Monday, October 21, 2013

ChemChina to integrate its agrochemical assets

According to CCM’s lately released newsletter, Herbicides China News 1310, on Sept. 10, 2013, Hubei Sanonda Co., Ltd. (Hubei Sanonda) announced that Celsius Property B.V. (Celsius) will acquire 148.48 million of its B shares. The acquisition arouses speculation that China National Chemical Corporation (ChemChina) has begun to restructure its agrochemical assets, as Celsius is a Dutch company controlled by Makhteshim Agan Industries Ltd. (Makhteshim Agan), a subsidiary of ChemChina. The purpose of ChemChina's indirect acquisition of Hubei Sanonda is to strengthen its control for the company by increasing its shareholdings.

The 148.48 million B shares of Hubei Sanonda to be acquired by ChemChina representing 65% of Hubei Sanonda's B share capital, or 25% of the company's total share capital. As the practical controlling shareholder, ChemChina's stake in Hubei Sanonda will rise to around 45.15% from the present 20.15%. This acquisition will cost approximately USD126.38 million, or USD0.85/share.

Notably, the acquisition price is much higher than the closing price before the suspension of Hubei Sanonda's B shares. Since July 30, 2013, Hubei Sanonda's shares (A shares and B shares) have been suspended because of this acquisition. The acquisition price is a premium of approximately 26% on the closing price, and is approaching towards the record high price which is USD0.91/share. 

The announcement also revealed that ChemChina is acquiring Hubei Sanonda in order to actively implement the globalization plans for its agrochemical business, and to further strengthen the synergies between the company and its subsidiaries at home and abroad. Insiders believe that ChemChina is planning to use Makhteshim Agan as the platform to restructure its agrochemical assets and business operations.

This acquisition is likely to be the beginning of ChemChina's agrochemical asset integration. According to Hubei Sanonda's announcement, ChemChina plans to follow up on this acquisition by also purchasing Hubei Sanonda's A shares.  Makhteshim Agan has not ruled out the possibility that it will within the next 12 months acquire Hubei Sanonda's A shares, which are now indirectly held by ChemChina through Celsius or its other holding subsidiaries. This is in accordance with the strategic arrangement between ChemChina and Makhteshim Agan.

ChemChina has had long-held plans to restructure its agrochemical assets. In May 2012, ChemChina originally planned to restructure its agrochemical assets by using Hubei Sanonda as a platform. The company intended to inject quality assets into Hubei Sanonda, including 80.93% equity of Jiangsu Anpon Electrochemical Co., Ltd. (Jiangsu Anpon) and 70% equity of Jiangsu Huaihe Chemical Co., Ltd. (Huaihe Chemical). Both Jiangsu Anpon and Huaihe Chemical are ChemChina's subsidiaries which operate in the agrochemical sector. However, this plan eventually failed in Nov. 2012 for various reasons.

ChemChina is likely to continue to restructure its subsidiaries in the future. This is because ChemChina has many subsidiaries and many overlapping businesses in its subsidiaries. Restructuring will help resolve problems such as intra-industry competition and operational coordination. Up to now, ChemChina's portfolio of agrochemical enterprises mainly includes Makhteshim Agan, Hubei Sanonda, Cangzhou Dahua Group Co., Ltd., Jiangsu Anpon, Anhui Petroleum & Chemical Group Co., Ltd. and Huaihe Chemical.                                                               Hubei Sanonda performed quite strongly in the first half of 2013, according to Hubei Sanonda's 2013 semi-annual report. Its operating revenue and net profit both witnessed a significant increase, growing by 36.08% and 431.43% year-on-year respectively. The significant growth in net profit was mainly due to the increase in the output, the sales volume and the sales prices of the company's main products. The output of the company's chemical pesticides (100% consistency) reached 33,200 tonnes during this period, increasing by 58.79% compared with the same period of last year. Additionally, the company's export revenue was approximately USD128 million, representing a year-on-year growth of 34.28%.   

Table of Contents of Herbicides China News 1310:
FOB Shanghai of main herbicides in China, Oct. 8, 2013
Shanghai port prices of main herbicides in China, Oct. 8, 2013
Ex-factory prices of main herbicides in China, Oct. 8, 2013
Ex-factory prices of key herbicide raw materials in China, Oct. 8, 2013
Shandong Qiaochang to be first domestic company producing imazamox
Noposion to acquire another 20% stock equity of Jiangsu Changlong
Bohan Chemical to build world's largest production base of oxadiazon technical
Huapont Nutrichem intends to acquire two chemical companies
Seven glyphosate companies step into 2012 China Top 20 Pesticide Enterprises
China's total profit of pesticide industry surges by 40.5% YoY, Jan.-Aug. 2013
Shandong's total profit of pesticide industry up 44.8% YoY, Jan.-July 2013
MOFCOM extends anti-dumping investigation period against pyridine
Hubei Sanonda's export revenue enjoys significant growth, 2013
Paraquat AS substitutes developed in China
China's herbicide exports witness growth, Jan.-Aug. 2013
Export volume of China's acetochlor TC declines sharply, H1 2013
China newly approves ten herbicide products' formal registrations
MOA bans three more long residual herbicides
ChemChina to integrate its agrochemical assets

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