Henan Billions announced that USD1.34
billion for acquisition of Sichuan Lomon was in place in late Sept. 2016, and
that it would materially proceed the acquisition based on the sum. With the acquisition
funds being in place, Henan Billions is expected to become the first global TiO2 giant in China, according to analyst CCM.
Source: Bing
Acquisition
funds of Henan Billions is in place
In late Sept. 2016, Henan Billions Chemicals Co., Ltd. (Henan Billions)
announced that a sum of USD1.34 billion aimed at being raised in the 2015
private placement, was in place, and that the fund would be used to proceed the
acquisition of Sichuan Lomon Titanium Co., Ltd. (Sichuan Lomon) materially.
In order to maintain the “stock corporation” of Sichuan Lomon, Henan
Billions plans to:
1. Input about USD1.34 billion in acquiring
1.20 billion shares (= 99.99% of the total) of Sichuan Lomon. Specifically,
USD537.25 million will be paid to Li Jiaquan, president of Sichuan Lomon
Corporation (Lomon Corporation) for 480 million shares, USD360.82 million to
Lomon Corporation for 322.36 million shares and USD444.93 million to Tibet
Lomon Investment Co., Ltd. for 397.52 million shares.
2. Use about USD134.31 thousand to increase capital in its fully-owned
subsidiary Jiaozuo Xintai Resource Comprehensive Use Co., Ltd. (Xintai
Resource). Then Xintai Resource will use this fund to acquire 120 thousand
shares (= 0.01% of the total) from Lomon Corporation. Reportedly they have
already signed supplement agreements accordingly.
From this acquisition, Henan Billions will directly hold 99.99% of shares in
Sichuan Lomon, and via its Xintai Resource, will indirectly hold the rest 0.01%
stake. That is to say, Sichuan Lomon will become a stock corporation controlled
jointly by Henan Billions and its subsidiary.
“In light of Sichuan Lomon’s profitability
which is second to none in China’s TiO2 industry, Henan Billions, following the
full receipt of fund, will accelerate its acquisition,” stated Dean Wu, editor
of Titanium Dioxide China Monthly Report, CCM.
“Evidently, Sichuan Lomon’s excellent
financial performance will contribute largely to Henan Billions’ combined
figures,” Dean said.
Henan
Billions sees in Sichuan Lomon’s good performance in TiO2 industry
In 2015 when domestic TiO2 business fell
into historic trough, Sichuan Lomon still made net profit of USD94.32 million,
far beyond USD16.57 million of Henan Billions.
However, Henan Billions still maintained
its leading role compared to most of TiO2 manufacturers in China, such as CNNC
Hua Yuan Titanium Dioxide Co., Ltd. and Anhui Annada Titanium Industry Co.,
Ltd. which made net loss of USD18.80 million and USD20.59 million respectively.
This year, 2016, saw 10-round price rises in TiO2 price. This certainly is good
for Sichuan Lomon to make more profits.
On 14 Sept., 2016, Henan Billions and Sichuan
Lomon announced rutile TiO2 price hikes: +USD74.87/t for domestic clients and
+USD50/t for foreign ones. This signals the 10th round of price rises in China
this year.
Prior to this, in early Sept., key
manufacturers, such as Shandong Doguide Group Co., Ltd. (Shandong Doguide),
Jilin GPRO Titanium Industry Co., Ltd. and Jinan Yuxing Chemical Co., Ltd., had
already raised their prices.
Following this, the price of rutile TiO2
now stands at USD673.81/t, up by nearly 50% over early 2016.
Ex-works
price of rutile TiO2 in China, Sept. 2015-Sept. 2016
Source:
CCM
“That’s to say, if Henan Billions speeds up
the acquisition even one minute earlier, it will have more positive financial
figures in its consolidated financial statements. Remarkable financial data and
high profits, undoubtedly, are short-run results strongly expected by Henan
Billions from this acquisition,” said Dean.
Acquisition
is beneficial to TiO2 industry in China
In view of market competitiveness, the pros
of this acquisition will outweigh the cons provided the acquisition is finished
as early as possible.
An unshakeable TiO2 “monolith” will have
been forged in China following the merger of Henan Billions and Sichuan Lomon.
Particularly against the backdrop of the continually increasing TiO2 price,
having the absolute say on price is of course of great importance.
Moreover, Sichuan Lomon’s advantage in
terms of minerals resources will be made use of to a larger extent, even if
both companies choose to maintain independent business operations at first
following the acquisition. Both enterprises will also be able to complement
each other in terms of technological resources and sales channels.
“Take a step back, even if China’s TiO2 business does not maintain its upturn
in 2017, and prices decline significantly, Henan Billions will have no need to
take the risks brought by acquisition of Sichuan Lomon,” stated Dean.
In May 2015, when Henan Billions officially
announced they were to acquire Sichuan Lomon, the latter ever made promises
regarding its financial performance: it predicted it would make a net profit of
USD104.47million in 2015, USD134.31 million in 2016, and USD164.16 million in
2017.
If there were discrepancies, the company
said, they would be made up by original shareholders.
In 2015, Henan Billions received USD10.14
million in compensation from Sichuan Lomon, which was then used by Henan
Billions to supplement the working capital of Sichuan Lomon.
“It is believed that Henan Billions will spare
no efforts to speed up the acquisition because it is for sure the biggest
gainer in this acquisition,” Dean added.
About CCM:
CCM is the
leading market intelligence provider for China’s agriculture, chemicals, food
& ingredients and life science markets. Founded in 2001, CCM offers a
range of data and content solutions, from price and trade data to industry
newsletters and customized market research reports. Our clients include Monsanto,
DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc.
For more
information about CCM, please visit www.cnchemicals.com or get in touch with us
directly by emailing econtact@cnchemicals.com or calling
+86-20-37616606.