February 3, 2016 / 7:29 PM / 3 years ago

ChemChina's Syngenta swoop: a 12-year crush, a 12-month courtship

BEIJING/LONDON (Reuters) - A frenetic year of negotiations and setbacks preceded China National Chemical Corp’s (ChemChina) blockbuster $43 billion bid for Swiss seeds and pesticides giant Syngenta.

A woman checks her phone at the headquarters of China National Chemical Corporation in Beijing, July 20, 2009. REUTERS/Stringer

But state-owned ChemChina boss Ren Jianxin’s dream of snapping up either Syngenta or its U.S. rival Dow Chemical Co goes back much further - to just after his firm was officially established in 2004.

“We’ve been following Syngenta from shortly after the group was founded, scouting for co-operation projects and joint venture opportunities,” said one veteran ChemChina staff member.

“To ChemChina, Syngenta and Dow were goddesses that we hoped one day we could win.”

For more than a decade, such aspirations were unaffordable for ChemChina and unappealing for Syngenta. Ren spent those years though developing a strong relationship with Mike Mack who, until last October, was Syngenta’s chief executive.

Ren’s canny relationship-building came into its own a year ago, when the Swiss firm found itself the subject of hostile bids from U.S. rival Monsanto.

“When it became clear that Syngenta was under attack from Monsanto, ChemChina called them up and asked if they should play the white knight,” said one adviser on the deal.

ChemChina mandated HSBC to work with them on a possible approach and while Syngenta was rebuffing Monsanto, it was drawing up ideas with its Chinese counterpart on what they could do together.

At the time, the state-owned Chinese giant could not match Monsanto’s financial fire power, but its collegial relationship with Syngenta left it in a strong position for later negotiations.

“ChemChina had reached out. They understood their proposal then was not commensurate with Monsanto’s,” said one source who worked on the deal from Syngenta’s side.


Last August Syngenta spurned Monsanto’s final offer for the company, which had valued it at $47 billion, prompting the U.S. firm to walk away, citing a lack of “constructive engagement” from the Swiss firm.

Syngenta said Monsanto was trying to buy it on the cheap, but the rejection angered investors, especially when the company’s subsequent third quarter earnings came in shy of expectations.

So two months after the final Monsanto rejection, Ren’s ally Mack left the company. By then consolidation between Syngenta’s rivals Dow and DuPont coupled with a slump in grain prices meant the board felt it had little choice but to push on negotiations with its friendly Chinese suitor.

“Discussions intensified at the time the Dow-DuPont merger surfaced, because that effectively took two players out of the market,” said the adviser.

Bankers and company executives shuttled between meetings in Basel, Beijing and London, with Gordon Dyal, Goldman Sachs’ former head of M&A, advising Syngenta through his one-man Dyalco outfit.

For several months, discussions were focused on a complex two-stage takeover that would involve ChemChina buying 70 percent of Syngenta up front, and the remaining 30 percent further down the line, according to the adviser on the deal.

That “proved too difficult to pull off from technical execution to regulatory approval” the adviser said, prompting discussions to move on to a pure all-in cash $43 billion deal.

“Towards end of the year, they indicated a value to us that we thought we could work with. The key issue for us is that we were never going to reach an agreement unless funding was certain and confirmed,” said the Syngenta-side source on the deal.

A source with knowledge of the deal said on Wednesday that ChemChina had secured 100 percent of its funding requirements.

“That’s what they achieved through the month of January; what clinched the deal ultimately was the ability to confirm to us that funding was in place. We had some discussions on price but the key was that the money was good,” the Syngenta-side source said.

Additional reporting by Arno Schuetze in Frankfurt; writing by Rachel Armstrong; editing by Philippa Fletcher

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