China National Chemical Corp (ChemChina, 中國化工) received approval from US national security officials for its takeover of Swiss agrochemical and seeds company Syngenta AG, seen as the biggest regulatory hurdle that the US$43 billion acquisition faces.
The Committee on Foreign Investment in the US 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 [committee’s] approval removes a major potential hurdle and should come as a relief to Syngenta shareholders,” Kepler Cheuvreux analyst Christian Faitz said.
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 US might block the deal. The takeover is leading a record wave of Chinese acquisitions that has prompted US 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.
The committee, which is led by the US Department of the Treasury and includes officials from the US Department of Defense and US Department of State, reviews acquisitions of US businesses by foreign investors for risks to US 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 US business.
ChemChina and Syngenta did not disclose the details of the agreement with the committee, with the Swiss company adding in an e-mailed response that “any mitigation measures are not material to Syngenta’s business.”
ChemChina is proposing to pay US$465 a share plus a 5 Swiss franc special dividend for Syngenta.
At current exchange rates, the offer had been equal to about SF451.87 a share versus Friday’s close of SF380.80, Kepler’s Faitz said in a note.
Shares of the Basel-based company climbed 10.6 percent to close at SF421.20 in Zurich.
The deal has come as other major players in the 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.
The committee’s approval drew criticism from US 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 US 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 anti-trust reviews of different countries shouldn’t be such a problem anymore,” Baader Helvea Equity analyst Markus Mayer said.
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