Given China’s profile, especially in the security context, it wouldn’t be surprising if it does not pass the CFIUS review. The fog of war could be lifted sometime next week, when the outcome of the review process is announced by both companies.
According to sources who are familiar with the matter at hand, ChemChina’s $43 billion acquisition of Syngenta AG is said to be in the final stages of clearance by the Committee on Foreign Investment in the United States (CFIUS). The Committee scrutinizes all deals which have national security implications.
A positive result in the CFIUS review would go a long way in removing most significant doubts hovering over the acquisition of the world’s biggest pesticide manufacturer.
With this news hitting the market, Syngenta’s shares were seen trading at $396 (380.80 Swiss Francs), nearly 100 Swiss Francs less than ChemChina’s valuation of the company.
Significantly, many U.S. lawmakers had earlier written to U.S. Treasury Secretary, Jacob Lew, asking for additional scrutiny on the CFIUS deal due to its impact on domestic food security.
Additionally, the U.S. Department of Agriculture has also joined the CFIUS review process.
Both companies, ChemChina and Syngenta expect the deal to be cleared by CFIUS. They hope to announce a positive outcome sometime next week, said the sources, who have also cautioned against an uncertain outcome.
As yet, it is uncertain, whether the two companies have agreed to any concession in their negotiations with CFIUS so as to get the deal approved.
On its part, Syngenta had earlier said it would voluntary make filing with CFIUS “even though no obvious national security concerns were identified during due diligence”.
Announced this year in February, this deal is important since it is the largest foreign acquisition ever by a Chinese company, which has the backing of the Chinese state.
This deal is of strategic importance to China, since through it is trying to secure its future food supplies for its massive population.
With its headquarters in North Carolina, Syngenta is a key player in the pesticide and seed market worldwide. It generates a quarter of its revenues from the United States. It has significant presence in many U.S. states, including, Delaware, California, Minnesota, Iowa, and others.
Expectedly, the entire CFIUS review process is being closely monitored by Monsanto Co., which happens to be the world’s biggest seed company. It is of strategic importance to Monsanto since it is deliberating as to whether it should sell itself to Bayer AG, a German company. Incidentally, in 2015, Syngenta had turned out a takeover bid by Monsanto.
With the presence of a large number of Chinese companies in the M&A arena, who are looking to acquire their U.S. peers, CFIUS has emerged, for them, as a material risk, given China’s profile as an aggressor with serious security concerns.