Chinese giants Sinochem Group and ChemChina in merger talks

Sinochem Group and China National Chemicals Corp (ChemChina) are in talks on a possible merger to create a chemical, fertilizer and oil company with annual revenue of nearly $100 billion, Reuters today reported, citing three sources familiar with the matter.

Top management of both companies held a meeting earlier this week to discuss a potential merger, the report said.

The deal has been proposed by the Chinese central government as part of its plan to reduce the number of state-owned companies and create larger, globally more competitive businesses, the report added.

The move comes amid regulators reviewing ChemChina's proposed $43-billion acquisition of Swiss pesticides and seed group Syngenta.

The mega deal has already been approved by US regulators (See: US approves $43-bn ChemChina-Syngenta deal), while European antitrust regulators are scrutinizing the deal to see whether it would have any effect on the crop-protection chemicals industry since ChemChina holds a majority stake in Adama, a large insecticide and weedkiller supplier in the region along with Syngenta and Dow Chemical Co.

Beijing-based ChemChina was created in 2005 by putting together several chemical firms under China's erstwhile ministry of chemical industry and grew into a $36.5-billion business with 140,000 employees under chief executive Aye Ren Jianxin, a former communist youth league leader.

The company's main businesses include materials science, life science, high-end manufacturing and basic chemicals, among others.

ChemChina, whose recent overseas acquisitions include Italian tyre maker Pirelli & C. SpA, German machinery maker KraussMaffei Groupa, and a 12 per cent stake in Swiss commodity trader Mercuria Energy Group.

Its earlier purchases include Adisseo Group of France, Australia's Qenos Holdings and Norway's Elkem.

The company has invested more than $15 billion in overseas deals in the past decade prior to Syngenta, however, it is still overshadowed by state-owned behemoths Sinopec Corp and PetroChina Co Ltd.

Founded in 1950, Sinochem's core business spans energy, agriculture, chemicals, real estate and financial service.

It is one of China's four state oil companies, China's biggest agricultural company - dealing in fertilizer, seed and agrochemicals, and the country's leading chemical company.

It also is in real estate and non-banking financial service sector.

The Beijing-based company has more than 300 subsidiaries inside and outside China and controls several listed companies including Sinochem International, Sinofert and Franshion Properties.

Sinochem has over 50,000 employees and has annual turnover of $60.45 billion.