As Syngenta deal closes, ChemChina and Sinochem press US$120 billion deal
HONG KONG/ BEIJING: Chinese state- owned Sinochem and ChemChina are in merger talks to create the world’s biggest industrial chemicals firm, to be headed by Sinochem chief Ning Gaoning, four people with knowledge of the negotiations said.
A deal could be announced by the end of the year, the people said, potentially just months after ChemChina completes its own US$ 43 billion purchase of Switzerland’s Syngenta, China’s biggest overseas deal to date.
A consolidation of Sinochem and ChemChina would be worth around US$ 120 billion, one of the people said, topping companies like industrial chemicals giant BASF.
Talks to create a Chinese chemicals powerhouse were first reported last year, but were dismissed by both companies as rumour.
Sinochem and China National Chemicals Corp, as ChemChina is officially known, did not immediately respond to requests for comment on Tuesday.
A Syngenta spokesperson said the company was not aware of any talks.
The two companies have acceler- ated negotiations after regulators last month cleared ChemChina’s acquisition of Syngenta, the people said.
With the approval also of over 80 per cent of Syngenta shareholders bringing completion of that deal nearer, focus has shifted to creating a Chinese powerhouse.
Beijing sees a Sinochem/ ChemChina deal as a blueprint for streamlining and consolidating its sprawling, debt-heavy state- owned enterprises, the people said, leaving fewer, but more powerful, national champions.
“This is the priority now for both companies. The message from the top to the managers is very clear: don’t be distracted by anything else,” one of the people said, adding that the focus on this deal accounted in part for Sinochem recently ditching a plan to invest in Noble Group, a loss-making commodity trader.
A deal is not yet final, and China’s 19th Communist Party Congress later this year leaves room for some political uncertainty.
The expected retirement of ChemChina chief Ren Jianxin in January may speed up the process, one of the people said, to allow for a handover period.
Ren, known for bold deals including Syngenta and the purchase of Italian tyremaker Pirelli, has spent over a decade and billions of dollars expanding ChemChina, founding a popular noodle chain along the way.
He may, though, have irked the authorities with his chutzpah in forging ahead with high-profile deals, another of those with knowledge of the discussions said.
Ning, who made a name for himself as head of state- owned food processing group Cofco, is seen as politically well connected.
“The magnitude of the Syngenta deal means Beijing wants to make sure it’s securely managed,” said a person from the oil and gas industry. — Reuters