China National Chemical Corporation, or ChemChina, has agreed to buy Switzerland’s pesticide and seeds manufacturer Syngenta for $43bn in cash. The deal, which would make ChemChina the world’s top pesticides and agrochemicals supplier, marks the biggest foreign takeover by a Chinese firm to date.
What the commentators said
Syngenta has done well, said Brooke Sutherland on Bloomberg.com. It took a lot of flak from its investors for rebuffing an offer from America’s agri-giant Monsanto recently. But that was a cash-and-shares bid, and the value of Monsanto’s shares has slipped amid the global market and commodities sell-off. This deal “is guaranteeing Syngenta investors a higher price than the stock had ever reached on its own – or was likely to anytime soon. This is the definition of selling high.”
While ChemChina is paying almost double the median earnings multiple seen for big chemicals deals in the past decade, Syngenta is a “rare prize”, said Economist.com, so the government will be prepared to help with “a blank cheque”. China’s rationale for doing this deal boils down to “the growing gap between two numbers”, said Anuradha Raghu and Aya Takada on Bloomberg.com: population and agricultural land.
China has a fifth of the world’s population but just 9% of its arable land. With 1.4 billion to feed it needs “a sharp boost in farm productivity, which has been damged by the overuse of fertiliser and contaminated water. China has lost 6% of its arable land in the past decade. Its corn yields, moreover, are 44% lower than America’s. China’s drive for food security includes importing genetically modified crops – and now, helped by Syngenta, it is planning to grow its own.