ChemChina-Syngenta could be last of the big love-ins

China is within striking distance of locking down its biggest-ever overseas acquisition, after China National Chemical Corp. won US and European Union antitrust approval for its $43 billion takeover of Swiss pesticide maker Syngenta AG. Just as well, because it may be the last big deal in a while.
Although the transaction still needs the green light from regulators in China, India and Mexico, it’s hard to see why any of those jurisdictions would turn it down. China is keen to get its hands on Syngenta’s seed technology. Beijing faces the tough task of trying to feed 21 percent of the world’s population with 9 percent of its arable land, and know-how from the Swiss giant would go a long way. India and Mexico, meanwhile, don’t have a history of rejecting large global deals.
But just as one door opens, another closes.
Efforts to stem capital outflows after the surprise devaluation of the yuan in August 2015 ushered in a wave of rules that made dream-big deals in Hollywood and the like all but impossible. In December, people familiar with the matter said regulators plan to bar transactions of $10 billion or more, while toppy real-estate purchases by state firms, and acquisitions in non-core areas, will also be viewed dimly.
The laundry list of transactions joining the scrap heap is growing. LeEco Inc.’s proposed $2 billion acquisition of Californian TV maker Vizio Inc. is being held up by tighter controls on yuan outflows, while the $1 billion purchase of Dick Clark Productions Inc. collapsed last month after the Chinese company owned by billionaire Wang Jianlin, Dalian Wanda Group Co., failed to get financing out of the country.
Political backlash over China’s record offshore buying spree is growing. Australia blocked State Grid Corp. of China from buying 50.4 percent of an electricity distributor last year and Germany, traditionally a fertile hunting ground for Chinese companies, is being viewed less favorably after the Committee on Foreign Investment in the U.S. ruled against a bid for chip-equipment supplier Aixtron SE. CFIUS, whose scope is national security, has also become more expansive regarding what that term constitutes.
Perhaps a bigger roadblock to Chinese international M&A, though, is Beijing’s clampdown on capital outflows. The nation’s foreign-exchange reserves have shrunk by a quarter since peaking at almost $4 trillion in 2014. And while the amount of money gushing out of the mainland has slowed in recent months, authorities are unlikely to open the flood gates too quickly and risk all that pent-up pressure being released overnight.
Companies in Asia’s largest economy racked up $248 billion of overseas deals in 2016. Suffice to say, those boom years have gone — and it would seem it’s Beijing’s rather than America’s doing.
— Bloomberg

Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter