The head of Chinese state-owned conglomerate Sinochem has firmly denied plans to merge with rival chemicals firm ChemChina, after reports of discussions unnerved investors betting that ChemChina will buy Swiss seeds and chemicals maker Syngenta.
In response to a question of whether Sinochem planned to buy ChemChina, Ning Gaoning, known to international investors as Frank Ning, told a forum in Hong Kong: “No, this rumour is very old.”
In October, the Financial Times and other news outlets reported that the two firms were in discussions for a merger, in line with an effort by the State Assets Supervision and Administration Commission (SASAC) to streamline the number of state-owned firms controlled by the central government.
The reports added to the uncertainties around ChemChina’s $44bn bid for Syngenta, as a successful merger of the two Chinese giants would have changed ChemChina’s ownership after the deal had cleared Washington’s Committee on Foreign Investment (CFIUS) review process. Chinese reports have also questioned ChemChina’s financing for the acquisition, although ChemChina, which has bridge loans in place, has told investors it will tap its own cash and government sources to help pay for the deal.
ChemChina this month submitted remedies to European anti-competition regulators, who must weigh its bid in the context of two other megamergers: Bayer’s $56bn bid for Monsanto and Dow Chemical’s $130bn plan to merge with Dupont. They will together shrink the number of multinational seeds and agri-chemicals firms from six to three.
Syngenta shares were up 0.5 per cent on Monday afternoon, to SFr421, their highest level since ChemChina’s refusal to submit concessions to European competition authorities raised fears the deal would be delayed in October.
Meanwhile in China, a series of mergers of state-owned agribusinesses in the past six months has created three national champions, clearly separating the functions of trading, reserves, or seeds and chemicals in a throwback to the state-planning era.
In July Cofco, the state grains trader turned food conglomerate that Mr Ning once headed, absorbed Chinatex, originally formed to import cotton on behalf of Chinese textile mills.
That deal was followed late last week by a merger of China National Cotton Reserves Corp. with China Grain Reserves Corp., or Sinograin, uniting two financially troubled but politically powerful relics of the state reserves system with combined assets of RMB1.47tn ($213bn).