State-owned enterprises

Sinochem plans to acquire assets around the world, think global

Sinochem chairman Frank Ning Gaoning says restructuring plan includes the introduction of strategic investors for various business arms in coming years

PUBLISHED : Monday, 23 October, 2017, 5:58pm
UPDATED : Monday, 23 October, 2017, 11:01pm

China’s US$60 billion chemical giant Sinochem Group is eyeing overseas merger and acquisition opportunities and plans to introduce strategic investors in three to five years for its business arms, according to company chairman Frank Ning Gaoning.

The state-owned enterprise (SOE) will focus on bulk petrochemical and downstream products, develop high value-added materials and life science products in the next few years, as well as invest in properties and financial services, Ning said in an email reply to the South China Morning Post.

“In the future, we will stick to internationalisation and strive to become a multinational company which is competitive in the world market, taking advantage of the Belt and Road Initiative,” Ning said, referring to China’s plan to improve global connectivity and enhance physical infrastructure.

“We will actively pay attention to possible chances of overseas mergers and acquisitions in our core business field.”

Sinochem is among bidders for a US$4 billion stake in Chile’s SQM, one of the world’s largest producers of lithium, a key component in the batteries of electric cars, the Financial Times reported on Monday, citing unnamed sources.

Sinochem declined to comment on the bid.

During his keynote speech to the party congress last week, President Xi Jinping highlighted the goal of building world-class enterprises, make SOEs bigger and stronger and encouraged their overseas investment under the Belt and Road Initiative, a plan unveiled in 2013 to expand China’s presence in Asia, Europe, Africa, the Middle East and South America and boost trade and investment particularly in energy and resources, technology, manufacturing and infrastructure.

Ning, who joined the Sinochem from food group COFCO last year, is known for aggressive restructuring. It is widely believed that the appointment was aimed to push ahead with restructuring and listing of Sinochem’s businesses.

Ning said research and preparations began last year for a mixed-ownership restructuring of the company’s business units.

“We set up energy, chemical, agricultural, property and financial units at the end of last year,” he said. “We plan to introduce strategic investors to participate in the mixed ownership reform [in the units] in the next three to five years.”

The government is encouraging state-controlled financial institutions and private companies to invest in weak state enterprises grappling with debt and inefficiency under its “mixed ownership reform”.

In a recent case, the parent of China Unicom, the weakest of the country’s three telecom operators in profitability, sold a combined 35.2 per cent equity stake to more than a dozen investors as part of a 78 billion yuan (HK$93 billion) deal in August. After the restructuring, the government remains the largest shareholder, while the hopes are on private company shareholders to improve the SOE’s corporate governance.

Sinochem, which employs more than 50,000 people in China, had an annual operating revenue of 395.5 billion yuan last year.