Being the giant state-owned chemical company in China, China National Chemical Corporation (ChemChina) shows great ambition and confidence in buying Syngenta, according to CCM.
Guangzhou, China, December 28, 2015 (Newswire.com) - Being the giant state-owned chemical company in China, China National Chemical Corporation (ChemChina) shows great ambition and confidence in buying Syngenta, according to CCM.
ChemChina has currently increased its takeover offer for Syngenta AG, the biggest Swiss crop science company.
That News comes from Bloomberg, ChemChina has offered about $472 a share for a 70 percent slice of Syngenta and the option to buy the remainder of the company at a later date, which is an increase of more than $20 a share from the roughly $450 a share ChemChina proposed earlier this year in an offer that was rejected.
Why is ChemChina willing to increase its bid and insists on acquiring Syngenta? CCM believes that behind this acquisition, it is the Chinese government who wants to increase the slow growth of grains in China through ChemChina buying Syngenta to develop the genetically modified organisms (GMOs).
The merger of Syngenta would help China deal with the shortfall of grain supply, which is increasingly important because China imports more grain from overseas, with over hundred million tonnes of rice, wheat and corn in 2014, according to China Customs.
It is estimated that China’s grain demand will reach near 700 million tonnes with a shortfall of about 100 million tonnes in 2020, according to Han Changfu, Secretary of Ministry of Agriculture of the People’s Republic of China.
In fact, the grain shortfall of 100 million tonnes is mainly the shortfall of forage grain, especially for professional forage grain.
Thus, to better solve the problem of lacking forage grain, the Chinese government has actually kept boosting development of GMOs to increase the yield of the grains.
The government is showing confidence in development of GMOs and decides to invest money in research of GMOs in the 13th Five-year Plan period, according to the Summary of No. 3769 Proposal from the 3rd Session of the 12th National Committee of the CPPCC.
In 2008, China had already begun the program of developing GMOs. During the 12th Five-year Plan period, the Chinese government had invested almost RMB300 million and had cultivated 730 new kinds of genetically modified wheat varieties which are disease-resistant, adverse-resistant and high-yielding.
Achieving great progress in research of GM wheat, the government decided to keep on supporting the GMO researches and make GM wheat as one of the crops with great support.
“Developing GMOs is the most effective way to deal with the lack of grain in China,” commented Lu Jialin, Chief Editor of Publishing Department, CCM, “The seeds of GMOs would help increase the yield of grain”.
ChemChina, being the biggest chemical enterprise in China, is also a state-owned company, which shows the sign that ChemChina is working on behalf of the Chinese government in some way.
The great support from the Chinese government on GMOs is one of the main reasons for ChemChina to acquire Syngenta for its advanced seed technology in developing GMOs.
Also, this transaction will help ChemChina transform into a maker of GM seeds, improving the seed technology in China.
The lack of seed technology is a key reason that China’s corn yields are half those in the U.S., said Jason Miner, an analyst at Bloomberg Intelligence.
Science technology in China’s agricultural industry is quite uncompetitive around the world, according to the Planning Department of MOA.
Take the seed industry as an example, advanced technologies and seed varieties are all controlled by developed countries; the share of China’s seed varieties keep declining these few years.
Over 50% of the market share of seed varieties that are planted in Northeast China is occupied by Pioneer (a seed company owned by DuPont), KWS Corp. (a German seed company) and Limagrain (a French seed company).
“If this big deal works through, ChemChina could improve grain yields by using advanced seed technology of GMOs provided by Syngenta and better solve the problem of grain shortfall in China,” said Lu.
It has been 7 years since the Chinese government has been supporting GMOs researches since 2008. However, the government is not absolutely satisfied with the development of technology.
“That’s why China decided to keep investing money in GMOs development,” said Lu.
If ChemChina succeeds in buying Syngenta, it will be easier for the Chinese government to show its determination in developing GMOs. Then, companies in China would follow the lead and starting putting their effort in the GMOs industry.
“Making Syngenta a giant company of GMOs in China is a sign from the Chinese government to serve as a stepping-stone for the GMOs industry to develop in China.”
“Also, as Syngenta being a leader, it will be easier for the Chinese government to make all the policies and regulations in the GMOs field,” Lu added.
Looking back at ChemChina’s history of mergers and acquisitions, CCM believes that this Syngenta acquisition would be a success, because ChemChina has been acquiring overseas companies during the past few years.
It is also worth noting that the CEO of ChemChina, Ren Jianxin, is a genius in merging. In the past 30 years, Mr. Ren has led the trend of restructuring China’s chemical industry, recombining over 100 enterprises owned by ChemChina into 6 sectors, producing products from basic chemicals, agrochemicals to organ silicones.
As for the international market, Mr. Ren has promoted ChemChina to the world through acquisitions. Since 2006, he promoted a total investment of RMB4.4 billion in enterprises in Australia, France, Norway and Israel to introduce international brands and professional management to China.
Mergers and acquisitions launched by ChemChina
2006.1.17
ChemChina acquired Adisseo Group (France), the second biggest methionine manufacturer in the world.
It was the biggest-ever acquisition launched by a Chinese company in France in the field of industry.
2006.4.3
ChemChina acquired Qenos (Australia) Pty Ltd (Australia), the biggest ethylene manufacturer and exclusive polyethylene manufacturer in Australia
2006.10.26
ChemChina acquired France Silicones Ltd. ChemChina then became the 3rd biggest organ silicone enterprise in the world.
2011.4.14
ChemChina acquired Elkem AS (Norway). ChemChina then mastered advanced technology in producing solar grade silicon.
2011. 10. 17
ChemChina acquired Makhteshim-Agan Industries Ltd. (Israel), the 7th biggest pesticide manufacturer in the world. ChemChina then became the 6th biggest pesticide manufacturer and dealer in the world.
2015.3
ChemChina acquired Pirelli & C. SpA (Italy), an Italian tire maker.
If you are looking for more detailed intelligence on China’s GMOs market, take a look at some of CCM’s latest research below:
Newsletter - for breaking news, data and expert commentary on China’s GMOs market, download the latest issue of Seed China News.
Industry Reports - for a detailed overview of the market and long-term market forecasts, see our latest Global Key Herbicides Applied on Genetically Modified Crop.
The article is reprinted from Eshare, an industrial blog powered by CCM.
About CCM:
CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.
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