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Sinochem plans to create largest listed rubber company

March 29, 2016
Chemical Value Chain

Sinochem International Corp. offered to buy a Singapore-listed global rubber trader and combine it with other units to create the world’s largest listed rubber company.

In the latest example of China’s hunt for global commodities assets, state-owned Sinochem International made an offer to buy Halcyon Agri Corp. that values the Singapore-based company at 450 million Singapore dollars (US$328.4 million). According to a joint statement Monday, Sinochem has offered to pay S$0.75 for each Halcyon share, a premium of 2.7% on its last traded price.

The statement said certain shareholders who own a 30.7% of Halcyon have agreed to sell their shares to Sinochem.

Under Singapore takeover rules, an acquiring company has to make a mandatory offer for the whole firm if it acquires or gets commitment to buy a 30% or higher stake.

According to the proposed deal, Halcyon Agri will absorb Sinochem’s Singapore-listed firm, GMG Global Ltd., through an issuance of Halcyon shares. It will also absorb Sinochem’s natural rubber processing assets and trading businesses in China and Malaysia. The combined entity will have an enterprise value of US$1.5 billion.

After the deal, Halcyon will remain listed on the Singapore Exchange, and would be the world’s largest listed rubber supply chain manager. Sinochem would be its largest shareholder.

Chinese companies have been snapping up commodity companies whose shares have been hurt by price declines. In some cases, those falls in prices have been caused by declining demand from China.

In recent years, Beijing has encouraged its largest companies to look abroad to buy parts of the global commodities supply chain. Last year, China National Chemical Corp., known as ChemChina, took control of Italy’s Pirelli & C. SpA in a deal that valued the tire maker at around $7.7 billion.

In January, Beijing named noted deal maker Ning Gaoning as chairman of Sinochem Group Corp. Mr. Ning, a flamboyant, American-educated Chinese executive who goes by “Frank” in English, led a string of big overseas deals during his time leading Chinese state-owned grains trader Cofco. In December, Cofco agreed to pay $750 million for commodities trader Noble Group Ltd.’s 49% stake in agricultural joint venture Noble Agri. Cofco already owned the other 51%, which it purchased in 2014 for $1.5 billion.

Sinochem is already one of the world’s largest rubber suppliers by production capacity.

Halcyon Agri operates 14 rubber-processing facilities in Indonesia and Malaysia and distributes its products through a network of warehouses and sales offices in Southeast Asia, China, the U.S. and Europe. In 2015, it had revenue of S$1.4 billion, which was more than double compared with the year earlier. As of 2014, Sinochem owned 80,000 hectares of natural rubber plantations world-wide and had 22 rubber processing plants in China, Thailand and West Africa with an annual processing capacity in excess of 700,000 metric tons.

The joint statement said that the new entity will have combined revenue of more than US$2.3 billion.

Australia and New Zealand Banking Group Ltd. advised Sinochem on the deal, while Deutsche Bank AG was the financial adviser to Halcyon Agri. TSMP Law Corp. was the legal adviser to Halcyon.

By P.R. Venkat and Jake Maxwell Watts

Source: Wall Street Journal

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