By Michael Shields and Greg Roumeliotis
(Reuters) - A U.S. national security panel has cleared ChemChina's $43 billion takeover of Swiss pesticides and seeds group Syngenta <SYNN.S>, the companies said, boosting chances that the largest foreign acquisition ever by a Chinese company will go through.
The decision removes significant uncertainty over the takeover of the world's largest pesticides maker. Several U.S. lawmakers and groups representing farmers had expressed fears over a Chinese state-owned company being in a position to influence the U.S. food supply.
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Syngenta shares jumped as much as 12.5 percent on the news and ended trading on Monday up 10.6 percent at 421.20 Swiss francs ($437.9). ChemChina's $465 per share cash offer values the company at around 448 Swiss francs per share at current exchange rates, plus a special five-franc dividend.
"This sends a very good signal to China that the U.S. is open for investments in most sectors. But this also shows the need for a bilateral investment treaty so that similar U.S. investments are possible in China," said Georgetown McDonough School of Business professor Charles Skuba, who studies market development in China.
The United States reviewed the deal because more than a quarter of the company's seeds and crop protection revenue last year came from North America. The major regulatory hurdle the deal now has to clear is an antitrust review by the European Union, which the companies may seek to facilitate through divestitures, if need be.
Kepler Cheuvreux analyst Christian Faitz called the step a "major milestone for the deal," adding in a note to clients that "approval removes a major potential hurdle and should come as a relief to Syngenta shareholders." Kepler Cheuvreux rates Syngenta shares a "Buy." Reuters reported earlier on Monday that the acquisition was in the final stages of being cleared by the U.S. panel that scrutinizes deals for national security implications.
"We are not disclosing the details of the agreement with the Committee on Foreign Investment in the United States (CFIUS) to respect the confidentiality of the process," a Syngenta spokesman said by email in response to a Reuters query. "Any mitigation measures are not material to Syngenta's business."
Syngenta reiterated that it expected the deal to close by the end of the year. It added that completing the transaction was subject to "anti-trust review by numerous regulators around the world and other customary closing conditions."
RIPPLES ACROSS SECTOR
The CFIUS review was monitored closely by Monsanto Co <MON.N>, the world's largest seed company, which has been deliberating whether it should sell itself to Germany's Bayer AG <BAYGn.DE>. Syngenta last year turned down offers to be acquired by Monsanto.
The deal comes as China looks to secure food supplies for its population. Syngenta is a key player in the market for pesticides and seeds. It has facilities in North Carolina, as well a presence in California, Delaware, Iowa and Minnesota among other states.
Several U.S. lawmakers wrote to Treasury Secretary Jack Lew this year asking for CFIUS to subject the deal to additional scrutiny over its impact on domestic food security. The U.S. Department of Agriculture also joined the CFIUS review, Reuters previously reported.
"It’s clear that China is looking at purchasing companies with food production expertise as part of a long-term strategic plan and a component of their national security. The fact that a state owned enterprise may have yet another stake in U.S. agriculture is alarming," said U.S. Senator Chuck Grassley, chairman of the U.S. Senate Judiciary Committee, who is sponsoring a bill to permanently add the U.S. Department of Agriculture to the CFIUS review process.
Syngenta had said this year it would make a voluntary filing with CFIUS "even though no obvious national security concerns were identified during due diligence."
With a growing number of Chinese companies looking to acquire U.S. peers, CFIUS has emerged as a significant risk for such deals, particularly those with potential cyber security implications.
For example, in February, state-backed Chinese firm Unisplendor Corp <000938.SZ> scrapped a $3.78 billion investment in Western Digital Corp <WDC.O> after CFIUS said it would investigate the transaction.
(Reporting by Michael Shields in Zurich and Greg Roumeliotis in New York; Additional reporting by John Revill in Zurich and Diane Bartz in Washington; Editing by Adrian Croft and Tom Brown)