ChemChina's Purchase of Syngenta Held Up by European Antitrust Review

(Beijing) – ChemChina's closely watched $43 billion purchase of the Swiss agribusiness giant Syngenta will probably be delayed into the first quarter of next year as European Union regulators extend their review of the transaction.

Closing of the deal has already been extended three times from the original goal of May. EU and other regulators have requested a large amount of additional information for a review of the deal in the context of industry consolidation, said Erik Fyrwald, the CEO of Basel-based Syngenta, in a news briefing Oct. 25 on quarterly financial results.

"ChemChina and Syngenta remain fully committed to the transaction and are confident of its closure," Fyrwald said. The transaction has already won approval by the Committee on Foreign Investment in the United States and 11 anti-trust approvals, he said.

If completed, the transaction would be the largest foreign acquisition by a Chinese company and would make state-owned chemical manufacturer ChemChina one of the world's largest producers of agrochemicals. ChemChina submitted the deal for EU review Sept. 23 and expected a conclusion by Oct. 28. Syngenta and ChemChina had planned to close the purchase by the end of this year.

The purchase has drawn worldwide attention because of a complex financing structure adopted by ChemChina. The highly leveraged plan has raised concerns among investors.

The EU review is likely to focus the potential business overlaps of Syngenta and ChemChina's pesticides unit, Adama, industry analysts said. Adama was formed by a combination of ChemChina's domestic pesticides assets with Israel's Makhteshim Agan Group, the world's largest maker of generic pesticides, following a 2011 takeover.

Several merger and acquisition experts interviewed by Caixin questioned why ChemChina didn't propose remedies to avoid an extended EU review. ChemChina could have planned a spinoff of assets, a common practice used by many international acquirers to ease concerns of antitrust regulators, the experts said.

"Such a practice is not complicated," said a source from an investment bank's M&A department. "I wonder why ChemChina didn't do it. … And the market is also confused."

There has been speculation since mid-October that ChemChina might merge with another state-owned chemical giant, Sinochem Group, to facilitate the deal. But several experts told Caixin that there is little possibility of a major change on the purchaser side now because that might trigger more regulatory reviews.

Contact reporter Han Wei (weihan@caixin.com)