FCS Fairchild Semiconductor International, Inc. (MM)

U.S. lawmakers want the Agriculture Department to weigh in on the national security review of China National Chemical Corp.'s planned takeover of pesticide and seed giant Syngenta AG, a move that would add a skeptical voice to the politically sensitive $43 billion deal.

Sen. Chuck Grassley (R., Iowa) said he and a bipartisan group of Farm Belt senators in coming days plan to seek a formal role for the USDA, which has aired concerns over the Syngenta deal in recent weeks.

The takeover, unveiled in February, is the largest-ever foreign acquisition by a Chinese company. If successful, the deal would realign the $100 billion global market for crop seeds and pesticides as China's government is pushing to modernize its agricultural sector, reduce reliance on imports, and compete with longer-established Western rivals.

The national security review of the ChemChina-Syngenta deal is being conducted by the powerful Committee on Foreign Investment in the U.S. Syngenta, based in Switzerland, generates about one-quarter of its sales in North America, where it is a top pesticide seller and supplies an estimated 10% of U.S. soybean seeds and 6% for corn.

The committee is made up of representatives from 16 U.S. departments and agencies, including the Treasury, Homeland Security and Defense departments, but not including the USDA. CFIUS has a track record of scotching foreign companies' purchases of U.S. assets they think raise national-security risks.

"I'm not saying foreign direct investment is inherently bad," Mr. Grassley said in an interview Wednesday. "But we ought to ensure through [CFIUS] that we're not permitting the sale of too much of our food industry, especially when government-controlled entities like ChemChina are the buyers."

Mr. Grassley said he and other senators want permanent roles on CFIUS for the USDA and the U.S. Food and Drug Administration, which are sometimes tapped to provide their views on mergers, to evaluate food security and safety aspects of foreign-driven deals.

"We need to consider the long-term implications of letting foreign entities control significant market share in U.S. agriculture, especially in consolidated markets, like the seed market has become," he said.

U.S. farm groups and agricultural companies also have complained that China's process for reviewing and approving agricultural products like genetically modified seeds is out of step with other major countries, leading to sometimes lengthy delays for high-tech seeds and trade disruptions.

U.S. Agriculture Secretary Thomas Vilsack said in February that the U.S. agricultural industry has grappled with "inconsistency" and "lack of synchronization" when it comes to securing China's approval to import new biotech crops in China, one of the world's top buyers of agricultural commodities.

"I have a watchful eye on all of this and continue to be extremely concerned about the way in which biotechnology and innovation is being treated and impeded by a system in China that often times is not based on science and appears to be based more on politics," Mr. Vilsack said in a conference call with reporters in February, responding to a question about the ChemChina-Syngenta deal.

A USDA spokeswoman declined to comment further.

A spokeswoman for the Treasury Department, which chairs CFIUS, declined to comment. Representatives for ChemChina and China's Ministry of Agriculture didn't respond to requests for comment.

Other farm-state lawmakers have their own reservations.

"Whenever the Chinese acquire American operations, it is reason for concern," said Rep. Jeff Fortenberry (R, Neb.) in a recent statement to The Wall Street Journal. Rep. Adrian Smith, another Nebraska Republican, said in a statement to the Journal that there were "still many details" to examine. He added: "I plan to look closely at any potential national security implications."

"China's the main holdup when we're trying to get biotech traits approved," said Chandler Goule, a senior at the Washington-based National Farmers Union. If a China state-owned company owns a major biotech seed company, he said, "there's a concern they'd block their competition."

A Syngenta spokesman declined to comment on the CFIUS review.

Michel Demaré , Syngenta's chairman, said in February that Syngenta doesn't expect preferential treatment by Chinese agricultural authorities, and that the ChemChina deal could help the Western seed industry by further opening the country to biotech crops, which currently permits cotton, papaya, sweet peppers and tomatoes.

"We are very convinced there is no security issue," Mr. Demaré said.

The companies could address any U.S. security concerns and still keep their deal, analysts say.

Terms of the deal allow ChemChina to walk away from the offer without paying a reverse breakup fee if CFIUS or antitrust concerns require selling businesses that generate more than $2.68 billion in annual sales. If the U.S. lodges protests over Syngenta's U.S. seed business, which generates about $1 billion in annual sales, the company could sell it, according to analysts at Sanford C. Bernstein.

Investors don't yet consider the deal a sure thing.

Syngenta shares on Wednesday climbed to 399.10 Swiss francs in European trading and have traded well below the offer, worth 480 francs a share, since the deal's announcement. "[M]arket unwillingness to fully price in the deal appears to center on CFIUS," Morgan Stanley analysts wrote in a research note last month.

ChemChina and Syngenta voluntarily initiated the CFIUS review upon announcement of their deal. The formal review process typically takes 75 days. The companies expect to close the deal by the end of 2016.

As part of its review, CFIUS is expected to scrutinize Syngenta's chemical facilities that sit close to U.S. military sites, like one within about 10 miles of Offutt Air Force Base, located near Omaha and the headquarters of U.S. Strategic Command, where President George W. Bush headed following the Sept. 11, 2001, terrorist attacks.

The group also will likely evaluate Syngenta's U.S. chemical plants that are potential terror targets.

Chinese companies increasingly are shopping abroad for acquisitions, putting more deals before CFIUS—which sometimes blocks them.

Amsterdam-based Royal Philips NV in January abandoned the $2.8 billion sale of an 80% stake in its lighting components unit to a Chinese investor after CFIUS blocked the deal on national-security grounds. Fairchild Semiconductor International and Pericom Semiconductor Corp., both based in San Jose, Calif., rejected separate deal proposals from Chinese firms over concerns of a CFIUS block.

Big China-driven agricultural deals have had fewer go-rounds with CFIUS. China-based meat giant WH Group Ltd.'s $4.7 billion deal in 2013 to buy Smithfield Foods Inc., the top U.S. pork processor, at the time ranked as the biggest-ever Chinese takeover of a U.S. company and drew some worries in U.S. farm country, but ultimately went through.

Some saw Syngenta, and U.S. farmers benefiting from a wealthier owner that is intent on boosting crop production around the world.

"I don't think our folks feel threatened by more production in China," said Bill Northey, Iowa's secretary of agriculture. "They're still going to need more in the long term than they are able to produce, and if market forces work there we're still going to get a chance to export into that market."

Write to Jacob Bunge at jacob.bunge@wsj.com

(END) Dow Jones Newswires

March 23, 2016 13:55 ET (17:55 GMT)

Fairchild Semiconductor (NASDAQ:FCS)
Gráfica de Acción Histórica
De Dic 2024 a Ene 2025

Fairchild Semiconductor (NASDAQ:FCS)
Gráfica de Acción Histórica
De Ene 2024 a Ene 2025