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ChemChina details changes to Syngenta purchase

June 21, 2016
Energy & Chemical Value Chain

A high-profile agriculture deal faces a lengthier regulatory review after China National Chemical Corp. detailed changes to the financing of its planned $43 billion purchase of Syngenta AG.

The Chinese company, known as ChemChina, said it has secured a $5 billion investment from an arm of Citic Ltd., one of China’s largest state-owned conglomerates, to help fund the acquisition of the Swiss seed and pesticide maker.

The planned deal, unveiled in February, would rank as the biggest-ever foreign acquisition by a Chinese company and would supercharge China’s effort to develop its domestic seed industry—a key part of the Chinese government’s strategy to secure food supplies as domestic consumption grows.

It is one of several mergers in the works that would reshape the $100 billion global market for crop seed and pesticide, as three straight years of declining prices for major crops have pressured profits and forced companies to scale back staff and research.

ChemChina’s deal for Syngenta faces scrutiny by regulators around the world, including the U.S. Committee on Foreign Investment, which reviews deals for national security concerns. The Treasury-led body includes representatives from 16 U.S. departments and agencies, and can recommend that the president block transactions that pose security risks. Farm-state lawmakers have called for a deep review of the deal, to evaluate any long-term risks to the U.S. food supply.

ChemChina said in a statement this week that a fund managed by Citic Trust Co. made a $5 billion equity commitment, which will allow ChemChina to reduce its reliance on loans to finance the deal. Adding the Citic investment unit as an equity participant expands the role for the conglomerate, which has already been advising the ChemChina and helping with debt fundraising.

“CFIUS will not be able to approve it or disapprove it until it knows who the controlling owners are,” said Theodore Moran, a professor of international business and finance at Georgetown University, who is not involved in the matter.

ChemChina has withdrawn and refiled the Syngenta deal to CFIUS, detailing the updated ownership information, according to a person familiar with the matter.

The companies still anticipate completing the deal by the end of 2016, ChemChina said.

Georgetown University’s Mr. Moran said that about 10% to 15% of mergers reviewed by CFIUS wind up being refiled, and that it doesn’t necessarily indicate that a deal will be opposed.

ChemChina’s continued effort to secure financing for the mammoth deal has been one factor weighing on shares of Syngenta, which have traded at a steep discount to the offer price. Shares of Syngenta, a takeover target of Monsanto Co. last year, were down 0.2% at 385.20 Swiss francs in European trading Friday.

“The financing is still a concern for some people, but to see them making progress on that front gives a bit of reassurance as well,” said Jeremy Redenius, analyst with Sanford C. Bernstein & Co.

By Jacob Bunge

Source: Wall Street Journal

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