USDA to join CFIUS in reviewing ChemChina - Syngenta $43 bn merger deal

The US Department of Agriculture (USDA) is joining US Committee on Foreign Investment (CFIUS) in reviewing Chinese state-owned ChemChina's planned $43-billion acquisition of Swiss seeds and pesticide maker Syngenta AG, Reuters yesterday reported, citing people familiar with the matter.

The move comes after US senators in March wrote to Treasury Secretary Jacob Lew requesting the USDA and the US Food and Drug Administration (FDA) be included in reviewing the deal.

Lew chairs CFIUS, which reviews deals for potential national security threats and is comprised of representatives from 16 US agencies including Treasury, Homeland Security and Defence.

In March, Syngenta said it would make a voluntary filing with CFIUS "even though no obvious national security concerns were identified during due diligence."
In February 2016, state-owned ChemChina struck a friendly $43-billion deal with Swiss seeds and pesticides giant Syngenta AG to become the world's biggest supplier of pesticides and agrochemicals. (See: ChemChina to acquire Syngenta in $43-bn friendly deal)

It is the biggest overseas acquisition by a Chinese company, surpassing the 2008 purchase of China Netcom Group by China Unicom Hong Kong Ltd for $29 billion.

The deal is also the second-biggest in the chemicals industry in the last two months after Dow Chemical and Dupont agreed in December to a $130-billion merger (Dow, DuPont to merge and split, say reports ). This deal is also under regulatory review in many countries.

Analysts had opined that the ChemChina - Syngenta deal may not face antitrust hurdles in other countries since the merger with ChemChina's existing agrochemical subsidiary Adama would result in only a 19-per cent market share for the combined entity.

ChemChina was created in 2005 by combining several chemical firms under China's erstwhile ministry of chemical industry. The combined entity grew into a $36.5-billion business with 140,000 employees under chief executive Aye Ren Jianxin, a former communist youth league leader.

Syngenta is the biggest seller of pesticides in North America and also a key player in seeds. The company generates nearly a quarter of its revenue from this region.

But the deal faces scrutiny in the US since Syngenta's has chemical facilities in the country and US regulators have concerns that that the deal could compromise US food security and affect farm interests.

''We believe that the probability of gaining approval to merge is no higher than 35 per cent at best,'' CLSA analyst Mark Connelly wrote in a report, adding the deal would undercut the US farm industry. ''The U.S. has the most to lose strategically from the acquisition.''

Chuck Grassley, a Republican from Iowa, who chairs the Senate Judiciary Committee, said he was concerned that the deal would give Beijing ownership of a vital part of agricultural infrastructure in the US.

CFIUS has never rejected a deal on the grounds of food security and analysts opine that the ChemChina-Syngenta deal does not raise any national security concerns, but CFIUS would still review the deal since ChemChina is state-owned.

If Syngenta calls off the deal, then it would pay ChemChina $800 million as break-up fee, while ChemChina would have to pay Syngenta about $3 billion if it terminates the transaction.