ChemChina’s quest to finalize its purchase of agriculture giant Syngenta this year got a major boost last week when the Committee on Foreign Investment in the United States (CFIUS) cleared the transaction. The deal still has to satisfy anti-trust regulators around the world at a time when consolidation moves are bringing increased scrutiny of the agriculture industry.
CFIUS reviews purchases of U.S. businesses by foreign firms to determine if they affect national security. Although Syngenta has its headquarters in Switzerland, the crop chemicals and seeds company fell under CFIUS’s jurisdiction because it has significant U.S. operations.
Earlier this year, the committee scotched Chinese efforts to buy electronics and LED lighting firms. But it appears to be less concerned about food security issues that might arise from Chinese ownership.
ChemChina’s $43 billion offer to buy Syngenta in February was the second of what may be a full round-robin of mergers as large agriculture firms look for ways to grow profits in a slow global economy. It came after Dow Chemical agreed to a merger of equals with DuPont and after Syngenta rejected a similar offer from Monsanto.
Next up could be an agreement by Monsanto to be acquired by Bayer. Thanks in part to its profitable healthcare segment, Bayer has the wherewithal to raise its recent $65 billion offer. According to Laurence Alexander, an analyst at the investment bank Jefferies, the companies may now move quickly to secure a place in line to get anti-trust review.
The global nature of the giant agriculture mergers may throw up obstacles that could delay or alter them, however. The European Commission is pursuing a detailed review of the Dow-DuPont deal. And in the U.S., Charles Grassley (R-Iowa), chair of the Senate Judiciary Committee, plans to hold hearings on the consolidation activities. He has asked the Department of Justice and Federal Trade Commission to coordinate their own reviews.
To avoid criticisms that the deals are anticompetitive, companies may proactively sell overlapping businesses in a flurry of divestments, Alexander notes, although it is unclear what agriculture companies will still be around to buy them.