 "Image courtesy: Syngenta")
ChemChina, which has business interests in materials science, life science, high-end manufacturing and basic chemicals, yesterday proposed to buy Swiss crop protection and seeds company Syngenta for about $ 43 billion. “The board of directors of Syngenta considers that the proposed transaction respects the interests of all stakeholders and is unanimously recommending the offer to shareholders. There is committed financing for the deal and a strong commitment to pursue regulatory clearances,” said Syngenta in a press release.
The transaction is expected to conclude by the end of the year.
As per the deal, Syngenta’s existing management will continue to run the company. After closing, a ten member board of directors will be chaired by Ren Jianxin, chairman of ChemChina, and will include four of the existing Syngenta Board members.
Michel Demare, chairman of Syngenta, commented, “In making this offer, ChemChina is recognising the quality and potential of Syngenta’s business. This includes industry-leading R&D and manufacturing and the quality of our people worldwide. The transaction minimises operational disruption; it is focused on growth globally, specifically in China and other emerging markets, and enables long-term investment in innovation.”
According to John Ramsay, chief executive officer, Syngenta, this deal will enable the company to maintain and expand its position in crop protection market, while at the same time significantly increase the potential for its seeds business.
Ren Jianxin, chairman of ChemChina, said, “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.”
Some industry observers believe the deal makes strategic sense as it allows Syngenta to expand in emerging markets (notably in China) and provides ChemChina access to latest crop protection technologies. “This is an acquisition driven primarily by growth strategy, and not potential synergies that usually result in cost cutting and reduction of workforce. So the deal is good news for both Syngenta’s shareholders as well as its employees. Most of the problems with such acquisitions tend to rise later on when the two firms try to integrate their processes,” commented Kamel Mellahi, a professor of strategic management at Warwick Business School who has studied key Chinese businesses for a number of years.
Syngenta has been going through challenging times recently, mainly because of its exposure to uncertainties in emerging markets and the recent collapse of commodity prices. “For ChemChina, acquiring one of the world’s leading manufacturer of agricultural and chemicals and seeds with world class resources and capabilities will enable it to access valuable knowledge that could help its drive for innovation. The deal is going to take ChemChina to a whole new level,” added Kamel Mellahi.
