ChemChina’s takeover of Syngenta

August 22, 2016 7:21 am

ChemChina clears hurdle in $44bn takeover of Syngenta

People take an elevator outside the headquarters of China National Chemical Corporation in Beijing...People take an elevator outside the headquarters of China National Chemical Corporation in Beijing, February 4, 2005. China National Chemical Corporation (ChemChina) agreed on March 22, 2015 to buy tyre maker Pirelli in a 7.1 billion euro ($7.7 billion) deal that will place one of the symbols of Italy's manufacturing industry in Chinese hands. Picture taken February 4, 2005. REUTERS/Stringer - RTR4UFNQ©Reuters

Shares in Syngenta jumped 11 per cent on Monday after a US committee scrutinising national security concerns approved ChemChina’s $44bn takeover of the Swiss agribusiness.

The two companies said on Monday they had received clearance from the US Committee on Foreign Investment for the deal, which was first announced in February, clearing a significant hurdle for the takeover.

Investors had seen US worries about the potential national security concerns in a strategically important sector as the main obstacle to execution of the transaction — leading to Syngenta’s shares trading at a significant discount to the offer price.

ChemChina’s bid for Syngenta, a Basel-based company that employs 28,000 people in more than 90 countries, is part of a wave of overseas acquisitions by Chinese companies searching for high quality corporate and real estate assets.

ChemChina’s acquisition of Syngenta would be China’s biggest outbound transaction.

In February, Michel Demaré, Syngenta chairman, said he was “convinced there was no security issue to be concerned about”. However, a month later Chuck Grassley, the US Republican who chairs the Senate Judiciary Committee, warned he was concerned that ChemChina’s bid would give Beijing ownership of a vital part of the US’s agricultural infrastructure.

“Because the food and agriculture sectors are part of the nation’s critical infrastructure this merger raises questions about the potential national security implications,” the veteran senator told an Iowa radio station.

CFIUS has the power to review and block any transaction that may concern US national security.

ChemChina offered to acquire Syngenta at $465 per share plus a special dividend of SFr5. However, investor scepticism over completion of the deal kept the Swiss company’s share price significantly below that level; on Friday the shares were trading at SFr380.80 ($395).

Syngenta’s shares rose 11.3 per cent to SFr423.80 in early Monday trading.

Monday’s announcement takes state-owned ChemChina closer to completion on schedule by the end of the year, although Monday’s statement said this remained “subject to antitrust 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 statement added.

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