After several years of rumors, the planned merger of Sinochem and ChemChina, two Chinese state-owned chemical conglomerates, has been confirmed.
Frank Ning, chairman of both companies since 2018, told journalists at a Sept. 2 news conference organized by the information office of the State Council, China’s cabinet, that the combination of the two companies is moving ahead. “The merger is highly necessary, and we will actively advance it,” he said.
Sinochem was established in 1950 and now employs nearly 60,000 people in diverse fields including energy, chemicals, finance, and real estate. Its sales last year were about $89 billion.
ChemChina, or China National Chemical Corp., has 148,000 employees in businesses such as specialty chemicals, refining, and chemical machinery. Its sales last year were $67 billion. ChemChina has been expanding aggressively overseas in recent years, acquiring the Swiss crop protection giant Syngenta and the Israeli generic agchem maker Adama.
In a prelude of sorts to the merger, in January the two Chinese firms merged their agchem businesses under the Syngenta umbrella.
Chinese news outlets quoted Ning as telling Sinochem’s annual meeting earlier this year that although China has become the world’s biggest manufacturer and consumer of chemicals, it has not developed a multinational chemical giant like BASF or Dow. Sinochem would like to play that role, he said.
Sun Chuanwang, an associate professor of energy economics at Xiamen University, praised the planned merger, saying it will enhance China’s competitiveness in high-end chemical markets. Combining the two firms is in keeping with ongoing reform of state-own enterprises, Sun notes. Since 2013, when Xi Jinxing became China’s president, the government has pushed mergers between large state-owned companies in the steel, rail, and shipbuilding industries.
But the combination of Sinochem and ChemChina may be more complicated. According to Caixin, a leading business magazine in China, one reason for the merger is to reduce ChemChina’s heavy debt burden, incurred during a spending spree that included the $43 billion purchase of Syngenta. Partly due to its non-chemical businesses like real estate, Sinochem is in better financial shape, the magazine said.