China National Chemical Corporation has announced a takeover of the world’s largest pesticides maker, Swiss-based Syngenta, in what could be a record deal for the world’s second-largest economy.
ChemChina, as the Chinese state-owned chemicals firm is known, offered $43 billion, or €39.4 billion, to buy Syngenta. The Basel-based chemicals firm supports the deal, the two companies said in a statement.
It comes less than one month after another major deal: In January, ChemChina agreed to buy German machine maker KraussMaffei for $1 billion, the biggest acquisition by a Chinese firm of a German company to date. ChemChina also bought Italian tire maker Pirelli last year and has bought businesses in France, Norway and the United Kingdom.
If successful, the Syngenta takeover will be the biggest ever by a Chinese company, according to Bloomberg data. ChemChina, the country’s largest chemicals group with a 2015 turnover of $45 billion, will become an important rival in the agrichemicals market, where Bayer and BASF from Germany and U.S. firms Monsanto, Dow Chemical and DuPont are the other dominant players.
Analysts, however, don’t expect the deal to have as big an impact on the industry as the sticker price suggests.
“The overlap of operations from Syngenta and ChemChina is rather limited,” said Lars Hettche, a Frankfurt-based steel and chemicals analyst at German bank Metzler. “I don’t see a large increase of market share and therefore, business will not become more difficult for BASF or Bayer.”
“I don’t see a large increase of market share and therefore, business will not become more difficult for BASF or Bayer.”
ChemChina currently owns a business which sells chemical fertilizers and pesticides, but these operations are relatively small compared to its rivals.
“I don’t expect any major divestments of the new combination because there are few anti-trust issues. This would have been different if Monsanto had bought Syngenta. That would have direct implications for BASF and Bayer,” Mr. Hettche told Handelsblatt Global Edition.
Monsanto, the U.S. chemicals firm, tried to buy Syngenta last year, but the Swiss company rejected the takeover. That merger might have triggered rival offers from BASF or other companies, because it would significantly have changed the competitive landscape in the seeds and pesticides market.
BASF shares were up 0.2 percent, while Bayer shares fell 1.5 percent at the end of the morning in Frankfurt. The German blue-chip DAX index fell 1.4 percent, in line with a global decline of stock markets. Syngenta shares rose 6 percent in Zurich.
With ChemChina set to buy Syngenta, Mr. Hettche said he does not expect Bayer or BASF to make a counterbid for Syngenta, because the competitive field would remain as it was.
However, the merger of Dow Chemical and DuPont, a deal announced in December, might have a greater impact on German firms.
“This has stronger implications because a strong chemicals player is being created. It may have to divest some operations, which others can buy, possibly BASF. It will especially raise questions for BASF, currently still the market leader. DuPont and Dow will jointly become number 1 in several chemical areas.” Mr. Hettche said.
“I think BASF will at some point in time participate in an acquisition. Pressure is mounting when rivals become stronger. It cannot be the right strategy for the biggest player to remain passive,” Mr. Hettche added.
The combination of Dow and DuPont would have limited implications for Bayer, because Bayer had divested most of its chemicals operations and would also further reduce its stake in Covestro, the former plastics division that was listed last October, Mr. Hettche said.
For Syngenta itself, there are unlikely to be too many major changes under the new ownership. Syngenta said it would remain headquartered in Switzerland, while ChemChina also plans to keep the Swiss firm’s current management team. The takeover will however give it opportunities to test its business in new waters.
“The transaction will enable further expansion of Syngenta’s presence in emerging markets and notably in China,” Syngenta said in a statement.
It’s also not clear just how long ChemChina will remain vested in Syngenta. The Chinese company said it would consider listing the Swiss firm again in the coming years.
“ChemChina will accelerate the implementation of Syngenta’s strategy while seeking to open new markets and opportunities for Syngenta’s next phase of growth and plans to relist Syngenta in a few years,”the Chinese firm said in a statement.
In other words, ChemChina may hope to cash in by selling Syngenta at a higher share price in future.