What's going on?

Back in February, ChemChina, a major Chinese chemicals company, agreed to buy Switzerland-based Syngenta for $43 billion. As expected, the US government wanted to examine the deal from a national security perspective. On Monday, it was announced that it wouldn�t block the deal because of those concerns – and Syngenta�s stock jumped more than 10% on the news!

What does this mean?

Syngenta is a big player in America�s agricultural industry (it sells farming chemicals and seeds), which is why the US government was examining the deal: countries generally view their food sources as pretty important to their national security. Other potential hurdles might still get in the way: for example, both the European Union and the US are considering whether it will reduce competition in the agrochemical industry too much – although this is seen as less of a threat to the deal.

Why should I care?

The bigger picture: Just because a deal is �agreed� doesn�t mean it�s a �done deal.�

We often report on a deal occurring (as we have in today�s other story). But these are really just initial agreements between the boards of two companies. Various other steps need to occur before a deal is finalized, (often) including the approval of certain governments. Usually, when a deal appears to be at risk, the stock price of the company being acquired trades significantly below the deal price (as was the case with Syngenta).


For the markets: Western governments appear to be getting more wary about Chinese investment.

The Australian government recently blocked two Chinese firms from bidding to take a controlling stake in the country�s biggest electricity network. Britain has �delayed� a decision on a new nuclear power plant, which was to be partly funded by a Chinese state-owned company. And in the US, Chinese firm Unisplendor walked away from a $4 billion investment in Western Digital after it became clear it would face national security hurdles. This has been a record year for Chinese investment outside of China � but it appears that there�s some backlash brewing (just not in Syngenta�s case!).