Sinochem-ChemChina merger is approved

China’s State-owned Assets Supervision & Administration Commission (SASAC) has approved the long-planned merger of Sinochem and ChemChina. Partly to alleviate competition concerns, they will operate as separate subsidies of a newly created holding company owned by SASAC.

The combined entity will be by far the largest chemical producer in the world, with assets of about $245 billion. “This joint restructuring will create synergy, build up a world-class chemical company and promote a high-quality development of the chemical industry in China,” Sinochem said.

Speciality chemicals will be among its many operations, along with basic chemicals, materials, equipment and environmental sciences. Indeed, they have already been seeking to focus on higher value-added chemicals and materials in the last few years, notably by ChemChina acquiring Syngenta and combining the agricultural activities of both under it.

The high cost of this deal has piled debt onto ChemChina and domestic sales from it are yet to match expectations. Some in China have openly called it a mistake and there has been speculation that the combined firm will list it separately in order to cut its debts, while still keeping a majority stake.