Ning Gaoning Takes Office at China National Chemical Corporation; the merger of the two “chemical” giants is “ready to go.”

Although China National Chemical Corporation and Sinochem Group have yet to issue any public statements on the merger, personnel appointments announced by the State-owned Assets Supervision and Administration Commission and other sources suggest that a reorganization of the two entities is highly likely. According to experts in state‑owned assets, this restructuring carries at least three strategic implications: strengthening and expanding the core businesses of central SOEs, building world‑class enterprises with international competitiveness, and supporting the deleveraging efforts of these companies.

After two years of speculation, the long‑rumored merger and restructuring between China National Chemical Corporation (ChemChina) and Sinochem Group are finally set to be finalized.

According to reports, on the afternoon of June 30, senior officials from the Organization Department of the CPC Central Committee and the State-owned Assets Supervision and Administration Commission of the State Council visited China National Chemical Corporation to announce the latest personnel arrangements: Ren Jianxin, Chairman of China National Chemical Corporation, has announced his retirement, while Ning Gaoning, Chairman of Sinochem Group, will concurrently serve as Party Secretary and Chairman of China National Chemical Corporation.

China National Chemical Corporation and Sinochem Group are both centrally administered state-owned enterprises in the chemical industry, directly supervised by the State-owned Assets Supervision and Administration Commission of the State Council. China National Chemical Corporation operates six major business segments—advanced chemical materials, basic chemicals, petroleum processing, agrochemicals, tires and rubber, and chemical equipment—and holds controlling stakes in seven A-share listed companies, making it the largest agrochemical enterprise in China. As of the end of 2016, the group’s total assets amounted to RMB 377.642 billion (prior to its acquisition of Syngenta), ranking 211th on the 2017 Fortune Global 500 list. Sinochem, meanwhile, is one of China’s four major national oil companies, with five core business divisions—energy, chemicals, agriculture, real estate, and finance—and ranked 143rd on the 2017 Fortune Global 500 list.

Analysts note that, as the two leading giants in China’s agrochemical sector, ChemChina and Sinochem have significant overlap in businesses such as pesticides, fertilizers, and seeds. A merger or restructuring could substantially reduce intra‑industry competition and enable complementary strengths. By further integrating domestic and international value chains across key agricultural segments—including pesticides, seeds, and fertilizers—Chinese agrochemical companies would also markedly enhance their global competitiveness.

Li Jin, director of the China Enterprise Voice Research Institute, also believes that if the merger between the two chemical industry giants ultimately goes through, its strategic significance would encompass at least three key dimensions.

First, it helps strengthen and expand the core businesses of central state-owned enterprises. Previously, the two companies’ operations in areas such as pesticides and fertilizers were relatively fragmented; following the merger, they are expected to achieve greater operational concentration, reduce homogeneous competition, and enhance both efficiency and profitability. Second, it will help implement and advance the Belt and Road Initiative. …to build a world-class enterprise with international competitiveness. Li Jin believes that both China National Chemical Corporation and Sinochem have been expanding overseas for many years. Following the implementation of this restructuring and merger, the newly formed group will see a substantial boost in its global market competitiveness.

Third, it will help central state-owned enterprises further deleverage and advance supply-side structural reform. Li Jin stated that ChemChina’s earlier acquisition of the Swiss agrochemical giant Syngenta had significantly increased its debt-to-asset ratio. By merging with Sinochem Group, the company could reduce its overall debt-to-asset ratio and alleviate its debt burden.

In early 2015, as global agrochemical giants were actively pursuing mergers and acquisitions to expand their scale, ChemChina also launched a takeover bid for Syngenta, the Swiss agrochemical giant. Syngenta is the world’s largest pesticide producer and the third-largest player in the seed and agrochemical sectors, boasting an extensive portfolio of cutting-edge seed technologies, agrochemical innovations, and patents. This deal, which set a new record for overseas M&A by a Chinese enterprise, ultimately totaled US$49 billion, with US$25 billion financed through equity and US$24 billion through debt.

In June 2017, ChemChina publicly announced the completion of the acquisition of Syngenta. As of the end of the third quarter of 2017, ChemChina’s total assets stood at RMB 791.5 billion, with total liabilities of RMB 586.5 billion, resulting in an asset–liability ratio of 74%. (ChemChina’s official website does not provide data on revenue, total assets, or other metrics as of the end of 2017.)

Even based solely on 2016 revenue figures, if ChemChina and Sinochem Group were to merge, the resulting agrochemical behemoth would easily rival the international chemical giant BASF.

Source: 21st Century Business Herald