Pirelli, Syngenta and China’s most ambitious global dealmaker
One thing to start: DD is hosting a get together/networking event in Manhattan in two weeks. Come join James, Sujeet, Arash and Neil from the team from 6.30pm to 9pm at Louie and Chan on October 18. RSVP: DDrsvp@ft.com
Around 15 months ago, a senior global dealmaker sat down with DD to discuss something he had never seen before. "Not even General Electric behavesike this," the exasperated adviser said. He was talking about a Chinese company that had simultaneously pursued a $43bn bid for agrichemicals behemoth Syngenta, and a $50bn+ offer to snatch BG Group from Royal Dutch Shell.
What was the company? ChemChina. And the dealmaker behind the state-owned group? Ren Jianxin, or as he is better known, Chairman Ren (you can read up on him here).
While the BG Group deal did not come off (the world learned about it thanks to this excellent Reuters scoop), the Syngenta deal did. And while that transaction completed earlier this year, it continues to be plagued by questions over ChemChina's financing.
Here's a quick timeline of our reporting of the situation:
September 25: Syngenta postpones $7bn bond sale after investor pushback. Investors are concerned about the overhang of lawsuits from US corn farmers.
September 26: Syngenta reaches a settlement with US corn farmers, for an undisclosed sum.
September 27: This story outlines how investors and analysts want Syngenta to explain how it will fund the settlement while retaining its investment grade rating with S&P. The agency said in an earlier report that ChemChina and China's State-owned Assets Supervision and Administration Commission (Sasac) are committed to an investment grade rating, but that funding needs to come from Sasac in the form of equity.
September 28: We report the head of Sasac as saying that ChemChina and Syngenta can handle the situation on their own, without any Sasac funding.
October 2: S&P puts Syngenta on "CreditWatch negative", saying that the company's communication around its Chinese support has been "inconsistent".
All of which brings us to a rather important event for Chairman Ren and ChemChina, which is taking place this week: the initial public offering of Italian tyremaker Pirelli. ChemChina led a €7.3bn takeover and delisting of Pirelli two years ago, before setting its sights on Syngenta.
As Rachel Sanderson and Lucy Hornby write here:
Pirelli — –he “Prada of tyres” — –ill be among the biggest IPOs in Europe this year with an expected enterprise value of about €6.5bn when shares start trading on Wednesday.
But it will also provide an insight into investor interest in ChemChina subsidiaries, amid questions about its debt levels and state support for its Syngenta purchase.
ChemChina, a state-backed chemical company, is selling up to 40 per cent of its stake in Pirelli, which it bought two years ago.
Investors are watching the deal closely and trying to decipher what it will mean for what comes next with Syngenta. So far, the IPO has been met with scepticism. Pirelli priced the offering on Friday at the low end of a proposed range and slightly below the level it was delisted at back in 2015.