China National Chemical Corporation (ChemChina) has been discussing the sale of significant shares in Syngenta Group Co., a Switzerland-based agricultural chemical company. It is rumored that prospective investors such as China Investment Corporation were approached before a public offering is made. According to anonymous sources, ChemChina contacted Silk Road Fund Co. as well as government-backed funding companies as other potential investors into Syngenta.
Is a Pre-IPO of $10 Billion Viable?
In December 2019, Reuters stated that an unidentified source claimed that ChemChina had initially hoped for a $10 billion investment in Syngenta’s pre-IPO round. However, in later reports it was claimed that the company will likely aim for a lower amount. The asserted reason behind this was that some of the potential investors were not satisfied with the terms of the investment round and it was implied that the company was valuated too high. The fundraising efforts were also presumably hampered by the Covid-19 pandemic.
Reports further implied that ChemChina is aiming at completing the pre-IPO investment round before the end of 2020 and that, once this is concluded, the company will be listed on the Shanghai Star board for high-tech companies. It was stated that this could happen as fast as early 2021. The Shanghai Star board, which has been in existence since July 2019, has attracted industry leaders like Geely Automobile Holdings and Semiconcuctor Manufacturing in recent months.
ChemChina and Syngenta Respond
A representative for ChemChina said that the company is not aware of an issue with overvaluation and added that Syngenta would be exploring an option to list at a suitable time. This will be ascertained by taking stock of market and business conditions at the time. A spokesperson for Syngenta said that the company has set a goal of being ready for an IPO by the middle of 2022 and declined to make further comment. A representative of CIC declined to comment and one speaking on behalf of Silk Road Fund claimed they don’t have any information to release.
Syngenta was acquired in 2017 by ChemChina. The main driver behind the acquisition was China’s objective to use the quality seeds technology and chemicals produced by Syngenta to improve local agricultural production. With a total investment of $43 million, the deal became the largest foreign takeover by a Chinese company at the time. Pre-IPO financing is a logical next step After Syngenta Group went through a reorganization in June 2020 in which other agricultural entities under ChemChina were incorporated. This included Adama Ltd. and the agricultural arm of Sinochem Corporation, a Chinese conglomerate. The Syngenta head office is located in Switzerland, has operations in over 100 countries where around 48,000 staff members work.
CEO of Syngenta, Erik Fyrwald was interviewed in June and confirmed that Syngenta is on track for an initial IPO by mid-2022. Fyrwald further stated that the company will continue to reduce their use of pesticides as governments and consumers across the globe are becoming increasingly more conscious of the environment.