The logo of Swiss pesticide and seed giant Syngenta on the facade of the company's headquarters in Basel, is pictured on February 3, 2016, ahead of a press conference presenting the company's annual results.MICHAEL BUHOLZER/AFP / Getty Images
HSBC Holdings Plc bet on the dark horse in the global race to create an agrochemicals giant and won.
As the lead adviser to China National Chemical Corp. on its $43-billion acquisition of Swiss pesticide and seeds maker Syngenta AG, HSBC will get the biggest cut of as much as $95-million in fees, according to estimates from consultants Freeman & Co. The deal is the largest-ever acquisition by a Chinese firm and will be HSBC's biggest advisory mandate.
Morgan Stanley had backed the rival bidder, St. Louis-based Monsanto Co., which tried and failed to buy Syngenta last year. Monsanto said in November it was considering making another bid for its Basel, Switzerland-based peer. Still, Syngenta's yield– boosting seeds and crop-protecting chemicals made it too appealing to pass up for the Chinese, who are looking for ways to feed the world's biggest population.
ChemChina, as the company is known, showed Syngenta's board a financing package that more than covered the $43-billion purchase price, people familiar with the matter said. The financing plan, which includes a bridge loan from HSBC and the company's other adviser, China Citic Bank Corp., eliminated concerns that the company could fund such a large takeover, said the people, who asked not to be named because the plans were private.
HSBC's willingness to fund the deal and its roots in Asia – – symbolized by its founding member's name Hongkong and Shanghai Banking Corp. – positioned it to cash in on booming deals in China.
Asian Growth
HSBC's strongest markets are in Asia. The lender was ranked ninth on merger advisory in Asia Pacific last year, compared with 19th globally, according to data compiled by Bloomberg. Prioritizing the region has put it in a prime position to advise on lucrative mergers as M&A picks up. The London-based lender is even considering moving its headquarters, with Hong Kong seen as the leading candidate city.
The bank outlined a global hiring and pay freeze in a memorandum to employees last week, as part of its drive to cut as much as $5-billion in costs by the end of 2017. The measures will affect the both the consumer and investment banking businesses. Chief Executive Officer Stuart Gulliver, 56, in June outlined a three-year plan to pare back a sprawling global network by shutting money-losing businesses, and eliminate as many as 25,000 jobs as he seeks to boost profitability.
HSBC is scheduled to release full-year earnings on Feb 22.
Syngenta's Banks
JPMorgan Chase & Co. and former Goldman Sachs Group Inc. Partner Gordon Dyal's firm – Dyalco – were lead advisers to Syngenta, along with Goldman Sachs and UBS Group AG. Banks advising Syngenta may get as much as $71-million, according to the Freeman estimates.
This isn't the first big agrochemicals deal for Goldman Sachs. The bank advised DuPont Co. on its merger with Dow Chemical Co. in December, which increased pressure on Syngenta to do a deal.
Ze'ev Goldberg, formerly an M&A banker at Lehman Brothers Holdings Inc. and officer in the Israeli Defense Forces, acted as an adviser to ChemChina Chairman Ren Jianxin, a person familiar with the deal said. Goldberg serves on the board of another of ChemChina's holdings, Italian tiremaker Pirelli & C. SpA. He didn't immediately return calls seeking comment.
Chinese companies are on track to smash records for overseas acquisitions for the second year in a row. Just 34 days into the year, there's been $68.1-billion of those deals and investments announced, including today's deal, according to data compiled by Bloomberg. That's almost half way to matching 2015's record breaking $123.9-billion in spending.