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ChemChina deal is a major development for the Chemical Industry


ChemChina, otherwise known as the China National Chemical Equipment Corporation, has signed on to an agreement with the Swiss-based agricultural chemical giant Syngenta worth an estimated $43 billion. This deal is significant in that it will be the largest ever acquisition by China of a foreign company. Of equal importance is the fact that this deal will be the second largest takeover of a chemical company over the past year. The number one berth goes to the Dow – DuPont merger valued at $130 billion.

The deal has been overwhelmingly supported by the directors at Syngenta, and shareholders are equally eager to sign on to it. The changes that are expected as a result of the deal will include an expanded board of directors numbering 10 people, with 4 of them from the existing board on Syngenta. The chairman of the China National Chemical Equipment Corporation, Ren Jianxin, will run operations, but a decentralized command and control centre will be maintained with the Swiss company remaining in Basil, Switzerland.

Company directors at the Swiss company have been quick to assuage investors that there will be very little disruption to operational activities. This agreement flies in the face of Syngenta’s prior refusal to partner with Monsanto for $47 billion. ChemChina is acquiring as many big-name chemical companies as possible. In 2015, ChemChina took over KrausMaffei and Italian tyre manufacturing giant Pirelli. The Chinese company is state-sponsored and it has enjoyed solid growth since inception in 1984. It has already acquired over 100 local companies, and its overseas acquisitions are a more recent phenomenon.

China is looking to lock up as many agreements as possible with food manufacturing entities, and it naturally makes sense that ChemChina would look towards the agricultural juggernaut in Syngenta. This is all part and parcel of a strategy aimed at ensuring food security. China is also more accepting of genetically modified technology, despite public opinion to the contrary.Genetically modified organic material is used for animals in China, but not for human consumption in crops. The deal is not done and dusted just yet, and will likely be finalised by the end of 2016. To facilitate this acquisition, two thirds of all registered shareholders must vote in favour of the proposition for it to pass. For its part, ChemChina is half convinced that the deal will move through and receive all the necessary regulatory approval.

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