China firm offers record $43bn for agri-giant Syngenta

State-owned China National Chemical Corp. Wednesday offered $43 billion in an agreed takeover for Swiss pesticide and seed giant Syngenta, in what would be by far the biggest-ever overseas acquisition by a Chinese firm.

The deal is the latest in a string of overseas investments for China's biggest chemical company, also known as ChemChina, as Beijing prods its companies to "go out" to expand.

Syngenta's board recommended the offer of $465 a share, plus a special dividend, to its shareholders, saying in a statement that "the proposed transaction respects the interests of all stakeholders".

The statement said the deal "will enable further expansion of Syngenta's presence in emerging markets and notably in China".

But it could face challenges before going through.

The Swiss company reportedly rejected a higher $47 billion bid from rival Monsanto in August last year, and in November Bloomberg News said the US firm was mulling a higher offer.

The transaction is also likely to face regulatory hurdles -- much of Syngenta's business is in the United States, where a $18.5 billion offer by Chinese state-owned energy company CNOOC for US oil firm Unocal failed in 2005 in the face of political pressure.
Ahead of the announcement an analyst at Germany's Baader Bank said that an all-cash deal would be welcomed by investors but "it could pose political problems".

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.

The Chinese government has encouraged its companies to invest abroad to secure raw materials and markets, while growth is slowing at home.

"They're (government officials) still thinking in terms of it's good for companies to gain access to these technologies and these distribution channels," Arthur Kroeber, managing director at research firm Gavekal Dragonomics, told Bloomberg News.

- Global multinationals -

The deal is the latest in a string of acquisitions by ChemChina, which last month bought a 12 percent stake in Swiss energy and commodities trader Mercuria to expand its portfolio.

Also in January, the Chinese company said it planned to buy Germany's KraussMaffei Group, which makes machinery for producing plastics and rubber, for 925 million euros ($1.01 billion).

Last year it announced the takeover of Italian tyre maker Pirelli, renowned for its Formula One equipment and racy calendars, in a deal valued at 7.4 billion euros.
Their acquisition strategy is not 'catching up' anymore," said Tyler Rooker, an assistant professor at the University of Nottingham. "They’re acquiring assets that add to their competitiveness as global multinationals."

Syngenta said its existing management will continue to run the company, which will remain headquartered in Switzerland, "reflecting this   country’s attractiveness as a corporate location".

After the deal ChemChina chairman Ren Jianxin will take over as chairman of a new 10-member Syngenta board, four of whom will be existing directors, the statement added.

"Our vision is not confined to our mutual interests, but will also respond to and maximise the interests of farmers and consumers around the world," Ren said.

China is trying to make its farming sector more efficient, supporting massive agricultural conglomerates to replace what were once small family-owned plots.

The country is a major importer of wheat and soybeans, and Beijing hopes to ensure food security for its nearly 1.4 billion people.

The government supports what it calls “hybrid” crops, such as rice but has moved cautiously on genetically modified food, saying it will prevent “unauthorised” varieties.

ChemChina has a unit specialising in agricultural chemicals, including fertilisers and pesticides, according to its website, but is not present in the seeds business.

Syngenta chairman Michel Demare said the deal was "focused on growth globally, specifically in China and other emerging markets, and enables long-term investment in innovation".