What: Shares of seed manufacturer Syngenta (NYSE:SYT) are up 10% as of 11:00 a.m. EDT today after the proposed buyout from China National Chemical Corp. -- also known as ChemChina -- got the blessing from a U.S. regulatory body.
So what: It would seem a little off that a Switzerland-based company would need approval from a U.S. government body to be acquired by a Chinese firm. However, Syngenta's size and influence on the U.S. seed market was so big that the Committee on Foreign Investment in the U.S. was forced to give a ruling on the potential merger. Today, Syngenta generates about 25% of its revenues from the U.S. Also, when we're talking about critical industries such as agriculture, there are national security hurdles that must be cleared. With the blessing of the U.S. Committee on Foreign Investment, that is one less hurdle for this $43 billion takeover.
Now what: The next big challenge will be to get approval from European regulatory bodies on this potential takeover bid. Over the past few years, Europe has been more critical of deals like this, so investors in Syngenta aren't out of the woods yet. For investors, this is an important thing to remember because we have seem many megamergers get scuttled because of regulatory pressure. So, until the ink is dry on this takeover deal, it's probably best to just wait on the sidelines.