You are here: Home » Reuters » News
Business Standard

ChemChina, Sinochem in talks on possible $100 bln merger -sources

Reuters  |  BEIJING 

By Chen Aizhu

(Reuters) - Chinese state-owned chemical companies Group and are in discussions about possible to create chemicals, fertiliser and oil giant with almost $100 billion in annual revenue, three sources familiar with the matter said.

The deal has been proposed by China's central government as part of its efforts to slash the number of state-owned companies and create larger, more competitive global industry players, said the sources.

The sources asked not to be identified because they were not authorised to speak publicly about the matter. Top management of the two firms held meeting earlier this week to discuss potential merger, said one source directly briefed on the matter.

"The government has given the mandate to let lead in this potential with ChemChina," said the source.

second source familiar with the matter said both firms have started due diligence work looking into each other's financial details and business segments.

When asked about potential merger, spokesperson said: "There is no such thing."

spokesman said he was not aware of the discussions. China's State-owned Assets Supervision and Administration Commission (SASAC), which oversees state-owned enterprises, did not comment when asked about the talks.

Shares in the companies' listed subsidiaries jumped on the news, with International up 10 percent for its biggest one-day rally in year and Sinofert on track for its best daily gain since December.

While still at an early stage, the talks come as China National Chemicals Corp, as is officially known, finalises $43 billion takeover of Swiss pesticides and seed group Syngenta. That deal would be China's largest-ever foreign investment.

In early European trading, Syngenta shares were down about 2 percent at their lowest in almost two months.

Syngenta declined to comment on the news.

European Competition Commissioner Margrethe Vestager would not comment on any potential issues arising from the deal, were China to create domestic chemicals, fertilizer and oil giant.

"It's very early days," she told reporters on Friday.

The European Union is expected to rule on the deal by Oct. 28.

STRONGER, LARGER

It was not clear why the discussions were happening before the ChemChina-Syngenta deal had been finalised, or whether it would create further problems with anti-trust regulators around the world which have been looking at that deal.

may have initiated the talks to create stronger, larger player to make it easier to absorb world-class company like Syngenta, said the source directly briefed on the matter.

Backing from might help finance its Syngenta deal on more favourable terms, the source said.

faces $3 billion break fee if its Syngenta deal does not proceed.

If approved, the ChemChina-would be among the largest between two Chinese state-owned enterprises, following similar marriages that created shipping giant China Cosco Shipping Corp, train maker CNR-CSR and more recently, the tie-up between Baosteel Group and Wuhan Steel.

Combining the two companies, which make everything from refined oil products to latex gloves and insecticides, would propel it into the top echelons of the competitive global chemicals, fertiliser and oil industries.

Based on 2015 annual reports, revenues of the combined group would comfortably eclipse Germany's BASF, the world's largest maker of industrial chemicals by sales.

It would be major global chemical giant and challenge domestic rivals Sinopec, PetroChina and CNOOC, said Michal Meidan, London-based China analyst with Energy Aspects.

"It really does align nicely the government's priority to reduce the number of SOEs (state-owned enterprises)," Meidan said.

XI'S PUSH

would fit in with President Xi Jinping's years-long push to shrink the number of centrally-controlled state-owned enterprises, which number more than 100.

In Sinochem's case, it is larger than ChemChina, but it needs partner in the long term if it wants to expand in the global market and extend beyond roots that go back almost 70 years in oil and chemical trading, experts who know the companies said.

has seen growth in the key energy business stagnate with increasing domestic competition in trading from the likes of state oil trader Unipec and Chinaoil, while its overseas oil and gas assets have struggled amid prolonged low oil prices.

would add some 500,000 barrels per day of crude oil processing capacity to Sinochem's oil refining business.

Premium assets acquired would also boost Sinochem's chemical departments.

The second source said deal would benefit both companies: Sinochem's upstream oil and gas assets could feed ChemChina's nine refineries, Sinochem's access to rubber trading would help ChemChina's tyre business, while Sinochem's dominance in fertiliser markets would be good fit for ChemChina's agri-chemical business.

"is generally light on assets, while is more of manufacturer," he said.

($1 = 6.6685 Chinese yuan renminbi)

(Additional reporting by Florence Tan in Singapore, Matthew Miller and Meng Meng in BEIJING, Joshua Franklin in ZURICH, Foo Wun Chee in BRUSSELS; Writing by Josephine Mason; Editing by Lincoln Feast and Mike Collett-White)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

RECOMMENDED FOR YOU

ChemChina, Sinochem in talks on possible $100 bln merger -sources

BEIJING (Reuters) - Chinese state-owned chemical companies Sinochem Group and ChemChina are in discussions about a possible merger to create a chemicals, fertiliser and oil giant with almost $100 billion in annual revenue, three sources familiar with the matter said.

By Chen Aizhu

(Reuters) - Chinese state-owned chemical companies Group and are in discussions about possible to create chemicals, fertiliser and oil giant with almost $100 billion in annual revenue, three sources familiar with the matter said.

The deal has been proposed by China's central government as part of its efforts to slash the number of state-owned companies and create larger, more competitive global industry players, said the sources.

The sources asked not to be identified because they were not authorised to speak publicly about the matter. Top management of the two firms held meeting earlier this week to discuss potential merger, said one source directly briefed on the matter.

"The government has given the mandate to let lead in this potential with ChemChina," said the source.

second source familiar with the matter said both firms have started due diligence work looking into each other's financial details and business segments.

When asked about potential merger, spokesperson said: "There is no such thing."

spokesman said he was not aware of the discussions. China's State-owned Assets Supervision and Administration Commission (SASAC), which oversees state-owned enterprises, did not comment when asked about the talks.

Shares in the companies' listed subsidiaries jumped on the news, with International up 10 percent for its biggest one-day rally in year and Sinofert on track for its best daily gain since December.

While still at an early stage, the talks come as China National Chemicals Corp, as is officially known, finalises $43 billion takeover of Swiss pesticides and seed group Syngenta. That deal would be China's largest-ever foreign investment.

In early European trading, Syngenta shares were down about 2 percent at their lowest in almost two months.

Syngenta declined to comment on the news.

European Competition Commissioner Margrethe Vestager would not comment on any potential issues arising from the deal, were China to create domestic chemicals, fertilizer and oil giant.

"It's very early days," she told reporters on Friday.

The European Union is expected to rule on the deal by Oct. 28.

STRONGER, LARGER

It was not clear why the discussions were happening before the ChemChina-Syngenta deal had been finalised, or whether it would create further problems with anti-trust regulators around the world which have been looking at that deal.

may have initiated the talks to create stronger, larger player to make it easier to absorb world-class company like Syngenta, said the source directly briefed on the matter.

Backing from might help finance its Syngenta deal on more favourable terms, the source said.

faces $3 billion break fee if its Syngenta deal does not proceed.

If approved, the ChemChina-would be among the largest between two Chinese state-owned enterprises, following similar marriages that created shipping giant China Cosco Shipping Corp, train maker CNR-CSR and more recently, the tie-up between Baosteel Group and Wuhan Steel.

Combining the two companies, which make everything from refined oil products to latex gloves and insecticides, would propel it into the top echelons of the competitive global chemicals, fertiliser and oil industries.

Based on 2015 annual reports, revenues of the combined group would comfortably eclipse Germany's BASF, the world's largest maker of industrial chemicals by sales.

It would be major global chemical giant and challenge domestic rivals Sinopec, PetroChina and CNOOC, said Michal Meidan, London-based China analyst with Energy Aspects.

"It really does align nicely the government's priority to reduce the number of SOEs (state-owned enterprises)," Meidan said.

XI'S PUSH

would fit in with President Xi Jinping's years-long push to shrink the number of centrally-controlled state-owned enterprises, which number more than 100.

In Sinochem's case, it is larger than ChemChina, but it needs partner in the long term if it wants to expand in the global market and extend beyond roots that go back almost 70 years in oil and chemical trading, experts who know the companies said.

has seen growth in the key energy business stagnate with increasing domestic competition in trading from the likes of state oil trader Unipec and Chinaoil, while its overseas oil and gas assets have struggled amid prolonged low oil prices.

would add some 500,000 barrels per day of crude oil processing capacity to Sinochem's oil refining business.

Premium assets acquired would also boost Sinochem's chemical departments.

The second source said deal would benefit both companies: Sinochem's upstream oil and gas assets could feed ChemChina's nine refineries, Sinochem's access to rubber trading would help ChemChina's tyre business, while Sinochem's dominance in fertiliser markets would be good fit for ChemChina's agri-chemical business.

"is generally light on assets, while is more of manufacturer," he said.

($1 = 6.6685 Chinese yuan renminbi)

(Additional reporting by Florence Tan in Singapore, Matthew Miller and Meng Meng in BEIJING, Joshua Franklin in ZURICH, Foo Wun Chee in BRUSSELS; Writing by Josephine Mason; Editing by Lincoln Feast and Mike Collett-White)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

image
Business Standard
177 22

ChemChina, Sinochem in talks on possible $100 bln merger -sources

By Chen Aizhu

(Reuters) - Chinese state-owned chemical companies Group and are in discussions about possible to create chemicals, fertiliser and oil giant with almost $100 billion in annual revenue, three sources familiar with the matter said.

The deal has been proposed by China's central government as part of its efforts to slash the number of state-owned companies and create larger, more competitive global industry players, said the sources.

The sources asked not to be identified because they were not authorised to speak publicly about the matter. Top management of the two firms held meeting earlier this week to discuss potential merger, said one source directly briefed on the matter.

"The government has given the mandate to let lead in this potential with ChemChina," said the source.

second source familiar with the matter said both firms have started due diligence work looking into each other's financial details and business segments.

When asked about potential merger, spokesperson said: "There is no such thing."

spokesman said he was not aware of the discussions. China's State-owned Assets Supervision and Administration Commission (SASAC), which oversees state-owned enterprises, did not comment when asked about the talks.

Shares in the companies' listed subsidiaries jumped on the news, with International up 10 percent for its biggest one-day rally in year and Sinofert on track for its best daily gain since December.

While still at an early stage, the talks come as China National Chemicals Corp, as is officially known, finalises $43 billion takeover of Swiss pesticides and seed group Syngenta. That deal would be China's largest-ever foreign investment.

In early European trading, Syngenta shares were down about 2 percent at their lowest in almost two months.

Syngenta declined to comment on the news.

European Competition Commissioner Margrethe Vestager would not comment on any potential issues arising from the deal, were China to create domestic chemicals, fertilizer and oil giant.

"It's very early days," she told reporters on Friday.

The European Union is expected to rule on the deal by Oct. 28.

STRONGER, LARGER

It was not clear why the discussions were happening before the ChemChina-Syngenta deal had been finalised, or whether it would create further problems with anti-trust regulators around the world which have been looking at that deal.

may have initiated the talks to create stronger, larger player to make it easier to absorb world-class company like Syngenta, said the source directly briefed on the matter.

Backing from might help finance its Syngenta deal on more favourable terms, the source said.

faces $3 billion break fee if its Syngenta deal does not proceed.

If approved, the ChemChina-would be among the largest between two Chinese state-owned enterprises, following similar marriages that created shipping giant China Cosco Shipping Corp, train maker CNR-CSR and more recently, the tie-up between Baosteel Group and Wuhan Steel.

Combining the two companies, which make everything from refined oil products to latex gloves and insecticides, would propel it into the top echelons of the competitive global chemicals, fertiliser and oil industries.

Based on 2015 annual reports, revenues of the combined group would comfortably eclipse Germany's BASF, the world's largest maker of industrial chemicals by sales.

It would be major global chemical giant and challenge domestic rivals Sinopec, PetroChina and CNOOC, said Michal Meidan, London-based China analyst with Energy Aspects.

"It really does align nicely the government's priority to reduce the number of SOEs (state-owned enterprises)," Meidan said.

XI'S PUSH

would fit in with President Xi Jinping's years-long push to shrink the number of centrally-controlled state-owned enterprises, which number more than 100.

In Sinochem's case, it is larger than ChemChina, but it needs partner in the long term if it wants to expand in the global market and extend beyond roots that go back almost 70 years in oil and chemical trading, experts who know the companies said.

has seen growth in the key energy business stagnate with increasing domestic competition in trading from the likes of state oil trader Unipec and Chinaoil, while its overseas oil and gas assets have struggled amid prolonged low oil prices.

would add some 500,000 barrels per day of crude oil processing capacity to Sinochem's oil refining business.

Premium assets acquired would also boost Sinochem's chemical departments.

The second source said deal would benefit both companies: Sinochem's upstream oil and gas assets could feed ChemChina's nine refineries, Sinochem's access to rubber trading would help ChemChina's tyre business, while Sinochem's dominance in fertiliser markets would be good fit for ChemChina's agri-chemical business.

"is generally light on assets, while is more of manufacturer," he said.

($1 = 6.6685 Chinese yuan renminbi)

(Additional reporting by Florence Tan in Singapore, Matthew Miller and Meng Meng in BEIJING, Joshua Franklin in ZURICH, Foo Wun Chee in BRUSSELS; Writing by Josephine Mason; Editing by Lincoln Feast and Mike Collett-White)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

image
Business Standard
177 22

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard