March 11, 2016
Syngenta-ChemChina merger: Syngenta pays lower penalty if agreement breaks
Syngenta will pay a lower penalty if it decides to break its landmark merger agreement with ChemChina, a recent prospectus revealed.
The initial penalty was US$1.5 billion which is now reduced to US$848 million.
The fee will also applies in a situation where Syngenta backs a rival offer.
However, the penalty fee - for which ChemChina will pay if it breaks the agreement on its part - remains unchanged, at an amount of US$3 billion.
Bernstein Research said it had clarified language in the prospectus to mean ChemChina would have to pay the reverse break fee unless Syngenta has to divest more than US$2.68 billion or 20% of sales to resolve anti-trust issues, or ChemChina has lost control of more than US$1.54 billion of sales to resolve CFIUS-related issues.
CFIUS is the Committee on Foreign Investment in the US, which has to sign off the deal.
A limited number of circumstances could also render the deal void, including by either Syngenta or ChemChina if the offer has not become unconditional by June 30, 2017.
The offer is expected to begin on March 23 and continue until May 23 if not extended, according to the prospectus.
Loans have been availed for full financing to support the offer. However, all or part of the debt may be replaced by equity funds, the prospectus said.
Other items in the prospectus included:
ChemChina can squeeze out remaining shareholders against a cash payment if it is tendered 90% or more.
If ChemChina clears the 67% acceptance threshold but is tendered less than 90%, it may carry out a ChemChina-backed capital increase excluding a rights issue to minority shareholders.