Dow CEO: Chinese firm pursued Indy acquisition in 2010

February 3, 2016
For Dow Chemical Co. CEO Andrew Liveris, it’s little surprise that China National Chemical Corp. plans to acquire the world’s largest pesticide maker, Switzerland-based Syngenta. He said in a Bloomberg News interview Tuesday that five years ago, it tried to buy his company’s agricultural unit, Indianapolis-based Dow AgroSciences.

ChemChina, as the company is also known, announced Wednesday morning that it has agreed to acquire Syngenta for $43 billion. In 2010, ChemChina participated in Dow’s unsuccessful effort to sell Dow AgroSciences, Liveris said.

As well as manufacturing crop chemicals, Syngenta is one of the handful of non-Chinese companies that dominate the production of genetically modified organisms, or GMOs, along with Monsanto Co., DuPont Co., Dow AgroSciences and Bayer AG. For years, the Chinese have told Liveris on his visits to the country that GMOs are an area of strategic focus for their farm economy, the Dow CEO said in a phone interview Tuesday.

"The Chinese see GMOs as strategic, so I would not be surprised by that move at all," Liveris said in the interview, which followed numerous news reports that the deal was brewing.  “It was just a question of which Chinese company would be involved."

China President Xi Jinping has urged the country to take the lead in developing genetically modified crops. Its nascent seed industry should “boldly research and innovate” in GMOs and prevent foreign companies from dominating the market, he said a 2014 speech. Biotechnology for crops is highlighted in China’s most recent draft Five-Year Plan.

The crop chemicals industry has been in a dealmaking frenzy since last spring, when Monsanto made a $45 billion bid for Sygenta that was ultimately rebuffed.

In December, Michigan-based Dow Chemical and Delaware-based DuPont announced a historic merger of equals that would lead to the creation of three separate publicly traded companies, one focused on agriculture.

Dow and DuPont have so far not said where the ag business will be headquartered, which has cast uncertainty over the future of Dow Agro’s 1,500 Indianapolis employees.

The mergers are fueled in part by a sales slowdown in the sector. Dow Agro on Tuesday announced fourth quarter sales of $1.6 billion, down 16 percent from the same period a year earlier.

Legal observers say U.S. national security watchdogs are likely to look closely at ChemChina’s proposed Syngenta purchase on two fronts—whether such a deal would compromise American food security and whether the combined company’s locations would be too close to U.S. military bases.

Syngenta has several U.S. research and production facilities, which may draw interest from the Committee on Foreign Investment in the United States. CFIUS, led by the Treasury Department and including Defense and State department officials, reviews acquisitions of U.S. businesses by foreign investors and can recommend the president block transactions it deems compromising to national security.

Syngenta has a crop-protection manufacturing facility in Louisiana, a crop genetics research facility in North Carolina and a diversified chemical formulating facility in Omaha, Nebraska, with more than 2 million gallons of chemical storage. The company generated 75 percent of its revenue in 2014 from crop-protection products such as pesticides, followed by its seed business. 

U.S. government agencies have considered food supply as potentially constituting critical infrastructure, and could look carefully at the new stewards of Syngenta’s seed technologies and pesticides, said Anne Salladin, a lawyer at Stroock & Stroock & Lavan LLP in Washington.

"There is a particular focus by CFIUS on critical infrastructure these days, and there is nothing that would prevent it from looking at food safety as a potential national security risk," said Salladin, who worked on CFIUS reviews while at the Treasury Department.

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