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chinadaily:ChemChina: Integration key to successful overseas M&A
来源: chinadaily 时间: 2017-01-17

In late October, in the lobby of China National Chemical Corp’s Beijing headquarters, a famous French song Les Champs-Elysees was sung in chorus as part of the company’s French Month,
themed “Starting from France,Our Ten-year Journey”.

The activity commemorated the company, also known as ChemChina, beginning its international merger and acquisition initiative.

In 2006, Adisseo, a global animal nutrition company based in France, joined ChemChina as its first overseas subsidiary.

The decade since that point has answered any doubts about the company’s pioneering move.Such uncertainty regarding a State-owned company’s overseas M&A activity usually focuses
both on its intention — whether it is a politically or economically driven — and its ability to run an overseas company.

As of 2016, ChemChina’s accumulative capital investment and research and development investment in France, where Adisseo is based, had reached 300 million euros ($319 million) and 380 million euros respectively.The company has provided nearly 2,000 jobs for local people.

Adisseo’s sales revenue increased from 500 million euros in 2005 to 1.76 billion euros in 2015, its profits increasing tenfold in that period.

Adisseo’s methionine production has a global market share of 29 percent, the second-highest.It was listed on the Shanghai Stock Exchange last year, becoming the first overseas business
acquired by a Chinese company to list on the Chinese market.After its listing, Adisseo’s market value reached 50 billion yuan($7.2 billion), increasing its value 12.5 times from the point
of acquisition.

These numbers proved that the chorus has been performed both in terms of corporate culture and commercial progress within ChemChina.

Strong expansion

“Good achievements result from deep integration,” said ChemChina Chairman Ren Jianxin.

ChemChina identified its overseas companies as the main method to consolidate and overhaul its existing domestic business segments, and to embed sophisticated business models and effective incentive systems into its domestic companies.

A host of international companies have joined ChemChina following Adisseo, including Rhodia’s silicon business in France, Australia’s Qenos,Elkem from Norway, Adama from Israel, REC Solar from Norway,Italy’s Pirelli and German KraussMaffei.

Overseas companies contributed 67.6 percent of the Chem-China’s revenue last year while overseas employees accounted for one third of the total. Some 14 languages are spoken throughout the company.

The integration of ChemChina’s fertilizer companies led by Adama has been completed,while that of the silicone value chain led by Elkem has been preliminarily completed.

Adisseo has finished its industrial layout in China and Qenos’ safety, health and environmental systems have been promoted within ChemChina companies.

In the next step, Pirelli and KraussMaffei are moving to lead the integration of Chem-China’s rubber and tire segments,and equipment segments.

Such moves could be regarded as a self-led revolution or rebirth. But ChemChina’s management has vowed to focus on integration, believing that business transformation and industrial restructuring with the help of its overseas businesses is the key to addressing the problem of overcapacity and the need for industrial upgrading.

China National Agrochemical Corp, a strategic business unit under ChemChina, started to integrate its four fertilizer companies with Adama’s crop protection brand and platform in 2015.

Ziki Levavi, who has been working at Adama for 26 years,led the integration. He moved to Beijing with his family and has traveled China, paying visits to large distributors in large
cities and retail stores in small towns.

This market-oriented integration enables product resources, customer resources and the sales force to gradually break through the former brands and regional boundaries
to achieve integration under the Adama brand.

As an important part of the integration, 153 sales personnel from the four companies have joined Adama (China).

Despite a decline in the global pesticide market, these four companies achieved a year-onyear sales increase of 11 percent in the first three quarters last year.
It is a motto of ChemChina Chairman Ren Jianxin that M&A is not about conquering,but rather achieving the maximum degree of integration and synergy.

His interpretation reflects his corporate culture and echoes the viewpoint of Marco Tronchetti Provera, former chairman and now executive vice-chairman and CEO of Pirelli. ChemChina acquired the iconic Italian tire maker in 2015.

In March 2016, Giovanni Pomati, CEO at Pirelli Industrial Asia Pacific, was named chief of the Italian side of the integration project and CEO of Aeolus Tyre, a tire company owned by China National Tire and Rubber, ChemChina’s strategic business unit in the rubber and tire sector. Aeolus Tyre combined its assets with Pirelli’s, while the latter spun off its 10 percent of industrial tire equity and merged it with Aeolus Tyre. “Both sides are looking for complementary
advantages in order to achieve maximum synergy,” Pomati said.

These advantages include Pirelli helping Aeolus Tyre to penetrate the North American market by building a complementary global sales network.A sales team will be set up to promote one-stop services for customers.

Domestic and overseas suppliers will coordinate to reduce the purchasing cost of raw materials for domestic companies and Pirelli.

Experts from Pirelli examine the facilities at Qingdao Yellow Sea Rubber. PHOTOS PROVIDED TO CHINA DAILY

A similar situation unfolded between ChemChina and KraussMaffei Group, one of Germany’s largest machinery suppliers. “This integration is new to both of us. It is a twoway program: KraussMaffei is incorporated into CNCE and CNCE’s plants are incorporated into KraussMaffei.

China National Chemical Equipment CEO Cai Ting said the ultimate goal is to increase the scale and to match the best elements of Chinese and German manufacturing. CNCE is ChemChina’s strategic business unit in chemical equipment manufacturing.

The integration efforts are based on nine workflows, four business segments workflows and five functional workflows, which include 37 projects.

Technicians from KraussMaffei Group discuss problems at Sino Rubber Machinery under ChemChina in Fujian province.

Due to time differences,the team works according to Beijing time before 3 pm,and after that the team works according to German time.

“This is a once in a lifetime opportunity for all of us. It’s not one person’s story, it’s a success story written by all of us and we therefore are all ambassadors of its success. We will get through the process and share the results as a family,”said CEO of the KraussMaffei Group Frank Stieler.

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Global vision

The “going out” strategy that China National Chemical Corp, also known as ChemChina,has consistently adhered to over the past decade has played a key role in the company’s rapid development and helped it to reap rich dividends in terms of revenue and technological development.In 2006, ChemChina began its overseas mergers and acquisitions program, starting with the purchase of Adisseo in France, followed by Qenos in Australia, BSI in France, Elkem in Norway, Adama in Israel,REC Solar in Norway, Pirelli in Italy and KraussMaffei in Germany.The combined assets of these overseas companies accounted for 46 percent of ChemChina’s total in 2015, and their sales revenues accounted for 55 percent of ChemChina’s total. The M&A projects also helped ChemChina solve many technological problems, enabling it to make huge technical progress in the fields of methionine, organic silicon and carbon fiber. The acquisition by Chinese companies of such internationally famous brands as Pirelli and KraussMaffei has also injected new vitality into the country’s national manufacturing strategy, Made in China 2025.

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