Henan Billions to be the first global TiO2 giant in China

With its funds in place for the acquisition of Sichuan Loman, Henan Billions is expected to be the first global TiO₂ giant, according to analyst, CCM.

In late September, Henan Billions Chemicals Co Ltd announced that a sum of US$1.34bn 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 materially.

In order to maintain the ‘stock corporation’ of Sichuan Lomon, Henan Billions plans to:

1. Input about US$1.34bn in acquiring 1.20bn shares (99.99% of the total) of Sichuan Lomon. Specifically, US$537.25M will be paid to Li Jiaquan, President of Sichuan Lomon Corporation for 480M shares, US$360.82M to Lomon Corporation for 322.36M shares and US$444.93M to Tibet Lomon Investment Co Ltd for 397.52M shares.

2. Use about US$134,310 to increase capital in its fully-owned subsidiary Jiaozuo Xintai Resource Comprehensive Use Co Ltd. Then Xintai Resource will use this fund to acquire 120,000 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 added.

Henan Billions sees in Sichuan Lomon’s good performance in TiO₂ industry

In 2015 when the domestic TiO₂ business fell into an historic trough, Sichuan Lomon still made a net profit of US$94.32M million, far beyond the US$16.57M of Henan Billions.

However, Henan Billions still maintained its leading role compared to most TiO₂ manufacturers in China, such as CNNC Hua Yuan Titanium Dioxide Co Ltd and Anhui Annada Titanium Industry Co Ltd; which made net losses of US$18.80M and US$20.59M respectively.

This year, 2016, has seen 10 rounds of rises in TiO₂ prices. This certainly is good for Sichuan Lomon to make more profits.

On 14 September 14, Henan Billions and Sichuan Lomon announced rutile TiO₂ price hikes: +US$74.87/t for domestic clients and +US$50/t for foreign ones.

Prior to this, in early September, key manufacturers, such as Shandong Doguide Group Co Ltd, 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 US$673.81/t, up by nearly 50% compared to early 2016.

"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 the acquisition of Sichuan Lomon,” stated Dean.

In May 2015, when Henan Billions officially announced they were to acquire Sichuan Lomon, the latter even made promises regarding its financial performance: it predicted it would make a net profit of US$104.47M in 2015, US$134.31M in 2016, and US$164.16M in 2017.

If there were discrepancies, the company said, they would be made up by original shareholders.

In 2015, Henan Billions received USD10.14M 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 a leading market intelligence provider for China¹s 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 customised market research reports. Its clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. If you want to know more about TiO₂ market in China, you can search in CCM Online Platform for more information.

For more information about CCM, please visit www.cnchemicals.com or get in touch with them directly by emailing econtact@cnchemicals.com or calling +86-20-37616606.