Blog Coverage US National Security Regulator Approves Chemchina Syngenta Deal

LONDON, UK / ACCESSWIRE / August 23, 2016 / Active Wall St. blog coverage looks at the headline from Syngenta AG (NYSE: SYT). In a major boost to the US-China business relations a US National Security panel on August 22, 2016 has given the green signal to China National Chemical Corp.’s (ChemChina) takeover of Swiss agribusiness company Syngenta AG. The deal is valued at $43 billion and is expected to close by the end of 2016. The deal is yet to be approved by the regulators of the European Union. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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Why did the deal need US regulators blessings?

ChemChina had announced its intention of takeover of Syngenta in February 2016, with the deal expected to be completed by May 2016. ChemChina had announced that it would pay $465 plus a special dividend for each Syngenta’s share. Syngenta has a major presence in North America, a region that contributes upwards of 25% of its total sales. Due to this, many stakeholders in the US were wary of the deal and raised their concerns. The issue was brought to the notice of Treasury Secretary, Jack Lew, by four members of the US Senate Agriculture Committee who requested the scrutiny of the deal and the potential ramifications to the US national security as well as the effects on food security and safety. This is when the Committee on Foreign Investment in the United States (CFIUS) was formed to review the national security implications of foreign investments in US companies.

This deal is the largest acquisition made outside China by a Chinese state-owned company. Though the deal was cleared by the CFIUS, it is not final though, as it has yet to be approved by anti-trust regulators of other nations.

Why this deal is important?

This deal is critical as it would have wide range impact across the agricultural businesses in the world. This merger would impact crop prices thereby affect the demand for related agricultural products.

Syngenta is a leading global Swiss agriculture company that produces agrochemicals, seeds, and is active in the field of biotechnology and does plant based genomic R&D. Syngenta has also the largest bank of genetically modified seed varieties. This deal will give ChemChina access to Syngenta’s state-of-the-art agrochemical and latest in gene-modification technology. Earlier Monsanto Co. had unsuccessfully tried to acquire Syngenta three times, before the latter accepted ChemChina’s offer.

Impact on EU’s regulators

EU regulators have been wary of Chinese investments due to anti-trust concerns and the influence of the Chinese state on the business decisions of the acquired companies. CIFUS approval may also impact the EU’s regulators monitoring this transaction. The EU regulator’s scrutiny is focused in the area of crop-protection chemicals as ChemChina holds a majority stake of 60% in Adama, an insecticide and weedkiller company. The anti-trust approval process is due to various concerns that are genuine – the proper use of the gene modification technology by ChemChina and food security of the region due to the presence of an agrochemical multi-national conglomerate.

The EU regulator is already scrutinizing The Dow Chemical Co. and E. I. du Pont de Nemours and Co.’s merger and looking at the impact on the competition in the crop-protection and petrochemicals space.

Wide ranging impact

The role of CIFUS gains importance as it will play an important part in assessing risks of such deals which have the potential to impact national security and impact local businesses. CIFUS verdict is being watched by other companies looking at mergers and acquisitions including Bayer AG which has been interested in acquiring Monsanto.

Chinese companies which have been sitting in the side lines would take this news positively and the US markets can prepare for further big-ticket investments from them. According to Dealogic, Chinese companies have already inked deals worth over $ 159.2 billion in 2016.

Stock Market reaction

Following the announcement that CIFUS approved the deal, Syngenta’s shares soared 10.44% to close the trading session at $87.81 with a total volume of 2.86 million shares being traded. The company’s stock price has advanced 10.33% in the past one month and 14.63% since the beginning of the year.

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