More than a year after state-owned Chinese chemicals conglomerate ChemChina announced its bid to acquire Swiss agricultural company Syngenta, the latter firm is “confident” that the $44 billion merger will close despite uncertainty regarding its upcoming public tender offer.
The Beijing-based company recently announced that the public tender offer for Syngenta shares will end May 4, but a Syngenta spokesperson told Agri Investor this week that as of April 5 just 21.6 percent of the 67 percent of shares needed for the transaction to be realized had been tendered.
Despite this, the spokesperson stated in an email that the transaction “has been positively received by all our major shareholders” and that “ChemChina and Syngenta remain confident in closing the transaction,” declining however to comment on whether the firm believes it is on track to meet the 67 percent threshold by May 4.
The vote of confidence follows the long-awaited clearance from the US and EU competition authorities, which granted their approval for the merger earlier this month. The Committee on Foreign Investment in the US (CFIUS), which considers national security concerns, granted its approval last August.
According to Syngenta’s chief executive Erik Fyrwald, part of the delay in receiving clearance from regulators was due to two other mega-deals under consideration in the sector, that of Dupont and Dow Chemical and Monsanto-Bayer.
“The process has taken longer than we originally expected, which is understandable given that there are three major deals going on at one time,” he had told analysts during the February earnings call.
“We’ve been asked for an enormous amount of data, have had a lot of questions asked, but we’ve had very constructive dialogue towards remedy proposals that we’ve made.”
Both the European Commission and the Federal Trade Commission in the US have raised competition concerns which would require Syngenta and ChemChina to divest certain assets, which both have agreed to.
The three products at issue, according to a complaint filed by the FTC on April 4, concerns the herbicide paraquat, the insecticide abamectin and the fungicide chlorothalonil. Syngenta owns the branded version of each of these, while ChemChina’s Israel-based subsidiary Adama, is either the first- or second-largest generic supplier in the US for each of these products.
Therefore, ChemChina is required to sell all rights and assets of Adama’s US paraquat, abamectin and chlorothalonil crop protection businesses to AMVAC, a California-based agrochemical company.
The EU’s requirements include: Syngenta divesting some of its pesticides, notably fungicides for vegetables and herbicides for cereals, vegetables and sunflower; Adama divesting 29 of its generic pesticides under development and providing access to third parties to studies and trial results for these products; and divesting all relevant intangible assets underpinning the divested pesticide and plant growth regulator products, according to a statement issued by the Commission.
The companies have received regulatory approval from 19 jurisdictions, the spokesperson said, noting that India is the only one still pending.
Industry experts have also raised concerns that mega-mergers such as this one can stifle innovation. However, Syngenta “will continue to operate independently and will continue to be a strong competitor offering choice in the marketplace with ongoing R&D investment across seeds, traits and crop protection products,” the spokesperson added.
The Chinese company has offered $465 per share plus a special dividend of CHF 5 ($5.01; €4.68), valuing the company at $43.8 billion. The price is slightly lower than the $47 billion stock and cash offer Monsanto, the US agricultural conglomerate, had put on the table in August 2015, which the Swiss company rejected as too low.
But according to Syngenta’s spokesperson, the price Monsanto offered was not the only reason for the rejection. “There was considerable regulatory and execution risk with the Monsanto proposal,” the spokesperson said. “Monsanto has declined to answer important questions about their proposal, including tax inversion and other matters.”
Under the terms of the offer, Syngenta will continue to be headquartered in Basel, Switzerland with its existing management in place. Upon closing, ChemChina’s chairman Ren Jianxin will also serve as the new entity’s chairman of the 10 member-board, while Michel Demaré, currently Syngenta’s chairman, will serve as vice chairman and lead independent director.