The China National Chemical Corporation (ChemChina) acquisition of Syngenta: A highly leveraged, bold merger

In a July 2017 report, Caijing Magazine interviewed industry insiders. Industry insiders believe ChemChina and Syngenta possess strong complementarity. In 2016, ChemChina completed its acquisition of ADAMA—the world’s largest generic agrochemical manufacturer—whose pesticide assets primarily consist of active ingredient manufacturing facilities. Syngenta, acquired in this deal, is the world’s most capable patented agrochemical producer. Thus, following this acquisition, ChemChina gained a complete pesticide industrial chain. Moreover, ChemChina had no seed business prior to the acquisition; Syngenta’s seed operations therefore fill this strategic gap. These strategic considerations are difficult to quantify, however, as analysis shows that although Syngenta is one of only a few agrochemical companies globally capable of developing active ingredients, the majority of its products are off-patent or patent-expired. Syngenta’s seed business is also not the strongest in the industry. Furthermore, Syngenta had long been operating pesticide and seed businesses in China, employing over 2,000 people. Its pesticides hold approximately 5% of the Chinese market—already establishing it as a significant player. In pesticides, Syngenta focuses on high-end products, generating nearly RMB 2 billion in annual sales in China—comparable to Noposin, the top-ranked domestic firm. Its fungicides sell especially well in China, with sales exceeding RMB 1 billion in 2014. Syngenta also places great importance on seeds in China. In 2008, it established a research center in Beijing—one of only three global biotechnology research centers. In 1998, Syngenta founded a vegetable seed company in Shouguang, Shandong Province; in 2007, it acquired a 49% stake in Sanbei Seed Industry, launching several corn hybrid products with relatively low market shares. According to media-released data, Syngenta holds only about 1% of China’s seed market. Thus, Syngenta has not neglected the Chinese market; its current market position—achieved amid fierce domestic competition—is already commendable. From a sales synergy perspective, simply transferring some of Syngenta’s technologies into China may not yield immediate results. Are Syngenta’s products competitive in China? Why hadn’t this competitiveness been fully realized earlier? Can ChemChina help unlock or enhance it? With Ning Gaoning—Chairman of Sinochem Group—assuming the role of Chairman of ChemChina in 2018, synergies for Syngenta’s China business may benefit not only from ChemChina but also from Sinochem Group. Potential areas of synergy in the Chinese market include: · Strategic guidance for the China market: In January 2019, Qin Hengde, President of Sinochem’s Agricultural Division, assumed oversight of Syngenta’s agricultural operations in China; former head Andrew Guthrie retired. · Sales: Integrating Syngenta’s products into ChemChina’s and Sinochem Group’s distribution channels. Sinochem Fertilizer, a subsidiary of Sinochem Group, operates its own distribution network across major agricultural provinces and counties in China—the largest domestic distribution and service network. · R&D: Developing cost-effective, high-performance formulations and seed products tailored to China’s agricultural characteristics, enabling direct competition with domestic manufacturers. · Production: Syngenta’s agrochemical products were once world-leading globally—and remain highly competitive.

Summary of major global chemical company M&A events (2016–2021)

September 24, 2019: BASF and DuPont Safety & Construction announced they had signed an agreement whereby BASF would sell its ultrafiltration membrane business to DuPont. Covestro | H.I.G. Capital November 4, 2019: Covestro announced completion of the sale of its European polyurethane systems business to H.I.G. Capital. The transaction value approached €100 million. H.I.G. is an investment firm specializing in mid- and small-cap companies. Clariant | Arsenal Capital Partners October 31, 2019: Clariant announced the successful sale of its healthcare packaging business to a newly formed company backed by Arsenal Capital Partners. The sale agreement had been signed on July 22, 2019. Showa Denko | Hitachi Chemical December 18, 2019: Showa Denko officially announced the successful acquisition of Hitachi Chemical, which was approximately 51% owned by Hitachi, Ltd. The deal proceeded via a Tender Offer (TOB), with an estimated total acquisition value exceeding ¥960 billion. Huntsman | Indorama Ventures January 6, 2020: Indorama Ventures completed its $2 billion acquisition of Huntsman Corporation’s chemical intermediates and surfactants business. Covestro | Serafin Group January 2, 2020: Covestro successfully sold its European polycarbonate sheet business to the Munich-based Serafin Group. The transaction included core management and sales functions across Europe, as well as production facilities in Belgium and Italy. BASF | Solvay January 31, 2020: BASF announced completion of its acquisition of Solvay’s polyamide (PA6.6) business. Through this deal, BASF added the Technyl® brand to its portfolio, strengthening its polyamide business capabilities. Huntsman | Icynene-Lapolla February 20, 2020: Huntsman announced completion of its acquisition of Icynene-Lapolla—a North American manufacturer and distributor of spray polyurethane foam (SPF) insulation materials for residential and commercial applications—to accelerate the globalization of its SPF business. On May 18, 2020, Huntsman announced completion of its acquisition of North American CVC Thermoset Specialty Materials Company, reinforcing its Advanced Materials division’s position in the North American market. December 8, 2020: Huntsman announced it had reached an agreement to acquire Gabriel, a North American specialty chemicals producer. JAC Technology | LG Chem February 26, 2020: JAC Technology announced that its wholly owned subsidiary, Siyang International, would use self-raised funds of approximately RMB 330 million to acquire certain operational assets of LG Chem’s Color Photoresist Division in South Korea. SK Siltron | DuPont March 1, 2020: SK Siltron announced completion of its acquisition of DuPont’s silicon carbide (SiC) wafer business for USD 450 million. The acquisition was approved at a board meeting in September 2019 and finalized on February 29, 2020.

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