ChemChina Acquires Syngenta for $43 Billion
The acquisition of Syngenta by ChemChina will quite
possibly end up being a marriage of convenience, with the Chinese market hungry
for innovative agricultural technology providing enough room for Syngenta to
grow into the world’s biggest biotech company
In what has been
one of the biggest deals of FY 2017 so far, China National Chemical Corp known
colloquially as ChemChina, has acquired Swiss pesticide and seed giant Syngenta
for an eye-watering $43 billion. ChemChina, a state owned Chinese company has
hitherto restricted its focus to its agrochemicals, rubber products, chemical
materials and specialty chemicals, industrial equipment, and petrochemical
processing business. This merger signals its recent shift into the crop
protection products market, of which Syngenta is one of the global leader.
Experts suggests that this move could boost Syngenta to the number three place
in the global seeds business.
ChemChina is one
of the largest chemical companies in the world with gross revenue of around $40
billion (as of 2015) and an employee headcount of about 140,000. In addition to
the aforementioned chemical products, ChemChina is also a leading manufacturer
of tires, conveyor belts and chemical machinery. The company is China’s largest
producer of pesticides, operates nine crude-oil refineries in China and also
owns the popular Malan Noodle restaurant chain. Syngenta AG is a global Swiss
agribusiness that produces agrochemicals and seeds; in 2015 company revenue
totalled around $13 billion with half of the business coming from the emerging
markets; In 2016, the Asia-Pacific region alone stood about 15% of Syngenta's
annual sales, reaching $1.84 billion; Latin America accounted for a further
$3.3 billion in sales. Syngenta employed nearly 28,000 people as of 2016. ChemChina,
as of now, has acquired around 98% of Syngenta's shares and will push for a delisting
of Syngenta from both Switzerland and the United States. ChemChina wants to
make the company go public again in the near future to realize long term
development and value addition goals.
Experts at
TechSci Research have suggested that the motive for the acquisition of Syngenta
is not purely business, but also has ramifications for the Chinese government.
China alone holds almost a fifth of humanity within its borders, but its share
of agricultural land is only about 8% of the total arable land across the
world. Factors such as chemical abuse and industrial pollution that sowed heavy
metals through rice paddies have also led to the shrinking of arable land in
China. The government has singled out food security as one of the major issues
facing the country and has tried to encourage more cooperation in science and
technology to come up with new agricultural innovations that can keep 1.4
billion people fed. This ties in remarkably well with Syngenta’s own strategic
vision of expansion into emerging markets, where it feels it will generate the
most revenue, which explains why Syngenta rebuffed a previous (and higher) bid
made by Monsanto and is focusing on becoming one of the biggest biotech titans,
with China providing most of the consumers.
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