Sinochem, ChemChina to be merged, sources dis­close

An­a­lysts say two giants are com­ple­men­tary to each other, both stronger in niche mar­kets

China Daily (USA) - - BUSINESS - By YANG ZIMAN yangz­i­man@chi­

Sinochem Group and China Na­tional Chem­i­cal Cor­po­ra­tion (ChemChina) are go­ing to be merged into one com­pany, ac­cord­ing to a news agency re­port quot­ing sources on Friday, which sent their two shares surg­ing.

News agency Bloomberg, which quoted sources close to the talks, said that de­tails of the deal, in­clud­ing tim­ing, were not im­me­di­ately clear and the plan­wasstill sub­ject to change. Com­ments from the two com­pa­nies were not avail­able on Friday.

Sinochem, founded in 1950, is China’s big­gest agri­cul­tural com­pa­nies by rev­enue with oper­a­tions in fer­til­iz­ers, seeds and agro­chem­i­cals. Its busi­ness also en­com­passes oil, real es­tate and non-bank­ing fi­nan­cial ser­vices. It has fourAshare listed com­pa­nies and four HongKong listed com­pa­nies.

ChemChina is China’s big­gest chem­i­cal com­pany with rev­enues of $45 bil­lion in 2015. Its main busi­nesses are chem­i­cals, oil pro­cess­ing, tire and rub­ber prod­ucts and chem­i­cal equip­ment.

“The two com­pa­nies’ busi­nesses are com­ple­men­tary to each other. Sinochem, how­ever, has a much wider port­fo­lio than ChemChina. If merged, Sinochem will be the leader in the new com­pany,” said Gao Jian, an oil an­a­lyst with Shan­dong-based bulk com­mod­ity in­for­ma­tion com­pany Sub­lime China In­for­ma­tion Group Co Ltd.

“Thet­wocom­pa­niesac­count for quite a small share in petro­chem­i­cal en­gi­neer­ing. They are stronger in niche mar­kets such as new ma­te­ri­als, fer­til­iz­ers and agri­cul­ture,” he said.

Ac­cord­ing to Gao, un­like the merger of mam­moth com­pa­nies such as Baos­teel Group and Wuhan Iron and Steel Group, this merger is a lot smaller and un­likely to have much im­pact one their strate­gic plans.

Sinochem In­ter­na­tional Corp, Sinochem’s listed unit on Shanghai Stock Ex­change, rose to 10.57 yuan ($1.6) per share, up 9.99 per­cent, on Friday.

Sinochem has been ac­tive in over­seas ac­qui­si­tions in re­cent years. In February it pro­posed a $43 bil­lion pur­chase of Swiss pes­ti­cide and seed group Syn­genta AG. If be­ing pushed through, that merger would be­come the big­gest over­seas pur­chase by a Chi­nese com­pany so far.

In Jan­uary, a con­sor­tium led by Sinochem pro­posed a $1 bil­lion pur­chase of KraussMaf­fei Group, the Ger­man plas­tic equip­ment man­u­fac­turer. If suc­cess­ful, the deal would be the big­gest takeover by a Chi­nese com­pany of a Ger­man group. Also in Jan­uary, Sinochem ini­ti­ated a deal to buy Hal­cyon Agri Corp, a Sin­ga­porean nat­u­ral rub­ber sup­ply chain man­age­ment com­pany, for a pro­posed price of around $300 mil­lion.

China Na­tional Chem­i­cal Cor­po­ra­tion’s rev­enues in 2015

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