M&As: Chemical giants Sinochem and ChemChina to merge; combined US$150 bn revenue

The government-owned State-Owned Assets Supervision and Administration Commission (SASAC), which regulates companies in China, has approved the merger of Sinochem Group and China National Chemical Corp (ChemChina Group), two companies that have long been the target of merger speculation. The move will not only minimise competition between the companies but it is also expected to create the world’s largest chemicals conglomerate with around US$150 billion in revenue.

In a statement released, Sinochem said the two firms will become wholly-owned subsidiaries of a new holding company that will be funded and overseen by the SASAC government body that holds state enterprises.

Sinochem said the joint restructuring will “create synergy, build up a world-class chemical company, and promote a high-quality development of the chemical industry in China.” It added, “In recent years, global chemical giants have undergone consolidation to create large-scale chemical companies which play a leading role in chemicals R&D and product innovation. This joint restructuring will assist the development of the chemical industry in China. The new holding company will further optimise resource allocation, strengthen innovation and stimulate business growth.”

Together, the companies operate a wide range of activities including oil and refining, petrochemicals and other basic chemicals, agriculture, and specialty chemicals, as well as life sciences, materials science, environmental science, rubber and tyres, machinery and equipment, real estate, and industrial finance.

The deal to combine both companies has been on the cards since 2016 and was reinforced by Ning Gaoning, Chairman of both companies, who in 2019 had said that they were exploring a merger and working on finance and legal matters.

Dow Jones reported last year in December that the two companies were seeking ways to combine that would avoid US security review of ChemChina’s ownership of Swiss agro-giant Syngenta AG, which ChemChina acquired in 2017 for US$43 billion. It was China’s biggest foreign acquisition.

(PRA)

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