August 22, 2016

3 Min Read
<p>BASF SE signalled it&rsquo;s ready to snap up any assets that come up for sale as the biggest wave of consolidation seen in the agrochemical industry approaches a critical juncture.</p>

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 on 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 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.

Stock Upside

ChemChina and Syngenta didn’t disclose the details of the agreement with CFIUS, with the Swiss company adding in an emailed response that "any mitigation measures are not material to Syngenta’s business.”

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’s close of 380.80 francs, Kepler’s Faitz said in a note. Stock of the Basel-based company traded 11 percent higher at 422 francs as of 1:35 p.m. in Zurich.

The deal has come at a time when 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.

Senator Concerns

Approval by CFIUS may trigger criticism in the U.S. A group of farm-state senators in March called on Treasury to closely scrutinize the Syngenta takeover, saying it could affect food security and safety as well as the U.S. farm sector. In June, Senator Chuck Grassley, a Republican from Iowa, called the deal “concerning” and said the U.S. needs to consider “strategic questions” before approving the sale of agricultural assets to foreign governments. Reuters earlier reported the expected clearance earlier, citing unidentified people.

ChemChina and Syngenta are working closely with “numerous regulators around the world” and discussions remain “constructive,” they said in the statement.

“Further anti-trust reviews of different countries shouldn’t be such a problem anymore,” Markus Mayer, an analyst at Baader Helvea Equity, said in a note.


--With assistance from Prudence Ho. To contact the reporter on this story: David McLaughlin in Washington at [email protected]

To contact the editors responsible for this story: Ben Scent at [email protected]; Sara Forden at [email protected]

Andrew Noël, Phil Serafino

© 2016 Bloomberg L.P

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