Syngenta Deal Adds Investor -- WSJ
18 June 2016 - 5:03PM
Dow Jones News
By Jacob Bunge
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ChemChina has withdrawn and refiled the Syngenta deal to CFIUS,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.
Rick Carew contributed to this article
Write to Jacob Bunge at jacob.bunge@wsj.com
(END) Dow Jones Newswires
June 18, 2016 02:48 ET (06:48 GMT)
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