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ChemChina is said to mull asset sales as megamerger moves aheadqrcode

Sep. 6, 2018

Favorites Print Sep. 6, 2018

ChemChina’s chairman is studying potential asset sales as the state-owned company moves ahead with preparations for a long-mooted megamerger with Sinochem Group, people with knowledge of the matter said.

Frank Ning, who leads both companies, has started reviewing the businesses of ChemChina and Sinochem to identify areas of overlap and potential synergies, according to the people. Ning is considering pursuing divestitures or initial public offerings of some units, the people said, asking not to be identified because the information is private.

Chinese authorities have granted preliminary approval for the merger of ChemChina and Sinochem, and have tasked Ning with working out some implementation details, the people said. One of the review’s aims is to find ways to reduce the debt ChemChina took on through its record $43 billion purchase of Swiss pesticide producer Syngenta AG, according to the people.

ChemChina has recently been fielding pitches from investment banks as it weighs an IPO for Syngenta in the coming years, according to the people. Deliberations on a potential share sale are at an early stage, the people said.

Consolidation Wave

Bloomberg News first reported nearly two years ago that the Chinese government was planning to merge ChemChina and Sinochem to create an oil-to-chemicals giant with more than $100 billion of assets. The deal would change the landscape of the Chinese chemicals industry, adding to a wave of consolidations that President Xi Jinping’s administration has pursued to shake up bloated state enterprises.

There’s no certainty Ning’s review of the companies’ businesses will lead to any transactions, the people said. It wasn’t clear which businesses he might decide to sell or spin off.

A media official at ChemChina, whose formal name is China National Chemical Corp., declined to comment. A representative for Sinochem didn’t immediately respond to emailed queries. The State-owned Assets Supervision and Administration Commission, an arm of the Chinese government overseeing the biggest government enterprises, didn’t immediately respond to a fax seeking comment.

Oil Refineries

A representative for Syngenta said that since ChemChina’s acquisition of the company, an IPO has always been considered an option within a four- to five-year timeframe, and there’s been no indication of any change in that view.

Both Sinochem and ChemChina are top chemical producers and major oil refiners in China. Ning, a 59-year-old veteran executive who used to run China’s biggest food company, was named chairman of Sinochem in early 2016. Chinese authorities announced in July he was also appointed chairman of ChemChina, stoking speculation that the merger of the two companies was moving ahead.

ChemChina, which has businesses in agrochemicals, rubber tires and chemical equipment, had been on a buying spree in recent years. It made its first overseas acquisition more than a decade ago when it bought French animal nutrition firm Adisseo Group.

Property, Leasing

The group has since purchased Adama Agricultural Solutions Ltd., an Israeli producer of crop-protection products, as well as German machinery maker KraussMaffei Group and a stake in Swiss commodity trader Mercuria Energy Group Ltd.

More recently, ChemChina has started listing some of the companies it acquired, paring its stake in Italian tire maker Pirelli & C. SpA through a $2.6 billion initial public offering last year. Elkem ASA, the Norwegian silicon maker controlled by ChemChina, completed an IPO in March. Last June, ChemChina’s then-chairman said the group could relist Syngenta in about five years.

Sinochem has more than 300 subsidiaries including Sinochem International Corp., a chemical trader with a market value of $2.1 billion in Shanghai, and phosphate producer Sinofert Holdings Ltd. It is also the biggest shareholder in Hong Kong-listed developer China Jinmao Holdings Group Ltd. and financial leasing firm Far East Horizon Ltd.

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