Leading plastics maker Qenos sold to Chinese

MELBOURNE - China National Chemical Corp (ChemChina) has agreed to take over Qenos, Australia's top plastics maker, from Orica and Exxon Mobil, in a sale Orica had hoped would fetch more than US$230 million.

State-owned ChemChina bought the company from Australia's Orica, the world's biggest maker of commercial explosives, and Exxon, the world's largest listed oil company, for an undisclosed sum, Orica said.

This is the second overseas acquisition by Beijing-based ChemChina in two weeks. Earlier this month, it signed a deal to take over Belgian animal feed producer Drakkar Holdings from funds advised by private equity investor CVC Capital Partners, also for an undisclosed sum.

Chinese state-run companies are growing bolder in overseas acquisitions due to stronger balance sheets, thanks to years of fast economic growth in the country.

ChemChina, created last year through a Government-directed merger of two Chinese chemical firms, has yet to prove its ability to run Qenos and Drakkar successfully, analysts said.

Drakkar owns the Adisseo Group, an international animal nutrition producer, which generated a turnover of 500 million ($862 million) in 2004. It has production facilities in France, Spain and the United States and 1360 employees.

"The stuff they are buying does not have a whole bunch of synergy with what they have already got," said a banker at an international investment bank, which is not involved in the transactions but familiar with ChemChina.

"If the guy like Exxon can't turn it (Qenos) around with their technology and their people, it is going to be a challenge for ChemChina," the banker said.

Qenos, Australia's only maker of polyethylene plastics, was put up for sale last year by its joint-venture owners after the business recovered from a three-year slump, battered by low polyethylene prices and poor operations.

It has 850 employees and has an annual capacity to produce about 500,000 tonnes ethylene, a basic building block for plastics, and 50,000 tonnes of propylene.

Orica said it would recognise an after-tax loss of A$34 million on the long-awaited sale.

- REUTERS