Syngenta has ended longstanding speculation over its future ownership by officially recommending a takeover bid from ChemChina. Monsanto had spent much of 2015 pursuing the Swiss multinational, with both Bayer and BASF understood to be involved in discussions over recent months.
The Syngenta board is unanimously recommending the proposed transaction to shareholders as allowing strategic continuity and long-term investment in innovation. It would combine Syngenta’s leading position in agrochemical and seeds R&D with ChemChina’s strong position in off-patent chemistry – the companies say there is minimal overlap in their product portfolios. Subject to the usual regulatory clearances, it is expected to complete by the end of 2016.
ChemChina’s cash offer, which values Syngenta at some $43 billion, would see Syngenta continue to work under its current identity and management from Switzerland. It also raises the possibility of a merged business being floated through an initial public offer (IPO) at a later stage. ChemChina already holds a 60% stake in the Adama off-patent pesticide business and owns the Adisseo fine chemicals business which has feed additive products in its portfolio.
Syngenta says the proposal would enable further expansion of its presence in emerging markets, notably China. ChemChina has “explicitly endorsed” Syngenta’s business objectives within its Good Growth Plan and Syngenta Foundation for Sustainable Agriculture which will continue to be integral parts of the company’s strategy.
In late August 2015, the Syngenta board rejected a final Monsanto bid worth $47bn for a 70% stake in the Swiss business plus a $3bn reverse takeover fee. At the time, Syngenta directors said the Monsanto offer undervalued the company and its pipeline, as well as being at risk of regulatory refusal.
State-owned Chem China had 2015 revenues of $45bn across its six industrial divisions, although turnover for its agrochemical activities is not disclosed. Syngenta had 2015 revenues of $13.4bn.
“In making this offer, ChemChina is recognizing the quality and potential of Syngenta’s business,” states Syngenta chairman Michel Demaré. “This includes industry-leading R&D and manufacturing and the quality of our people worldwide. The transaction minimizes operational disruption; it is focused on growth globally, specifically in China and other emerging markets, and enables long-term investment in innovation. Syngenta will remain Syngenta and will continue to be headquartered in Switzerland, reflecting this country’s attractiveness as a corporate location.”
Syngenta chief executive John Ramsay adds: “Syngenta is the world leader in crop protection, having significantly increased its global market share over the last ten years. This deal will enable us to maintain and expand this position, while at the same time significantly increasing the potential for our seeds business. It will ensure continuing choice for growers and ongoing R&D investment across technology platforms and across crops. Our commitment to cost and capital efficiency will remain unchanged.”
For ChemChina, Chairman Ren Jianxin says: “The discussions between our two companies have been friendly, constructive and co-operative. We will continue to work alongside the management and employees of Syngenta to maintain the company’s leading competitive edge in the global agricultural technology field. Our vision is not confined to our mutual interests, but will also respond to and maximize the interests of farmers and consumers around the world to deliver safe and reliable solutions for the continued growth in global food demand.”
Once the transaction is cleared and completed, Syngenta’s existing management will continue to run the company. A ten member board will be formed under Mr Jianxin’s chairmanship. It would have four existing Syngenta directors including Mr Demaré as vice-chairman and lead independent director and Mr Ramsay.