U.S. clearance of ChemChina's Syngenta deal removes key hurdle

Mon Aug 22, 2016 3:34pm EDT
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By Michael Shields and Greg Roumeliotis

(Reuters) - A U.S. national security panel has cleared ChemChina's $43 billion takeover of Swiss pesticides and seeds group Syngenta (SYNN.S: Quote), the companies said, boosting chances that the largest foreign acquisition ever by a Chinese company will go through.

The decision removes significant uncertainty over the takeover of the world's largest pesticides maker. Several U.S. lawmakers and groups representing farmers had expressed fears over a Chinese state-owned company being in a position to influence the U.S. food supply.

Syngenta shares jumped as much as 12.5 percent on the news and ended trading on Monday up 10.6 percent at 421.20 Swiss francs ($437.9). ChemChina's $465 per share cash offer values the company at around 448 Swiss francs per share at current exchange rates, plus a special five-franc dividend.

"This sends a very good signal to China that the U.S. is open for investments in most sectors. But this also shows the need for a bilateral investment treaty so that similar U.S. investments are possible in China," said Georgetown McDonough School of Business professor Charles Skuba, who studies market development in China.

The United States reviewed the deal because more than a quarter of the company's seeds and crop protection revenue last year came from North America. The major regulatory hurdle the deal now has to clear is an antitrust review by the European Union, which the companies may seek to facilitate through divestitures, if need be.

Kepler Cheuvreux analyst Christian Faitz called the step a "major milestone for the deal," adding in a note to clients that "approval removes a major potential hurdle and should come as a relief to Syngenta shareholders." Kepler Cheuvreux rates Syngenta shares a "Buy." Reuters reported earlier on Monday that the acquisition was in the final stages of being cleared by the U.S. panel that scrutinizes deals for national security implications.

"We are not disclosing the details of the agreement with the Committee on Foreign Investment in the United States (CFIUS) to respect the confidentiality of the process," a Syngenta spokesman said by email in response to a Reuters query. "Any mitigation measures are not material to Syngenta's business."

Syngenta reiterated that it expected the deal to close by the end of the year. It added that completing the transaction was subject to "anti-trust review by numerous regulators around the world and other customary closing conditions."   Continued...

People use an escalator outside the headquarters of ChemChina (China National Chemical Corporation) in Beijing, China, February 4, 2005. REUTERS/Stringer/File Photo