The Obama administration should examine the food-security implications of the proposed $43 billion purchase by state-owned ChemChina of Swiss-based Syngenta, one of the world’s largest seed and agro-chemical companies, said the Senate Judiciary chairman and the Democratic leader of the Senate Agriculture Committee. In a letter, the senators said the prospect of larger foreign investment in U.S. agriculture means that the food supply must be considered during the government’s review of the national security aspects of foreign investments. “The risk of negative outcomes is heightened to the extent than an acquired U.S. agricultural asset becomes in some part governed by a foreign government with clear strategic interests,” says the letter.
U.S. review of investments are made through the Committee on Foreign Investment in the United States (CFIUS), an inter-agency panel led by the Treasury Department. The committee has “nearly limitless jurisdiction,” in the words of Houston law firm Baker Botts LLP, to examine if a transaction results in foreign control of an entity doing business in the United States. If CFIUS decides a transaction creates a national security risk, it may impose conditions on the deal to mitigate the risk or refer the case to the president for action, says the Treasury.
The purchase of Syngenta, which rejected a take-over by U.S. rival Monsanto, would be the largest overseas transaction by a Chinese company, according to Reuters. ChemChina says it has 140,000 employees and operates in 150 countries. Syngenta, based in Switzerland, has 28,000 employees in 90 countries.
“We believe any foreign acquisition of an important U.S. agricultural asset should be reviewed closely for potential risks to the food system,” says the letter. “It is not unreasonable to suggest that shifts in company governance; operational strategy; or financial health – particularly in light of the magnitude of this leverage transaction – could have consequences for food safety, biosecurity, and the highly competitive U.S. farm sector as a whole.”
The Senate Judiciary chairman, Charles Grassley, is from Iowa, the No. 1 state in corn, hogs, eggs and ethanol. Debbie Stabenow, the senior Democrat on the Senate Agriculture Committee, is from Michigan, also a major farm state. Also signing the letter were Sens. Sherrod Brown, Ohio Democrat, and Joni Ernst, Iowa Republican.
Food security usually is not a key factor in CFIUS reviews, says Bloomberg. “But the committee did review and approve the 2013 purchase of Smithfield Foods Inc., a major hog and pork producer, by China’s Shuanghui International Holdings Ltd.”
Stabenow was a prominent critic of the Smithfield sale, then described as the largest Chinese purchase of a U.S. company. She said the USDA and FDA should be part of CFIUS reviews when food safety or food security is at stake.
Analysts say the Syngenta-ChemChina deal, along with the Dow-DuPont merger, “is likely just the beginning of consolidation in the chemical industry,” said U.S. News and World Report. “The takeover will give ChemChina access to Syngenta’s seed technology, which is expected to help the state-run company improve food security in the world’s most populous country.” But it may also worry some U.S. farmers, if reduced competition impacts the price of seeds and chemicals.
Under the merger, the chairman of ChemChina will head Syngenta’s board of directors, said CNBC. Syngenta chairman Michel Demare told CNBC on Feb. 3, when the deal was announced, “This is absolutely not a China nationalization.”
One-fourth of Syngenta’s $13.4 billion in sales in 2015 were in North America. One of its three major research sites is in North Carolina and three of its 11 main production sites are in Texas, Nebraska and Louisiana. Its major business lines are pesticides, seeds, seedcare products, and turf, garden, home care and public health products.