federal agency expected to study whether the transaction would affect U.S. national security.

Similarly, the proposed tie-up will likely be examined in Beijing as China copes with a slowing national economy and international outflow of capital. China's GDP hit a 25-year low in 2015.

Announced as Syngenta's 2015 earnings report showed improved profitability, the deal extends a surge in international mergers and acquisitions by Chinese firms. Deals totaling nearly $68.2 billion have been announced so far this year, more than half the record $112.5 billion for all of 2015, according to transaction tracker Dealogic.

“We are concerned about the need to increase global crop yield while conserving scarce natural resources,” said ChemChina Chairman Ren Jianxin as he hailed the deal in a video interview posted on the company's website. He said the planned merger would provide growth opportunity in China, “where there is rapid modernization driven by the need to increase grain productivity and increase food quality.”

Chris Pultz, a Kellner Merger Investors Fund portfolio manager who leads the firm's merger arbitrage investing, characterized the Syngenta deal as “a vital strategic move” that could help fill China's need to feed the country's growing population by upgrading farming techniques, crop yield and food safety.

Chem China offered $465 for each Syngenta share, a 20% premium. The deal, endorsed by Syngenta's board, includes an additional special dividend of 5 Swiss francs (approximately $5) per share if the deal is finalized. Both companies said they expect the transaction to close by the end of the year.

ChemChina is headquartered in Beijing and is not a publicly traded firm. Syngenta is based in Basel. The deal represents the latest consolidation of the chemical and agribusiness sector following the $68 billion merger deal of Dow Chemical and DuPont announced in December.

St. Louis-based rival Monsanto wooed Syngenta with a roughly $46 billion merger deal last year, but dropped the bid when the Swiss company rejected the sweetened offer.

ChemChina's success in landing the deal marks the latest cross-border corporate foray by the company and its chairman. ChemChina last year acquired Italian tire maker Pirelli in a $7.9 billion transaction.

The proposed transaction marks the largest proposed foreign takeover by a Chinese company in history, and represents the latest of several recent acquisitions by the company known as ChemChina.