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Syngenta agrees $43bn takeover by ChemChina

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Syngenta, thrown onto the defensive after fending off a bid from US rival Monsanto last year, has agreed to a $43bn bid from ChemChina, in what would be the biggest ever foreign takeover by a Chinese buyer.

Swiss-based Syngenta, the world's biggest agrichemicals group, said that its board had unanimously agreed the cash offer by ChemChina - the Beijing-based chemicals giant which last year bought Italian tyremaker Pirelli, and last month announced the purchase of German industrial machinery maker KraussMaffei Group.

The bid, announced at $465 per share, plus a dividend of SFr5, values Syngenta at SFr480 a share – a little above the revised SFr470 a cash-and-shares offer which Monsanto submitted in mid-August, but which was pulled after the Swiss group failed to engage in takeover talks.

Monsanto's withdrawal prompted a backlash from many Syngenta investors, provoking the Swiss group to announce asset sales and cash returns to shareholders in an effort to prop up its flagging shares, and heralding too the departure of Mike Mack as chief executive.

Syngenta, which had warned that a merger with Monsanto bid was likely to require significant concessions to win antitrust clearance, said on Wednesday that, with the ChemChina deal, there was a "strong commitment to pursue regulatory clearances.

The Swiss group also confirmed that "there is committed financing for the deal," which is expected to close by the end of 2016.

Investor caution

Nonetheless, shareholders appeared cautious over the chances of the deal succeeding, sending Syngenta shares to SFr416.70 in early deals, up 6.2% on the day, but well short of the ChemChina offer.

Chinese deals abroad have a chequered history of success, notably in the natural resources sector, including failed bids for US oil group Unocal and mining giant Rio Tinto.

In the ag sector itself, Chinese buyers have found themselves blocked from many foreign land deals – including the high profile sale of Australia's Kidman cattle station, the world's largest spanning 101,411 square kilometres, an area the size of Hungary.

However, they have had more success in the grain trading sector, with China's state-run giant Cofco leading the consortium which bought the ag assets of Singapore-based Noble Group, and taking a controlling stake of Dutch-based trader Nidera too.

A Chinese takeover of Syngenta would carry a large irony.

China landed the Swiss group with a litany of lawsuits after from November 2013 rejecting cargos of US corn and distillers' grains for containing a genetically-modified seed variety, made by Syngenta, which was then unapproved in Beijing.

'Syngenta will remain Syngenta'

The ChemChina bid will leave Syngenta based in Switzerland, reflecting the country's "attractiveness as a corporate location", said Michel Demare, the chairman of the ag sprays group.

"Syngenta will remain Syngenta," he said.

However, the merger would boost the group's "presence in emerging markets, and notably in China", a joint statement from the group said.

The announcement represents the latest sign of consolidation among ag suppliers, which have suffered sharp decline in their fortunes as lower crop prices have slashed farmers' profitability, and willingness to spend.

Syngenta also on Wednesday unveiled a 17% drop to $1.34bn in earnings for 2015, on sales down 11% at $13.4bn.

"We have been dealing not only with low crop prices but also with emerging market instability and massive movements in currencies," said John Ramsay, the Syngenta chief executive, while adding that, excluding currency moves, underlying profitability had grown, boosted by a cost-cutting drive.

DuPont and Dow Chemical are amid a $130bn merger which will see the groups' combined ag assets, including the Pioneer seeds business, spun off as a separate company.

In the machinery sector, Agco, the maker of Fendt and Massey Ferguson tractors, on Tuesday saw its shares tumble after it warned that the equipment industry's troubles would "persist through 2016".

By Mike Verdin

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