NEW YORK — US opposition to the largest acquisition by a Chinese company is growing, with a top farm-state senator saying the $43bn takeover of seed giant Syngenta could pose risks to the security of America’s food supply.
Republican Senator Charles Grassley, of Iowa, launched a public broadside against China National Chemical’s planned deal, saying that the government must ensure that "we’re not permitting the sale of too much of our food industry, especially when government-controlled entities like ChemChina are the buyers".
He said in an interview on Wednesday that a bipartisan group of senators would seek a formal role for the US agriculture department as the Treasury-led committee on foreign investment in the US, or CFIUS, carries out a national security review of the proposed ChemChina-Syngenta deal.
Legislators want food security and safety implications analysed, Mr Grassley said.
CFIUS is already expected to examine Syngenta’s US chemical plants that are potential terrorist targets, including some near military bases.
Syngenta, based in Switzerland, generates about a quarter of its sales in North America, where it is a top pesticide seller and supplies an estimated 10% of US soybean seeds and 6% for maize.
The legislator’s comments raise a new threat to a deal investors do not yet regard as a sure thing.
The agriculture department has already expressed concern over the deal’s potential impact on the sector.
ChemChina struck a deal to buy Syngenta in February, extending a string of deal making among global giants in the $100bn market for crop seeds and sprays.
Agricultural companies are pursuing deals as they grapple with a three-year slide in major crop prices that has hit farmers’ pocketbooks and forced seed makers to cut thousands of jobs.
"I’m not saying foreign direct investment is inherently bad," Mr Grassley said in the interview.
"We need to consider the long-term implications of letting foreign entities control significant market share in US agriculture, especially in consolidated markets, like the seed market has become," he said.
CFIUS is made up of representatives from 16 US departments and agencies, including the Treasury, homeland security and defence departments, but not including the agriculture department.
CFIUS has a track record of scotching foreign companies’ purchases of US assets they think raise risks to national security.
Mr Grassley said he and other senators wanted permanent roles on CFIUS for the agriculture department and the US Food and Drug Administration, which are sometimes tapped to provide their views on mergers, and to evaluate food security and safety aspects of foreign-driven deals.
US farm groups and agricultural companies also have complained China’s process for reviewing and approving agricultural products such as genetically modified seeds is out of step with other major countries, leading to sometimes lengthy delays for hi-tech seeds and trade disruptions.
US Agriculture Secretary Thomas Vilsack said in February that the US agricultural industry has grappled with "inconsistency" and "lack of synchronisation" when it came 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.
An agriculture department spokeswoman declined to comment further.
A Treasury spokeswoman, which chairs CFIUS, declined to comment.
Representatives for ChemChina and China’s agriculture ministry did not respond to requests for comment.
A Syngenta spokesman declined to comment on the CFIUS review.
Other farm-state legislators have their own reservations.
"Whenever the Chinese acquire American operations, it is reason for concern," Republican Representative Jeff Fortenberry of Nebraska said in a recent statement to The Wall Street Journal.
Representative Adrian Smith, another Nebraska Republican, said in a statement to the Journal that there were "still many details" to examine.
"I plan to look closely at any potential national security implications," he said.
Michel Demaré, Syngenta’s chairman, said in February that Syngenta did not 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. It currently permits cotton, papaya, sweet peppers and tomatoes.
"We are very convinced there is no security issue," Mr Demaré said.
Investors do not yet consider the deal a sure thing. Syngenta shares on Wednesday climbed to Sf399.10 ($410.30) in European trading and have traded well below the offer, worth Sf480 per share, since the deal’s announcement.
Morgan Stanley analysts wrote in a research note last month that "market unwillingness to fully price in the deal appears to centre on CFIUS".
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 scrutinise Syngenta’s chemical facilities that sit close to US military sites, like one within about 10 miles of Offutt Air Force Base, located near Omaha and the headquarters of US Strategic Command, where former president George W Bush headed following the September 11 2001 terrorist attacks.
Chinese companies increasingly are shopping abroad for acquisitions, putting more deals before CFIUS — which sometimes blocks them.
Amsterdam-based Royal Philips in January abandoned the $2.8bn 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 rejected separate deal proposals from Chinese companies over concern about a CFIUS block.
Big China-driven agricultural deals have had fewer go-rounds with CFIUS.
China-based meat giant WH Group’s $4.7bn deal in 2013 to buy Smithfield Foods, the top US pork processor, at the time ranked as the biggest Chinese takeover of a US company yet, and drew some worries in US farm country, but ultimately went through.
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Ren Jianxin, chairman of ChemChina hands over documents next to Michel Demare, chairman of Swiss farm chemicals giant Syngenta during a press conference to present Syngenta's annual results in Basel on Wednesday. Picture: AFP
NEW YORK — US opposition to the largest acquisition by a Chinese company is growing, with a top farm-state senator saying the $43bn takeover of seed giant Syngenta could pose risks to the security of America’s food supply.
Republican Senator Charles Grassley, of Iowa, launched a public broadside against China National Chemical’s planned deal, saying that the government must ensure that "we’re not permitting the sale of too much of our food industry, especially when government-controlled entities like ChemChina are the buyers".
He said in an interview on Wednesday that a bipartisan group of senators would seek a formal role for the US agriculture department as the Treasury-led committee on foreign investment in the US, or CFIUS, carries out a national security review of the proposed ChemChina-Syngenta deal.
Legislators want food security and safety implications analysed, Mr Grassley said.
CFIUS is already expected to examine Syngenta’s US chemical plants that are potential terrorist targets, including some near military bases.
Syngenta, based in Switzerland, generates about a quarter of its sales in North America, where it is a top pesticide seller and supplies an estimated 10% of US soybean seeds and 6% for maize.
The legislator’s comments raise a new threat to a deal investors do not yet regard as a sure thing.
The agriculture department has already expressed concern over the deal’s potential impact on the sector.
ChemChina struck a deal to buy Syngenta in February, extending a string of deal making among global giants in the $100bn market for crop seeds and sprays.
Agricultural companies are pursuing deals as they grapple with a three-year slide in major crop prices that has hit farmers’ pocketbooks and forced seed makers to cut thousands of jobs.
"I’m not saying foreign direct investment is inherently bad," Mr Grassley said in the interview.
"We need to consider the long-term implications of letting foreign entities control significant market share in US agriculture, especially in consolidated markets, like the seed market has become," he said.
CFIUS is made up of representatives from 16 US departments and agencies, including the Treasury, homeland security and defence departments, but not including the agriculture department.
CFIUS has a track record of scotching foreign companies’ purchases of US assets they think raise risks to national security.
Mr Grassley said he and other senators wanted permanent roles on CFIUS for the agriculture department and the US Food and Drug Administration, which are sometimes tapped to provide their views on mergers, and to evaluate food security and safety aspects of foreign-driven deals.
US farm groups and agricultural companies also have complained China’s process for reviewing and approving agricultural products such as genetically modified seeds is out of step with other major countries, leading to sometimes lengthy delays for hi-tech seeds and trade disruptions.
US Agriculture Secretary Thomas Vilsack said in February that the US agricultural industry has grappled with "inconsistency" and "lack of synchronisation" when it came 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.
An agriculture department spokeswoman declined to comment further.
A Treasury spokeswoman, which chairs CFIUS, declined to comment.
Representatives for ChemChina and China’s agriculture ministry did not respond to requests for comment.
A Syngenta spokesman declined to comment on the CFIUS review.
Other farm-state legislators have their own reservations.
"Whenever the Chinese acquire American operations, it is reason for concern," Republican Representative Jeff Fortenberry of Nebraska said in a recent statement to The Wall Street Journal.
Representative Adrian Smith, another Nebraska Republican, said in a statement to the Journal that there were "still many details" to examine.
"I plan to look closely at any potential national security implications," he said.
Michel Demaré, Syngenta’s chairman, said in February that Syngenta did not 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. It currently permits cotton, papaya, sweet peppers and tomatoes.
"We are very convinced there is no security issue," Mr Demaré said.
Investors do not yet consider the deal a sure thing. Syngenta shares on Wednesday climbed to Sf399.10 ($410.30) in European trading and have traded well below the offer, worth Sf480 per share, since the deal’s announcement.
Morgan Stanley analysts wrote in a research note last month that "market unwillingness to fully price in the deal appears to centre on CFIUS".
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 scrutinise Syngenta’s chemical facilities that sit close to US military sites, like one within about 10 miles of Offutt Air Force Base, located near Omaha and the headquarters of US Strategic Command, where former president George W Bush headed following the September 11 2001 terrorist attacks.
Chinese companies increasingly are shopping abroad for acquisitions, putting more deals before CFIUS — which sometimes blocks them.
Amsterdam-based Royal Philips in January abandoned the $2.8bn 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 rejected separate deal proposals from Chinese companies over concern about a CFIUS block.
Big China-driven agricultural deals have had fewer go-rounds with CFIUS.
China-based meat giant WH Group’s $4.7bn deal in 2013 to buy Smithfield Foods, the top US pork processor, at the time ranked as the biggest Chinese takeover of a US company yet, and drew some worries in US farm country, but ultimately went through.
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