- Deal would be biggest in record year of Chinese takeovers
- Offer by state-owned firm has drawn criticism from lawmakers
China National Chemical Corp. received approval from U.S. national security officials for its takeover of Swiss agrochemical and seeds company Syngenta AG, seen as the biggest regulatory hurdle that the $43 billion acquisition faces.
The Committee on Foreign Investment in the U.S. has cleared the transaction, the companies said in a statement Monday. The deal, expected to be completed by the end of the year, is still subject to antitrust review by regulators worldwide, according to the statement.
“The CFIUS approval removes a major potential hurdle and should come as a relief to Syngenta shareholders,” said Christian Faitz, an analyst at Kepler Cheuvreux.
Shares of Syngenta jumped as much as 13 percent. Since announcing the deal in February, the stock has traded below ChemChina’s bid price amid investor concerns that regulators in the U.S. might block the deal. The takeover is leading a record wave of Chinese acquisitions that has prompted U.S. officials to consider claims that some purchases could threaten national security.
Syngenta, which got more than a quarter of its revenue last year from seeds and crop protection in North America, would help transform state-owned ChemChina into a global pesticide and agrochemical giant.
CFIUS, which is led by the Treasury Department and includes officials from the Defense and State departments, reviews acquisitions of U.S. businesses by foreign investors for risks to American security and can recommend that deals be blocked. The committee often imposes conditions on transactions before clearing them, such as restricting the foreign company’s access to parts of the U.S. business.
ChemChina and Syngenta didn’t disclose the details of the agreement with CFIUS, with the Swiss company adding in an e-mailed response that “any mitigation measures are not material to Syngenta’s business.” The Treasury Department declined to comment.
ChemChina is proposing to pay $465 a share plus a 5 Swiss franc special dividend for Syngenta. At current exchange rates, the offer had been equal to about 451.87 francs a share versus the Aug. 19 close of 380.80 francs, Kepler’s Faitz said in a note. Stock of the Basel-based company climbed 10.6 percent to close at 421.20 francs in Zurich.
The deal has come as other major players in the agrochemical and seeds industry plan to merge, or are holding talks together. Dow Chemical Co. is combining with DuPont Co., and Bayer AG is targeting genetically-modified seeds maker Monsanto Co. Only BASF SE has remained on the sidelines of the consolidation wave.
CFIUS’s approval drew criticism from Senator Chuck Grassley, a Republican from Iowa, who has introduced legislation to clarify that agricultural assets should be considered by the committee as critical national security infrastructure.
“It’s clear that China is looking at purchasing companies with food production expertise as part of a long-term strategic plan and a component of their national security,” Grassley said in a statement. “The fact that a state-owned enterprise may have yet another stake in U.S. agriculture is alarming.”
ChemChina and Syngenta are working closely with “numerous regulators around the world,” and discussions remain “constructive,” they said in the statement.
“Further antitrust reviews of different countries shouldn’t be such a problem anymore,” Markus Mayer, an analyst at Baader Helvea Equity, said in a note.