On Wednesday, February 3, state-owned ChemChina made a US$43 billion (C$60 billion) bid for the Swiss seed and pesticide firm Syngenta, which if completed will be the largest ever foreign purchase by a Chinese firm. While not completed, the Swiss board has agreed to pay US$1.5 billion if the deal falls through due to board opposition or resistance on the Swiss side, while ChemChina has agreed to pay US$3 billion if they fail to meet the requirements for the deal. The purchase of the Canadian oil company Nexen in 2012 by China National Offshore Oil Corp, the current largest foreign transaction, was less than half that amount, at US$19 billion (C$20 billion).
ChemChina plans to borrow US$30 billion in loans in order to fund the deal, and Syngenta will take on US$13 billion in debt not guaranteed by ChemChina. With Chinese agricultural yields 40% lower than those of the United States, the offer may also reflect a government move to address food insecurity within China, as Syngenta produces almost 7,000 seed varieties. Less than 10% of Earth’s arable land is in China, which has to feed over 20% of the world’s population.
This deal, plus ChemChina’s US$1 billion acquisition of German manufacturer KraussMaffei Group last month and their €7.3 billion (C$11.0 billion) acquisition of Italian tire company Pirelli in 2015 reflect ChemChina’s interest in European acquisitions. ChemChina was formed from the merger of over 100 companies, primarily in the chemical sector. Syngenta operates in some 90 countries, employing 28,000 people in all. The company’s 2015 profit of US$1.3 billion was down 17% from the year before.