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Mainland oil trader Sinochem Corp will, by next month at the latest, have its fertilizer assets listed in Hong Kong.
It plans to do this by selling the major business to listed Sinochem Hong Kong Holdings (Sinochem HK) for HK$5.05 billion (US$641 million) in a reverse takeover, a source close to the deal said.
The mainland State-controlled company will sell the assets to the Hong Kong-listed Sinochem in exchange for new shares, gaining a controlling stake in the listed company, according to a Sinochem HK announcement released last month.
A road show for the newly issued shares will begin this month or August, the source said.
Sinochem Corp yesterday declined to comment.
Sinochem will control 94.6 per cent of the enlarged issued share capital of the Hong Kong-listed company following the completion of the deal, compared with the current 21.1 per cent, the Sinopec HK announcement said.
To ensure compliance with the 25 per cent minimum public float requirement under the listing rules of acquisition at the Hong Kong stock exchange, the Sinochem Corp and Sinochem HK are considering an offering structure involving existing and new shares to a strategic investor Potash Corporation of Saskatchewan Inc plus qualifying shareholders and professional, institutional and other investors.
Upon completion of the acquisition and the offering, the company said it will publicly float around 34 per cent of its total issued ordinary share capital.
Sinochem plans to use approximately 50 per cent of the net proceeds from the offerings to enhance the fertilizer group's upstream manufacturing facilities.
It plans to use 30 per cent of the proceeds to expand the division group's distribution network. The rest of the money will be used for working capital and other general corporate purposes.
"After the acquisition, Sinochem HK will become the leading listed overseas vehicle for Sinochem Corporation, a Fortune Global 500 enterprise," Sinochem said in the announcement.
And as a leading vertically integrated fertilizer enterprise, the group will also be well positioned to take advantage of the growth potential of China's fertilizer industry, it said.
"It is our goal to build up a new Sinochem in five years' time and continue to stride towards the position of being a great company with world influence," said President Liu Deshu, according to a recent speech on the company's website.
Sinochem offers a comprehensive range of fertilizers and agricultural-related products.
It is the largest importer of fertilizer products in China in terms of import volume, company sources said.
The fertilizer business division of Sinochem turned over 12.6 billion yuan (US$1.5 billion) last year, up 20 per cent from 2003. Net profit grew 30 per cent year-on-year, to 543 million yuan (US$65 million) for the same period.
Sinochem HK is a wholly-owned subsidiary of Sinochem Corporation, one of the largest State-owned enterprises in China, with global operations in the petroleum refining, chemicals and fertilizer industries.
Shares of Sinochem HK yesterday fell 5.6 per cent to HK$0.151 (1.9 US cents) in Hong Kong.
(China Daily July 6, 2005)
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