“Two chemical” joint reorganization approved to become the world’s largest chemical enterprise

On March 31, the website of the state owned assets supervision and Administration Commission of the State Council announced that with the approval of the State Council, Sinochem Group Co., Ltd. (hereinafter referred to as “Sinochem Group”) and China National Chemical Industry Group Co., Ltd. (hereinafter referred to as “Sinochem”) were jointly reorganized. Since the two enterprises are both state-owned enterprises, the number of state-owned enterprises will be further reduced to 96 after the joint reorganization.

For more details of the joint reorganization, Beijing business daily contacted the relevant person in charge of Sinochem Group, but as of press, no reply has been received.

According to the data, Sinochem Group is the fourth largest petroleum state-owned enterprise in China. It has established five business divisions of energy, chemical industry, agriculture, real estate and finance, holding shares of Sinochem International, Sinochem fertilizer, China Jinmao and other listed companies, with nearly 60000 employees worldwide. In 2019, Sinochem Group’s operating revenue will reach 586.3 billion yuan, and its total profit and net profit will be 18.68 billion yuan and 13.36 billion yuan respectively.

Sinochem is a state-owned enterprise established on the basis of the enterprises affiliated to the former Ministry of chemical industry. It is the largest chemical enterprise in China. It has six business blocks: new chemical materials and special chemicals, agricultural chemicals, petroleum processing and refining products, rubber tires, chemical equipment and scientific research and design. In 2019, Sinochem’s operating revenue is 454.345 billion yuan and its net profit is 2.755 billion yuan.

In fact, since October 2016, rumors of a merger between Sinochem and SINOCHEM began to appear. In June 2017, Sinochem officially completed a super merger of US $49 billion, with a sharp increase in total liabilities. Rumors of a merger between Sinochem Group and SINOCHEM were once again rampant. In March 2018, Sinochem said it had no plan to merge with Sinochem.

In July 2018, the state owned assets supervision and Administration Commission of the State Council announced that Ning Gaoning, the chairman of Sinochem Group, was concurrently the chairman of Sinochem; Ren Jianxin retired from the position of chairman and director of Sinochem and retired. This matter is regarded as the merger of Sinochem and SINOCHEM.

It is understood that if Sinochem and SINOCHEM are successfully merged, it will be the fourth reorganization of central enterprises in the energy industry after China Power Investment and China Nuclear Power Technology (SDIC), Shenhua Group and China Power Group (National Energy Investment Group), and China nuclear power and China Nuclear Power Construction (CNNC). According to the operating revenue, the two combined central enterprises will become the world’s largest chemical enterprises.

It is worth noting that Sinochem and SINOCHEM are complementary in business. On the one hand, Sinochem ranks third in the world in terms of rubber and plastic machinery manufacturing, and is the upstream enterprise of Sinochem’s natural rubber and rubber chemicals business.

On the other hand, Sinochem is an important producer and supplier of natural rubber in the world. After Sinochem completed the acquisition of Pirelli, an Italian tire manufacturer, in 2015, its tire production capacity has ranked first in China and 15th in the world. In addition, in many chemical raw materials and chemical business, the two enterprises are also closely linked.

Dong Xiang, a financial market expert, said that once Sinochem and SINOCHEM have completed the restructuring, they will open up the upstream and downstream industrial chains in the chemical business and agricultural business, and realize the vertical layout, which is conducive to improving the overall anti risk ability of the new group. However, the joint reorganization of the two central enterprises involves a wide range of aspects. It remains to be seen how to achieve effective coordination among the business sectors after the merger and how to obtain stronger market competitiveness after the merger.

Beijing Business News (reporter Qian Yu, Pu Zhenyu)

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