Survey Result: an “embraced synergetic effect” of Syngenta and ADAMA or a “rich fruit with few nutrients” after Chemchina's acquisition？

 

To better understand outside views from global industry readers on the acquisition, AgroPages, in the week from 26th April to 5th May, conducted a questionnaire survey among its readers worldwide. The questionnaire is entitled - How would you comment on ChemChina’s “suicide acquisition” of Syngenta? The questionnaire includes 3 single-choice questions, 1 multiple-choice question and 1 open viewpoint question to ask for different opinions.  

 

A total of 310 questionnaires were received back, respectively filled in by readers from FMC, Monsanto, BASF, Syngenta, Bayer, Isagro, Sipcam, Indian Rallis, ADAMAand Kleffmann, as well as more from other companies. The readers actively participated on the survey and gave their wonderful views. 

 

 

In the eyes of Chinese government,this is a smart strategic decision. It is very imperative that the high-density population in China and Asia need biotechnology for fast increase of crop yield; the technical progress of biotechnology research in this region can be accelerated by this acquisition. Its agricultural productivity can be enhanced while in the past time the agriculture in this region could only be developed via idioplasmatic update.

 

Areader who is very familiar with Chinese agriculture and Syngenta’s business operations, left a message that “China wants to promote consumptions. China has currently 600 million small-sized framers and government wants to increase their incomes. Syngenta knows how to back up the production of small-sized farmers because Syngenta has got proven market experience in Africa. So the acquisition of Syngenta is a wise move of Chinese government.”

 

From ChemChina perspective, quite a lot of readers think that ChemChina has taken over majority shares of ADAMA which leads to capture of the generic pesticide market share. This acquisition enables ChemChina to retain GMO technology and seed. As a result, the 2 companies would obtain a synergetic effect, which will further increase the group’s global market share. 

 

Speaking of Syngenta, a reader said, “the company has a strong R & D capacity, supported by an extensive and low-risk sales team as well as local distributors. The acquisition allows Syngenta to receive a long-term investment to support its agricultural sustainable development and maintain its global farm work values.”

 

A reader expressed views on Monsanto, saying that “for the agricultural industry, the acquisition will bring about more industry competitions, which will result in production of lower price seed and pesticide. If the merge is between Monsanto and Syngenta, larger layoffs will arise within the industry. Monsanto is the one being hurt, as its trait-authorization income is reducing. They have no product within the trait research chain, also the future business relies on the high-risk biological formulations. After Monsanto’s acquisition of Climate, Monsanto has separated the agriculture insurance and precision planting from Climate, which is a serious tactic mistake. In my view, the concerns currently from press media over the acquisition are probably made up by Monsanto behind the scene.”

 

 

1/3 of the questionnaire survey participants (30.3%) say that the acquisition is not really a wise move, which is also reflected by the answers to the open viewpoint question. Analysis of these answers indicates that there are concerns from industry practitioners over the business operation of Chinese pesticide manufacturers, protection of IPRs and the Chinese-style of business management.

 

Product quality is the pride of the century-old company Syngenta, which makes up its brand value. However Chinese pesticide manufacturers do not yet have a quality image in the international market. So some readers have the worry that “quality will vanish with the acquisition and Syngenta is going to become a generic pesticide manufacturer.”

 

Some other views hold thatChinese business managers lackinternational business management experience. Under present Chinese management conditions, the capacity to attract talented people within the industry is weakened. This is a challenge to the management and development of the company. China’s IPRs protection has been always a concern, which is not beneficial to a company with huge amount of IPRs. If a corporate governance becomes political, then this giant company will cause harm globally to the business industry. 

 

Something interesting is that there are 2 readers questioning Syngenta’s innovative product pipeline. One of them left such a message: “Syngenta’s innovative product is running out, its research pipeline does not exist, so the acquisition price is much over estimated. The company relies heavily on cooperation with 3rd parties, such as for the chlorantraniliprole in cooperation with DuPont, the SDHI active ingredient with Bayer and the GM seed with Monsanto. Syngenta is no more than just a large generic pesticide manufacturer. Also the company has lost its opportunity of growth 10 years ago due to the insufficient setting of brand ladder and the weak protection of core chemical patent. Additionally the company does not really have managers of leadership and innovation, most of the management are only executors. In this sense, to the acquiring company, this acquired company is just like a mature fruit for pick, which is however almost not nutritious any more.”

 

As a matter of fact, no small number of readers believe that the price of $43 billion is too high, whichlead people to think about ChemChina’s financing need for the acquisition, as well asmaking people to worry about its financial standing to sustain the debt burden. 

 

 

 

Syngenta’s the world’s largest sales for years among all agrochemical enterprises, and in possession of a world first-class innovative active ingredient research pipeline, full range of pesticide product mix, biological technical expertise and GM product. What is the most beneficial thing to ChemChina as brought by the acquisition of such a super company? In the multiple choice question, following items are listed for an answer:

 

It is shown that the “fast entry to international premium market” is the most selected answer (25.9%). It is indeed a most direct benefit for a company like ChemChina, which is Chinese state-owned to obtain international market share via capital operation and to change into a brand owner from a raw material producer. 

 

Also 23.5% readers have chosen the “biological technical expertise and GMO” as their answer. At present China is under a debate whether GM crops are going to be permitted for planting and consumption; Chinese government is looking for sufficient demonstrations to justify the safety of GMO to humans and the environment. However, whateverhappens, the advanced seed technology, which might greatly enhance productivity is going to become a natural tendency of agricultural development in the future, bearing in mind the requirement of population and natural environment. As one of the largest agrochemicals vendors in China or even Southeast Asia, ChemChina’s acquisition enables it to obtain the technology and product which used to belong to the world’s first-class GMO research company. This will not only enhance its competitive edge in the competition in the agricultural market, but will also play a solid foundation for the regional food security.

 

Moreover, the product research pipeline and the full range of pesticide product are higher selected answers, being respectively by20.5%and 19.0% readers. The 1.7% readers gave other miscellaneous answers to the benefits of the acquisition, such as seed and pesticide pricing ability, availability of health and safety- assured high-standard production process, product testing service ability, global influence and vision on food security, as well as an excellent field crop technical service team.

 

 

Over 2/3 readers (69.7%) believe the acquisition to be a wise move.

 

  

 

32.9% readers think that Monsanto did give a shill bidding to jack up price.

 

 

 

2/3 readers (66.7%) believe that after the acquisition, Syngenta will still remain as an industry leader and will continue its development more vigorously.

 

At present Chinese economy faces considerable challenges, with growth of GDP being expected to slow down to 6.5%. Domestic demand and industrial profit are going down, whilst there is an overcapacity problem. The large numbers of merge and acquisition in the first quarter of this year attracted media attentions, but China’s overseas acquisition prospects may not be promising as from the appearance. Chinese enterprises’ overseas acquisitions are being challenged with the pressures of transparency and accountability, the increasing state security concerns and growing debt burdens. Under such a circumstance, can this record-making overseas acquisition be smoothly accomplished? Will the 2 companies be able to move into a new development path?

 

Wise see wisdom; time will tell.