BY Fraser Tennant
China National Chemical Corporation (ChemChina) and Swiss pesticides and seeds group Syngenta announced that have received clearance from a US regulator on their proposed $43bn transaction.
The acquisition of Syngenta by ChemChina – which, once complete, will be the biggest ever foreign acquisition by a Chinese company – was given the go-ahead by the Committee on Foreign Investment in the United States (CFIUS), a body tasked with ensuring that deals do not have national security implications (a quarter of the Swiss firm’s sales are in North America).
The decision by CFIUS to approve the deal is being viewed as the clearing of a significant hurdle, with shares in Syngenta – a Basel-based company employing 28,000 people in more than 90 countries – jumping 10 percent following the US committee’s accord.
A joint statement issued by ChemChina and Syngenta stated: “In addition to CFIUS clearance, the closing of the transaction is subject to anti-trust review by numerous regulators around the world and other customary closing conditions. Both companies are working closely with the regulatory agencies involved and discussions remain constructive. The proposed transaction is expected to close by the end of the year."
Originally announced in February 2016, with ChemChina offering $465 per share for Syngenta, the transaction ran into problems when concerns arose that CFIUS could potentially block the deal. At this stage, Syngenta shares had fallen by approximately 20 percent.
Syngenta's chairman Michel Demaré, while stating that he was “convinced there was no security issue to be concerned about” in ChemChina’s bid for his company, also opined that the Chinese company “has a very ambitious vision of the industry in the future".
Headquartered in Beijing, state-owned ChemChina is the largest chemical corporation in China, and occupies the 234th position among the Fortune 500. The company’s main businesses include materials science, life sciences, high-end manufacturing and basic chemicals.
In addition to its current activities, ChemChina also has an impressive track record of acquisitions, having procured nine leading industrial companies in France, the United Kingdom, Israel, Italy and Germany, among others.
Although characterised as a mega deal in the chemicals industry, the ChemChina/Syngenta transaction is significantly smaller than last year’s $130bn Dow Chemical-DuPont merger in December 2015, itself the subject of an investigation, by the European Commission in Brussels, into whether or not the merger of the US chemical giant could adversely impact farmers in Europe.