Sat, Oct 15, 2016 - Page 10 News List

China planning to merge state-run chemicals giants

Bloomberg

China is planning to merge Sinochem Group (中國中化集團) and China National Chemical Corp (ChemChina, 中國化工) as the government continues its overhaul of state-owned enterprises, according to a person familiar with the matter.

Details of the deal, which would combine two companies with assets of more than US$100 billion, were not immediately clear and the plan is still subject to change, the person said, asking not to be identified because the transaction has not been publicly announced.

The merger would change the landscape of China’s chemicals industry and add to the wave of consolidations the government has pushed under Chinese President Xi Jinping (習近平).

More than US$1 trillion of asset combinations have emerged since late 2014 amid the nation’s biggest shake-up of state enterprises since the 1990s.

“These two are already mega on their own, so combining them would create a super mega,” said Iris Pang, a senior economist for Greater China at Natixis SA in Hong Kong.

A merger could ease competition in the industry and help prices go higher, she said.

It was not clear how the the plan would affect ChemChina, and its proposed acquisition of Syngenta AG for a record US$43 billion.

The Chinese State-Owned Assets Supervision and Administration Commission did not respond to a request for comment.

ChemChina is China’s largest chemical firm with 140,000 employees, according to its Web site.

The company posted a net loss of 828.3 million yuan (US$123 million) last year, while its total assets were worth 372.5 billion yuan.

The state-owned firm, which has businesses in agrochemicals, rubber tires and chemical equipment, has been in a buying spree in recent years. It started its first overseas acquisition a decade ago when it bought France’s Adisseo Group.

After that, it did a series of overseas acquisitions including Elkem in Norway, Pirelli in Italy and KraussMaffei in Germany.

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