How Many Difficulties Does Syngenta Group Still Have In Achieving International Leading Position

A share is now a giant IPO, this time the enterprise chose to land on the science and technology innovation board.

On July 2, Syngenta group's application for listing on the science and technology innovation board was officially accepted and disclosed by the Shanghai Stock Exchange. It plans to apply for a public offering of no more than 2.786 billion new shares, and the planned fund-raising amount is as high as 65 billion yuan.

If the listing goes smoothly, Syngenta group will break the financing record of the science and technology innovation board and rewrite the list of initial fund-raising in the A-share market, becoming the fourth largest IPO company in A-share market after Agricultural Bank of China, PetroChina and Shenhua of China, which is expected to be the largest IPO capital raising of A-share since 2010.

According to the prospectus, Syngenta group was registered in Shanghai in 2019, mainly composed of the agricultural business sectors of Syngenta, Andorra and SINOCHEM. Three years ago, the "Swiss" agricultural giant has been transformed into a world-class agricultural carrier with China's absolute control after a series of integration.

At present, agrochemical company directly holds 99.1% shares of Syngenta group and 0.9% shares of Syngenta group through its wholly-owned subsidiary McDonnell Douglas, which means that agrochemical company is the wholly-owned controlling shareholder of the company. Agrochemical company is a wholly-owned subsidiary of Sinochem, a wholly-owned state-owned enterprise subordinate to SASAC. Therefore, the actual controller of Syngenta group is SASAC of the State Council.

According to the statistics of 21st century economic report, in 2020, the total assets of Syngenta group will reach 472.5 billion yuan, and the revenue will reach 151.960 billion yuan. According to the average exchange rate of that year, Syngenta group's revenue will exceed 22 billion US dollars, surpassing Bayer of Germany and kodawa of the United States, and become the agricultural giant leading the world's first ladder team.

According to its listing plan, Syngenta group plans to spend 13 billion yuan on cutting-edge agricultural technology research and development costs and reserves, 3.9 billion yuan for the expansion, upgrading and maintenance of production assets and other capital expenditures, 7.8 billion yuan for the expansion of modern agricultural technology service platform (map), and 20.8 billion yuan for global M & A projects including Yangnong chemical and walagou, 19.5 billion yuan was used to repay long-term debts.

This means that Syngenta group, a giant of agricultural materials dominated by state-owned assets, will further open the pace of expansion, continue to widen the distance from Bayer of Germany, the second place of Germany, and cordix of the United States, and become the world-class carrier of agricultural materials on behalf of China.

World class agricultural carrier

Syngenta group consists of four business units: Syngenta plant protection, Syngenta Seeds, Syngenta China and Andorra.

The product portfolio covers plant protection, seeds, crop nutrition and modern agricultural services, with leading positions in their respective market sectors.

According to the prospectus, during the reporting period from 2018 to 2020, Syngenta group achieved revenue of 139.695 billion yuan, 144.566 billion yuan and 151.960 billion yuan respectively, and realized net profits of 3.804 billion yuan, 4.730 billion yuan and 7.997 billion yuan respectively, and the net profit attributable to its parent company was - 4.048 billion yuan, - 2.206 billion yuan and 4.424 billion yuan, respectively. No matter in terms of asset size or operating income, China's agricultural materials aircraft carrier has become a global industry leader.

The company has ranked first in the global plant protection industry, the third in the seed industry, and is in a leading position in the field of digital agriculture; In China's plant protection industry, crop nutrition industry, the company has ranked first, domestic seed industry ranked second.

Looking back on the world market three years ago, Chinese agricultural materials companies were still unable to occupy a place in the world agricultural materials market. European and American agricultural material giants continued to merge and integrate, seizing the voice of global competition. For example, Bayer of Germany, which was stronger than plant protection business, acquired Monsanto, a seed giant, and DuPont and Dow, which had a place in the seed market and plant protection field, merged into cordix.

At present, the Chinese carrier of agricultural materials is ready to emerge, and has led the world market in many fields, and began to reshape the global agricultural science and technology industry market pattern dominated by China, the United States and Europe.

According to the reporter survey of 21st century economic report, Syngenta group, founded in 2019, leads the global market and also benefits from inheriting and integrating the resources of many important global agricultural companies.

In June 2017, China National Chemical Corporation completed the acquisition of Syngenta, a Swiss agricultural material giant, with us $43 billion, setting a record for a single overseas acquisition by a Chinese enterprise. After the acquisition, Sinochem Agrochem and McDonnell Agrochem initiated the establishment of Sinochem (Shanghai) agricultural technology company in 2019, and renamed Syngenta group in early 2020.

In addition to Syngenta Switzerland, Syngenta group's business is derived from Andorra, a leading plant protection company in Israel. In 2011, Sinochem acquired 60% of makhteshim Agan and renamed it Adama solutions in 2014. In 2017, Andorra (then known as Hubei Sanonda) issued shares to acquire all shares of Adama solutions.

During the reporting period, Syngenta group transferred the shares of 4 companies of China chemical industry group and 8 companies of Sinochem Group by means of free transfer or agreement transfer. Over the past few decades, Syngenta group's plant protection, seed and crop nutrition businesses have finally become a global leader through a large number of acquisitions, including the acquisition of Nidra, walagor, Quanyin high tech and Huifeng.

Worries about integrated listing

Syngenta group disclosed that there are no comparable enterprises in the world in terms of business model and product range. However, the 21st century economic reporter has noticed that Syngenta group, which has grown up rapidly through merger and acquisition, also has many financial problems due to its early expansion.

In 2017, Sinochem acquired Syngenta of Switzerland to form a huge amount of goodwill. After its establishment in 2019, Syngenta group undertook the goodwill generated from the acquisition of Syngenta in Switzerland by way of business combination under the same control.

Syngenta group has confirmed the scale of goodwill of 100 billion yuan. At the end of 2018 and 2019, the book value of goodwill recognized by Syngenta group was 171.772 billion yuan and 174.978 billion yuan respectively, accounting for 37.03% and 36.15% of its total assets at the end of the period.

As of the end of 2020, the book value of goodwill of Syngenta group still amounted to RMB 165.922 billion, accounting for 35.12% of the total assets at the end of the period. Among them, the goodwill recognized by the acquisition of Swiss Syngenta (the relevant goodwill has been split in the two divisions of Syngenta plant protection and Syngenta Seeds since 2019), Adama solutions, Sinochem Yunlong and other companies were 160.428 billion yuan, 4.584 billion yuan, respectively 531 million yuan and 379 million yuan.

At the same time, the early acquisition of Syngenta group led to a high level of intangible assets, including non patented technology, trademark rights, patent rights, software, franchises, etc. at the end of each reporting period, the company's intangible assets reached 111.870 billion yuan, 109.929 billion yuan and 102.605 billion yuan, respectively, accounting for 24.11%, 22.71% and 21.72% of its total assets, respectively.

In this regard, Syngenta group said that during the reporting period, the company did not make provision for impairment of goodwill. If the future operation of the acquired company fails to meet the expectation, Syngenta group may face a huge impairment of goodwill, which may reduce the company's profitability. In addition, if the intangible assets are impaired due to significant adverse changes in the macro-economy and the industry in which the company is located, technical iteration, etc, It will also affect the company's profitability.

21st century economic reporter noticed that under the strong merger and acquisition, Syngenta group's production capacity of main products is difficult to fully digest.

In the plant protection business sector of the company, the capacity utilization rate of herbicides, fungicides, insecticides and other major products of the company will be less than 60% in 2020, and only the productivity utilization rate of seed coating agent products will reach 80.59%; In the seed business sector, in 2020, the capacity utilization rate of corn and soybean seeds was 91.85%, that of other field crops was only 63.96%, and that of vegetable seeds and flower seeds was 86.56% and 68.60%, respectively; For crop nutrition business, in 2020, the capacity utilization rate of basic fertilizer, compound fertilizer, special fertilizer and feed calcium is only 23.40%, 57.7%, 24.60% and 114.0%, respectively.

After the rapid expansion of merger and acquisition, Syngenta group's assets and revenue scale has been in the forefront of the world, but its remaining goodwill and business risks still need to be integrated and resolved.

An analyst of a head securities firm in Beijing told the 21st century economic report that the performance of Bayer in Germany and Monsanto in the United States after merger and acquisition had fluctuated in the past two years, and the revenue and market value even declined. Whether Syngenta group can open up the market and realize the benefits of M & A remains to be seen.

How to rise in international competition

It is worth noting that although Syngenta group has completed 100% state-owned assets holding, most of its main business income comes from the international market, which brings some operational risks to the company.

Syngenta Group believes that after years of development, the company has accumulated rich customer resources and has established business in more than 100 countries around the world. During the reporting period, Syngenta group's main business income from overseas accounted for 79.47%, 80.16% and 79.78% respectively, which was in line with the global layout strategy of Syngenta group.

At the same time, the company points out that the company is facing great competition in the market it operates, not only to face more competition in the industry, price competition and patent competition, but also to carry out business in many countries around the world, and the economic and trade structure of some countries is not mature, which may affect the company's sustainable operation. In addition, the increasing volatility of global political, economic and trade policies may lead to Global trade instability and global growth slowdown, which may have a significant adverse impact on the business development of Syngenta group.

Looking at its prospectus, it is not difficult to find that the outstanding major litigation and arbitration matters of Syngenta group during the reporting period mainly occurred in the international market. As of the end of 2020, there were as many as eight lawsuits or arbitrations involving more than US $100 million for the company's important overseas subsidiaries.

In September 2017, several plaintiffs in the United States claimed that they suffered from Parkinson's disease or kidney damage due to long-term exposure to paraquat products of Syngenta group, so they initiated a series of lawsuits. Syngenta (Switzerland) and Syngenta plant protection (USA) signed a general settlement agreement with relevant litigants on June 1, 2021 to reach a settlement on some of the lawsuits. However, as of June 22, 2021, there were still 136 outstanding lawsuits that Syngenta group's subsidiaries had received or knew to have been filed, except for those settled.

Since September 2014, Syngenta group has been deeply involved in thousands of class actions against genetically modified corn seeds in the United States. Until March 2019, Syngenta, Syngenta plant protection (Switzerland), Syngenta Corporation, Syngenta plant protection (United States) and Syngenta Seeds (United States) had to pay a full settlement of US $1.51 billion. Up to now, some lawsuits have not been settled.

Since September 2014, Syngenta group has also faced a class action lawsuit initiated by Canadian bee farmers in the Canadian market. Ontario bee farmers claim a claim of C $450 million.

In addition, the company also faces antitrust litigation initiated in the U.S. market, disputes arising from the sake project, Gnome project and tve29 compound related cooperation agreement, contract dispute litigation with plantlab BV, as well as disputes over OECD's product liability charges against the company and disputes with Roundup products.

At present, the international trade disputes are becoming more and more serious, and the operational risks of Chinese companies in the European and American markets are increasing. Whether the Chinese agricultural giant relying on the international market can really rise in the international competition, Syngenta group has a long way to go in addition to listing and financing.

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