Industrial chemical maker Lumena Resources' shares soared 14 per cent after it announced a major diversification into downstream production, but a rating agency warned it may downgrade its debt rating in view of uncertainties on the deal's funding and potential synergies.
The Sichuan-based company on Sunday announced it was buying from controlling shareholder and chairman Suolang Duoji up to 95 per cent of Sino Polymer New Materials for 11.63 billion yuan (HK$13.49 billion). It will pay 90 per cent of the price by issuing shares and 10 per cent by cash.
Lumena said Sino Polymer is one of the world's largest makers of engineering plastic polyphenylene sulfide (PPS), which can be derived from Lumena's main product, thenardite.
Thenardite is used in the production of powder detergents, textiles, and laxative and anti-inflammatory drugs. PPS is a heat and corrosion-resistant material used in electronic, automotive, and aerospace sectors.
Chief executive Zhang Daming said the deal will see the company turn low-end thenardite costing around 250 yuan a tonne into PPS that fetches 73,000 yuan a tonne.
But Moody's said last night that this represents an 'aggressive' expansion as revenues of the new business slightly exceeds that of the current one, and 'the benefits of any potential synergies are yet to be established'.
