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A successful bid by state-owned China National Chemical Corp., or ChemChina, to buy Syngenta AG, a Swiss producer of pesticides and engineered seeds, could help China combat weeds and insects with less labor as farm workers are increasingly turning to higher-paying city jobs, and after the amount of arable land has declined. At the same time, China’s growing middle class has increased its meat consumption, boosting feed-grain demands.
While ChemChina’s initial $42 billion bid for Syngenta was rejected, people with knowledge of the matter said, the rationale remains strong. Such a deal would also transform ChemChina into a developer of genetically modified organisms, or GMOs, vaulting it into direct competition with market leader Monsanto Co.
For more than a year, President Xi Jinping has urged his country to take the lead in developing genetically modified crops. China’s nascent seed industry, he said a speech last year, should “boldly research and innovate” in GMOs and prevent foreign companies from dominating the market. Biotech for crops was highlighted in China’s most recent draft Five-Year Plan.
“What ChemChina is really interested in is the seed research,” Jonas Oxgaard, a New York-based analyst at Sanford C. Bernstein & Co., said by phone Friday. “It’s arguably the main strategic rationale for the deal.”
Syngenta has one of the broadest seeds portfolio in the industry, including 6,800 varieties of its own proprietary genetics. Buying Syngenta would also give ChemChina the know-how to win regulatory approvals for future technologies, London-based analysts at Deutsche Bank AG said in a note Friday.
Read full, original post: China’s Hunger to Join GMO Club Revealed in Move to Buy Syngenta