US EUROPE AFRICA ASIA 中文
World / Europe

How China analysts view the country's biggest ever acquisition bid

By Fu Jing in London (chinadaily.com.cn) Updated: 2016-02-03 23:34

How China analysts view the country's biggest ever acquisition bid
President Michel Demare of Swiss agrochemicals maker Syngenta and Ren Jianxin (L) Chairman of China National Chemical Corp, address Syngenta's annual news conference at the company's headquarters in Basel, Switzerland Feb 3, 2016. [Photo/Agencies]

China National Chemical Corp (ChemChina) offered Swiss agrochemical and seeds producer Syngenta AG more than $43 billion on Wednesday to acquire its entire stake, the biggest-ever acquisition deal by a Chinese company in global market.

This case, if successful, is another big Chinese move in Switzerland after Addax Petroleum, a former Geneva-based company, was sold to Sinopec in 2009 for $7.6 billion.

The takeover comes hot on the heels of China's shipping giant Cosco, which consolidated its hold over the Greek port of Piraeus in January, when it agreed to pay 368.5 million euros ($402 million) for a 67 percent stake to help boost Greece's moribund economy.

For ChemChina, the Swiss bid followed its announcement at the beginning of January that it bought Germany's KraussMaffei machinery supplier for 925 million euros ($1 billion), which is the biggest outbound investment from China into Germany.

In the latest deal, the two companies have agreed that the board of directors of Syngenta will unanimously recommend ChemChina's offer to purchase 100 percent of Syngenta's equity. The offer price is $465 per share in cash. The acquisition is subject to anti-trust reviews and approvals from relevant countries.

ChemChina will maintain Syngenta's operations, management and employees, including keeping its headquarters in Basel, Switzerland.‎ It will further enhance Syngenta's reputation by continuing to invest in its agricultural solutions and innovation capabilities, he said.

Syngenta employs 28,000 people in more than 90 countries and regions. It has more than 2,000 people in China since it started business there in 1998.

The Swiss company has invested $360 million in China since 2000 to compete with established rivals from the United States and Germany.

While the acquisition is in process, China Daily talked with leading analysts, who all welcomed the deal.

Prof. Ruedi Nutzi, director of School of Business of University of Applied Sciences and Arts Northwestern Switzerland

"Based on what we know so far about this agreement, ChemChina plans to allow Syngenta to operate quite independently within the ChemChina group and invest in Syngenta's future growth and development in China itself and in emerging and developing markets worldwide. Syngenta will be able to develop further and will no longer be a takeover candidate for its competitors. This will enable the company to make long term plans for its future success.

"ChemChina and other Chinese investors have been able to benefit from the stagnating economic situation in Europe. The economic problems which Europe has faced since the financial crisis have up to now not been solved. Chinese investors are in a strong position due to their large financial reserves and so can invest at this time. Investments such as this demonstrate that Chinese enterprises are now recognized as global players who are seen as serious partners in the international economy."

Dr. Fredrik Erixon, Director of the European Centre for International Political Economy (ECIPE) in Brussels

"This is a huge deal and it will no doubt have an impact on the sector. The deal is a trophy for ChemChina, given the attempt by Monsanto to acquire Syngenta, and the benefit for Syngenta is that it will be getting much better opportunities to market their own innovation and products in growing markets in Asia, especially China of course. ChemChina get access to a new source of innovations and will be able to scale production in various markets in a better way than before.

China's mergers and acquisitions in Europe are increasing in numbers and volume, but there are not many deals of this size. Big company M&As are always tricky, and they are not by far guaranteed to be successful. Many of China's M&As are helpful to Europe's companies in getting better positions on markets where they have not been very successful."

Luigi Gambardella, president of ChinaEU, a business-led association in Brussels

There have been many cases of Chinese companies' M&As in Europe since the beginning of the century. There have been a number of profitable deals, which not only raised the confidence of Chinese overseas activities in the developed world, but also supported the growth of European local economies in two ways: positive impact on local employment and access to the Chinese market.

This deal has also urged the European politicians to look at the big picture and long-term interest to make the beneficial economic cooperation bigger and bigger. The intention of ChemChina to buy Syngenta is a clear example of this and shows the growing interest of Chinese companies to invest in Europe.

China's bid for Syngenta, if successful, would give a capital boost to Syngenta and grant it improved access to the Chinese market, the biggest agricultural manufacturer in the world.

By keeping the management and the local employees in place, as happened in previous acquisitions by Chinese companies, local employment figures would remain unchanged or even increase.

Prof. Zhang Haiyan, director of Neoma's Confucius Business Institute in France

The ongoing take-over of Syngenta reflects the continuous efforts of ChemChina to boost its internationalization process. Since 2006, the company started to upgrade and expand its global value chain through a series of international M&As. Clearly, ChemChina has always targeted world-class companies in order to acquire cutting-Edge technology and managerial and innovation expertise.

This deal also confirms that despite a slowdown in the Chinese economy, the international expansion of Chinese companies continued to speed up. According to a recent study by Deloitte, Chinese outbound M&A deal volume increased by 25 percent in 2015 as compared to 2014, while the deal value increased by 70 percent during the same period.

Michael Smith, Vice-president at IHS Chemical, a company specializing in information analysis and consulting

"Syngenta gets additional capital and easier access into the extremely important Chinese agricultural market. ChemChina gets access to Syngenta's world-class biotechnology for seed development (increasingly important in order to feed the world's growing population) and access to new markets for Chinese products and services.

Germany has been the main target of Chinese investments in recent times. This makes perfect sense given Germany's strong industrial and technology base and large number of successful SMEs (small to mid-sized enterprises). These two factors also apply to Switzerland. The weak Euro has made buying in the Eurozone (not Switzerland) much more attractive."

Most Popular
Hot Topics

...