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YNGENTA (SYNN VX)Our comment following confirmation that no EC remedies were offered
We are retracting our earlier check that Syngenta and ChemChina can offer remedies post the 21 October (“Day 20” deadline). We have received confirmation from our lawyers and have reviewed the EC merger regulations and concluded that this is a HARD deadline which cannot be extended or breached should the companies wish to obtain antitrust clearance in Phase I. Any remedies offered by the parties would have resulted in an automatic 10 business day extension to the timetable (i.e. a Phase I decision would have been expected on 14 November). The EC Press Office has confirmed that any remedies (if submitted) would have been reflected in the public case file. As there are no references to any remedies there, no remedies have thus been submitted. We have confirmed that SYNGENTA AND CHEMCHINA ARE NO LONGER ABLE TO SUBMIT REMEDIES IN PHASE I.
A state-of-play meeting (alleged to have taken place on 14 October) does not necessarily indicate that there are significant issues with the transaction and can be requested by the merging parties to demonstrate to the EC in detail that there are no significant competition overlaps, and still receive Phase I approval. Nevertheless, we find it surprising that after such lengthy pre-notification discussions (deal was announced on 13 November 2015 and the EC filing was only formally submitted on 23 September 2016), a state-of-play meeting was still requested by the parties to make their case to the EU and yet no remedy package was formally filed.
The EC may extend the review period with the agreement of the notifying parties at any time post-filing and any extension on this basis cannot exceed 20 working days (i.e. a further 20 business day extension from the 28 October decision date would be 30 November accounting for EC holidays). Nevertheless, no remedies can be submitted to the EC despite this extension, during Phase I.
The ACCC have also announced today that “the former proposed decision date of 27 October 2016 delayed at the request of the merger parties so that they can provide more information to the ACCC. A new proposed decision date will be published in due course.” This is a VOLUNTARY suspension of the timeline.
Another possible explanation would be that the parties are working with the EC and the other regulators to offer a global remedy packaged for the deal which explains the lack of remedies offered to date. We await the update from Syngenta when they announce their Q3 earnings tomorrow morning.
Clearly, the initial share price reaction was overdone for a Phase I to a potential Phase II extension, and now the spread is back to pre-CFIUS levels, but supporters of any “conspiracy theory” will find comfort in this news. Clearly, it is becoming increasingly difficult to find much comfort at this time given the information vacuum and traditional worries about a Chinese buyer.