Wednesday, January 18, 2012

Main M&A Cases in Pesticide Industry, 2011

After China released the Pesticide Industry Policy on 19 Sept., 2010, pesticide companies' capital operations are more frequent in domestic pesticide industry. Supported by the policy, large pesticide enterprises, especially listed ones with a large amount of capital, launched their expansion by M&A, setting up subsidiaries and IPO, based on CCM’s latest issue of Crop Protection China News.

In this issue, CCM International will list the most influential M&A cases in domestic pesticide industry in 2011.
As M&A has the advantage of relatively low cost and high efficiency, it is considered to be the most important method for companies' expansion. Most international pesticide giants have realized a rapid growth through this kind of expansion, namely external expansion.
In 2011, there were eight main M&A cases that took place in domestic pesticide industry, and most of them happened among listed pesticide companies and non-listed ones.
1. On 6 Jan., 2011, Hebei Veyong Bio-chemical Co., Ltd. (Hebei Veyong), a leading avermectin player in China, announced that its transaction with ENN Energy Holding Limited (ENN Energy), a Chinese energy group listed on Hong Kong Exchanges and Clearing Limited, has been approved by China Securities Regulatory Commission (CSRC).
According to the transaction, Hebei Veyong acquired large equities of ENN Energy's two wholly-owned subsidiaries, namely Xinneng Energy Zhangjiagang Co., Ltd. (Xinneng Zhangjiagang) and Xinneng Energy Bengbu Co., Ltd. (Xinneng Bengbu) to involve in the production and sales of methoxymethane (DME), a kind of raw material of pesticides. 75% equities of Xinneng Zhangjiagang and 100% equities of Xinneng Bengbu are now controlled by Hebei Veyong with the total cost of about USD83.12 million.
2. On 9 Feb., 2011, Shandong Huayang Technology Co., Ltd. (Huayang Technology), a large pesticide company in Shandong Province, revealed that Zibo Hongda Mining Co., Ltd. (Zibo Hongda), a big mining company in Shandong Province, has successfully bid for Huayang Technology's 20.38% equities with capital investment of about USD44.76 million. After the transaction, Zibo Hongda represented Shandong Huayang Pesticide Chemical Industry Group Co., Ltd. (Huayang Group), the biggest shareholder of Huayang Technology, to become the biggest shareholder of Huayang Technology.
3. On 18 Jan., 2011, Shandong Dacheng Pesticide Co., Ltd. (Shandong Dacheng), a listed pesticide company, launched its major assets reorganization. 29.84% of Shandong Dacheng's total equities that was sold to an assignee group, namely Shandong Yinshan Investments Co., Ltd. (Shandong Yinshan), Dongli Town Collective Assets Management Center (Shandong Province) and Huiquan International Investments Co., Ltd. (Huiquan International, Beijing City).
4. On 31 Jan., 2011, Hubei Sanonda Co., Ltd. (Hubei Sanonda), a large listed pesticide company in China, revealed that it will acquire 98% equities of a pyridine player in Hubei Province, namely Jingzhou Hongxiang Chemical Co., Ltd. (Jingzhou Hongxiang), with the total cost of USD5.3 million.
5. On 20 April 2011, Lianhe Chemical Technology Co., Ltd. (Lianhe Technology), a leading pesticide intermediate company in China, purchased 55% equities of Yongheng Chemical Co., Ltd. (Yongheng Chemical), a large chemical intermediate enterprise in Shandong Province, with the total cost of USD10.74 million.
6. In early May 2011, China National Chemical Corporation (ChemChina) obtained the approvals from the Ministry of Commerce and the State Administration of Foreign Exchange for its acquisition of Makhteshim Agan Industries (MAI), an Israeli agrochemical giant.
In this transaction, ChemChina bought 60% equity of MAI (53% holdings of the public and 7% holdings of Koor Industries, the parent company of MAI), with the total cost of USD1.44 billion. In addition, ChemChina arranged a non-recourse loan of USD960 million to Koor through a Chinese bank, using Koor's shares in MAI as collateral, and the loan would be paid in full after seven years.
7. On 24 June 2011, China Agri-Business Inc. (China Agri-Business), a domestic agricultural company listed on NASDAQ in 2007 (Code No.: CHBU.OB), released that it temporarily acquired the management and operation rights of Shaanxi Qinfeng Agrochemical Co., Ltd. (Shaanxi Qinfeng), a large agrochemical player in Shaanxi Province for more than two and a half year, from 1 June 2011 to 31 Dec., 2013.
As a transaction chip, China Agri-Business invested USD185,470 in Shaanxi Qinfeng on 14 June 2011. From 1 Jan., 2012 to 31 Dec., 2013, the company must pay an aggregate of USD370,943 each year to Shaanxi Qinfeng. The capital will be paid in installments of USD185,471 each year.
8. On 31 Aug., 2011, Lianhe Chemical Technology Co., Ltd. (Lianhe Technology) launched its second M&A to purchase 70% equities of Tianyu Chemical Co., Ltd., an intermediate production company in China, with total investment of USD4.52 million.

Content of Crop Protection China News 1201:
10% glyphosate SL retreats from Chinese market
Hubei Sanonda predicts net profit in 2011 to up 100%-150%
New policy to better guide foreign investment released
Three pesticide enterprises' production of new products approved by MIIT
Hebei Veyong to relocate pesticide base
Some pesticide companies in Zhejiang approved to enjoy tax break
China may accept amendment of Stockholm Convention
Main M&A cases in pesticide industry, 2011
China's import volume of oil declines in Jan.-Nov., 2011

Crop Protection China News, a semimonthly publication issued by CCM International on 15th and 30th(31st) of every month, aims to gain a deep insight into Chinese market, supply the latest market data and strategy support, analyze the newest legislation and policy and grasp the future market trend.

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