ChemChina to Integrate Its Pesticide Asset

Hubei Sanonda Co., Ltd. (Hubei Sanonda), a subsidiary of the leading pesticide company in China, ChemChina, released a reorganization plan on 5 May 2012 that ChemChina will inject its two other pesticide subsidiaries into Hubei Sanonda, which is the first step for ChemChina to integrate its numerous pesticide asset. The share price of Hubei Sanonda increased by 10% on 5 May, hitting the daily increase limit, according to CCM’s May issue of AgriChina Investor.

According to the plan released by Hubei Sanonda, it will acquire 80.93% and 70% equities of two other pesticide subsidiaries of ChemChina, namely Jiangsu Anpon Electrochemical Co., Ltd. (Jiangsu Anpon) and Jiangsu Huaihe Chemicals Co., Ltd. (Jiangsu Huaihe), by issuing 131.96 million shares to ChemChina, with the share price of USD0.86/share. Besides, Hubei Sanonda also plans to issue 43.99 million shares to no more than ten particular investors, raising USD37.75 million. The fund raised will be used for the reorganization and to supplement the current funds.

The reorganization plan is not a surprise to domestic investors. There have been rumors that ChemChina planned to integrate its pesticide asset for a long time. ChemChina has taken over some leading pesticide companies in recent years. After gaining 60% stakes of Makhteshim Agan, a leading generic pesticide player in the world, in 2011, ChemChina has become the biggest pesticide company in China and the sixth largest pesticide company in the world.

However, insiders reveal that these companies are operated independently. Though the previous acquisitions haven't achieved the intended target of ChemChina, the integration of these pesticide assets is inevitable.

"The reorganization will benefit the development of the listed company (Hubei Sanonda). It will also increase the profitability and integrate the pesticide business of ChemChina. After the reorganization, the competition among ChemChina's subsidiaries will be reduced. Besides, the asset size of Hubei Sanonda will be greatly enlarged and the risks will be dispersed." According to the reorganization plan released by Hubei Sanonda.

After the reorganization, the sales revenue and product portfolio of Hubei Sanonda will be greatly increased. Hubei Sanonda's sales revenue may exceed USD790 million (RMB5 billion) in 2012 and the company will change from a fertilizer and pesticide company to a company covering raw materials, pesticide intermediates, pesticides and fine chemicals.

The sales revenue and net profit of Jiangsu Anpon are USD277 million and USD8.12 million respectively in 2011. Its business covers chlor-alkali, fine chemicals and pesticides. The major pesticides of Jiangsu Anpon include ethephon and pymetrozine. It is a leading ethephon producer in China and its pymetrozine is very famous in domestic market. The sales revenue and net profit of Jiangsu Huaihe are USD191 million and USD2.41 million respectively in 2011. Its major products are nitrotoluene and 2-toluidine. The sales revenue and net profit of Hubei Sanonda are USD300 million and USD12 million in 2011.

Source: AgriChina Investor 1205

http://www.cnchemicals.com/Newsletter/NewsletterDetail_192.html

Content of AgriChina Investor 1205:

ChemChina to integrate its pesticide asset

Huangshanghuang Food to land on Shenzhen SME Board

Mengniu Dairy to enter Hunan's dairy industry

Tony's Farm: attractive to local governments

China enhances food security by urban modern agriculture

China developing woody oil plants to reduce soybean import

Planting cost increases sharply in 2012

Raw material supply for sugar falls short of its demand

Pilot project of input VAT deduction on processed agricultural products to be launched

Fujian provincial government to support facility agriculture

Draft Proposal on Agricultural Insurance Regulations launched

Promising forestry property right investment in China

……

AgriChina Investor, periodically published on 25^th every month, offers timely update and close follow up of agriculture investment in China, analyzing market data and trends, as well as related policies. Major columns include investment environment, investment dynamics, market watcher, market review etc.

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