China Chemical's $2.7 billion acquisition of Israel's pesticide giant

China's central enterprises once again set off an upsurge of overseas mergers and acquisitions.

Yesterday, CNOOC Limited (00883.HK) announced that it will invest US$2.16 billion in the second day of investment in Chesapeake, the second-largest natural gas producer in the United States. China National Chemical Industry Group (hereinafter referred to as “China Chemical”) has also started A potentially multi-billion-dollar overseas merger and acquisition.

China Chemical seeks to acquire Makhteshim Agan Industries, the world's largest producer of generic pesticides. Koor Industries, its parent company, said in a statement yesterday that the two parties are negotiating on the purchase of 70% of Maxim Agan by Sinochem.

China Chemical Industry insiders confirmed to the "First Financial Daily" yesterday: "The company does contact Maxim Agan for its acquisition intention."

Estimated $2.7 billion Maxim Agan mainly produces agrochemical products such as herbicides, fungicides and insecticides. In 1998, it was formed from the merger of Makhteshhim and Agan. Since then, the company has achieved rapid growth through a series of corporate acquisitions and product acquisitions.

Based on Koor's valuation, Maxim Agan's entire company's valuation may be about 2.7 billion US dollars. Koor said it will retain 30% of Maxim Agan’s shares. Currently Koor holds a 47% stake in Maxim Agan. Maksim Agan has 47.75% of the shares listed on the Tel Aviv Stock Exchange.

Chinese chemical insiders told this reporter that at present there is no signing of an intent agreement with Maxim Agan.

Koor said that at the current stage, as far as transactions are concerned, the signing and signing time of the binding agreement between the company and China Chemical cannot be ensured, and the structure and terms of the transaction cannot be guaranteed.

The company further stated that as part of the preliminary agreement, the two parties will implement a shareholder agreement to manage their relationship with Maxim Agan, including giving Koor a certain minority shareholder rights.

The insiders of China Chemical believe that Koor's announcement of this negotiation process may be aimed at attracting the attention of global investors to attract more companies to participate in the bidding and thus increase the premium.

Resource demand promotes overseas mergers and acquisitions The ongoing acquisition of China Chemical Industry Co., Ltd. is only a microcosm of overseas mergers and acquisitions once again this year.

In April of this year, CNOOC suddenly announced after many years of silence that it had won a 20% stake in Pan American, Argentina’s second-largest oil and gas producer, for 3.1 billion US dollars.

In May, Jiang Jiemin, chairman of CNPC, disclosed that CNPC has established a new overall goal for overseas expansion, namely, investing US$60 billion in overseas expansion in the next 10 years. Last month, Sinopec invested 7.1 billion U.S. dollars in the purchase of a 40% stake in Repsol, a major Spanish oil company, in Brazilian companies.

Prior to this, there have been intensive overseas acquisitions in 2008 and 2009. After the financial crisis, Chinese companies “dip” and focused on investing in resource companies in Australia, Canada and other regions.

It is worth noting that since the beginning of this year, the accelerated depreciation of the U.S. dollar has helped Chinese companies make overseas acquisitions because the depreciation of the U.S. dollar has further hit all asset prices priced in U.S. dollars.

Deloitte, one of the world’s top four accounting firms, stated in a report last month that Chinese companies have continued to invest heavily in overseas investment this year. Since the second quarter of 2009, they have had more than 25 transactions per quarter. These overseas acquisitions More concentrated in the mining, oil and gas industries and the automotive industry.

Xie Qilong, managing partner of Deloitte Asia-Pacific and China M&A transaction services, told this reporter that China’s foreign investment in M&A is due to multiple factors, including access to overseas natural resources, improved market positioning, and government support.

At present, more than half of China’s oil imports rely on imports, and China does not plan to launch new domestic exploration projects. Therefore, Chinese oil companies have to ensure the supply of upstream assets through overseas mergers and acquisitions rather than buying oil directly from the international spot market.

Xie Qilong pointed out that Chinese mining companies must ensure the supply of materials, which will undoubtedly be the main driving factor for overseas mergers and acquisitions, and the rapid growth of China's economy will continue to stimulate domestic demand for related resources.

Deloitte made a survey on the expected future international mergers and reorganizations last month. 85% of respondents believe that in the next 12 months, the supply of guaranteed materials is an important driving factor in the development of foreign mining, with more than 80% of respondents It is expected that the transaction price of crude oil and natural gas will rise in the next 12 months.