CEFC Oil Spent Yuan 1.97 bn to acquire Huaxing Chemical

Date:08-08-2012

Anhui Huaxing Chemical Co., Ltd (Huaxing Chemical) recently announced a directional add-issuance plan which offers no less than 452 million shares to CEFC Shanghai Oil Group at Yuan 4.36 per share to raise fund up to an amount of Yuan 1.97 billion. Upon completion of the issuance, CEFC Shanghai Oil will hold no less than 60.61% stake in Huaxing Chemical, thus to become the new controlling shareholder of Huaxing Chemical.

According to the directional add-issuance plan, CEFC Oil is the only subscriber of the directional add-issuance. Of the Yuan 1.97 billion fund to be raised, Yuan 703 million and 307 million will be respectively spent on the 300,000-ton ion exchange membrane caustic soda project and the linearfull distribution center project while the balance of Yuan 300 million is used as repayment to bank loan and Yuan 600 million as working capital input.

Because of the feel-good news, the stock of Huaxing Chemical hit limit up and closed at Yuan 5.19 right after resumption on the same day; before this date, stock of Huaxing Chemical was noticed to suspend on 6th July.

Huaxing Chemical currently focuses on production and marketing of pesticide, being a prime glyphosate supplier in the global market. Over the last 3-year downturn period, Huaxing Chemical has had a hard time and suffered losses in 2010 and 2011 net of non-recurrent gain and loss; also the asset-liability ratio of the company is rising, which is especially difficult while most of the bank loans are short-term loans. The input of CEFC Oil in this high-stress situation provides a timely help.

CEFC Oil specializes in the marketing and distribution of petrochemical materials and additives including aromatic hydrocarbon, paraxylene and electrolytic copper. Up until end of 2011, the total assets of CEFC Oil amounted to Yuan 5.09 billion and owner’s equity reached Yuan 1.03 billion; its business income of 2011 reached Yuan 12.69 billion and net profit reached Yuan 62.13 million.

After the funded projects are brought to operation, Huaxing Chemical will have an annual 300,000-ton new ion exchange membrane caustic soda facility and enhanced storage/distribution capacities which are expected to generate an annual income of Yuan 1.66 billion and profit of Yuan 150 million; these newly generated incomes will be 180% of the incomes of Huaxing Chemical in 2011.