Daily Management Review

ChemShina and Sinochem are in talks to merge


10/14/2016


Chinese state-owned Sinochem and ChemChina are in talks to merge. The deal could give rise to a world leader in the field of oil refining, chemicals and fertilizers revenues, learned Reuters.



Pui Shan Chan
Pui Shan Chan
Sinochem Group and ChemChina started discussing a possible merger at instigation of the central government of the PRC, told three sources familiar with the negotiations. "The government has authorized Sinochem to conduct negotiations on a possible merger with ChemChina", - said one of them. Another interviewee told Reuters that the two companies have already started mutual due diligence. 
Representative of ChemChina has denied information about the possible deal, and representative of Sinochem said that he knew nothing about it.

If the union takes place, Sinochem-ChemChina’s pro-forma income for 2015 will number $ 99.4 billion

Such transactions are expected to help the Chinese authorities to reduce the number of state-owned enterprises and create larger, more competitive global industry players, sources said to Reuters. Earlier, the same model was applied to transport and logistics giant China Cosco Shipping and manufacturer of locomotives and wagons CNR-CSR. In addition, but Baosteel and Wuhan Steel companies recently announced another merger. 

Fortune global top 50 list includes 11 Chinese companies with a combined revenue of nearly $ 2 trillion.

Combined company Sinochem-ChemChina would manufacture various products, from oil and tires to condoms, medical gloves and insecticides. Both companies also produce fertilizers, and, above that, Sinochem has real estate and financial services divisions. The Chinese giant’s annual revenue of $ 100 billion could easily overtake German BASF, the largest global producer in terms of revenue of industrial chemistry.

Reuters’ source said that ChemChina and Sinochem businesses complement each other. Sinochem’s oil and gas assets can provide raw materials for nine refineries of ChemChina. In turn, Sinochem’s access to rubber trading business will help ChemChina’s tire business. Agricultural fertilizers of Sinochem and agrochemicals of ChemChina also fit each other.

Reports of a possible merger between ChemChina and Sinochem have provoked an increase in shares of their subsidiaries. In particular, quotes of Sinochem International Corp. jumped 10% in trading in Shanghai, quotes Sinofert Holdings Ltd. increased by 6% in Hong Kong.

Another merger of ChemChina and Swiss manufacturer of pesticides and seeds Syngenta should be completed by the end of the year. The deal for the $ 43 billion would be the largest foreign investment in China.

ChemChina and Sinohem recently entered into an alliance for international cooperation in the field of production facilities and access to foreign markets.

Chinese petrochemical industry is one of the biggest in the world, and accelerated development of overseas markets through high-quality investment and construction of the world will bring new benefits to the country.

According to the Chinese Federation of Petroleum and Chemical Industry, China is the main market for implementation of the global petrochemical products. It shows a great potential for growth and development.

At the same time, Chinese enterprises are constantly increasing their production capacities abroad and are stepping up development of foreign markets. 

source: reuters.com






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