China National BlueStar (Group) Co, Ltd (BlueStar) and Rhodia signed the agreement on BlueStar's 100 percent acquisition of Rhodia's organic silicone and sulphide business in Beijing on October 26, 2006.
After the acquisition, BlueStar's production capacity of organic silicone monomers will increase to 42,000 tons per year to make it become the world's third biggest organic silicone monomers manufacturer. This acquisition is the second overseas acquisition of BlueStar after it acquired the world's second biggest methionine provider, Adisseo France S.A.S, on January 17, 2006.
Asian and Pacific regions boast an organic silicone market with the most rapid growth. International companies have considered Asian and Pacific regions, especially China, as their first choice for investment. After consideration, Rhodia has decided to increase investment and expand cooperation in China.
Because of the lack of world's advanced technology, China's organic silicone industry developed slowly, with 60 percent of the organic silicone needed in China relying on import. After BlueStar's merger of Jiangxi Xinghuo Chemical Company in 1996, BlueStar has made a breakthrough in organic silicone production technology by its own research and development. Now BlueStar's production capacity of organic silicone ranks sixth in the world after Rhodia.
In one year, BlueStar acquired Adisseo and Rhodia, which made BlueStar enter the top three producers of methionine and organic silicone in the world and symbolized that the Chinese companies began to take part in pricing the hi-tech chemical raw materials.
After the 100 percent acquisition of Rhodia, BlueStar further expanded its business of organic silicone production at home and optimized the industrial structure based on the output plan of 400,000 tons annually issued by National Development and Reform Commission. Meanwhile, Rhodia's deep processing technology, global marketing network, strong R & D capability and excellent management group enabled BlueStar to keep technology superiority and the competitive edge in the world.
First of all, the world production bases of organic silicone mainly focus in North America, West Europe and Japan and 81.2 percent of the global output belongs to six companies. China produces 330,000 tons per year, counting 12.6 percent of the global total amount. After the acquisition of Rhodia, China enhanced its production capability to 550,000 tons per year, making 21 percent of the global total amount. BlueStar now produces 420,000 tons per year and becomes the third largest producer of organic silicone in the world.
With the merger & acquisition within organic silicone industry, the industrial concentration ratio becomes higher than before. The present trend is: organic silicone monomer is the basic of organic silicone industry. The downstream products with high value-added is the most lucrative part with the biggest technological barrier in the whole industrial chain. BlueStar thinks highly of downstream enterprises with high technical know-how.
BlueStar New Chemicals Co will be greatly benefited in trial runs of new equipments, which will see stable improvement while keeps their original features. It is estimated that the BlueStar New Chemicals' output of methyl silicone monomers should be 150 thousand tons. After the new equipment is put into production, the scale effect of organic silicone production will be realized. And BlueStar New Chemicals Co's takeover of BlueStar's silicon briquette units meets the enlarged demand of silicon briquettes, sharply reducing the original production cost.
BlueStar has made its first step to be a listed company while BlueStar New Chemicals completes its product chains by absorbing Rhodia's organic silicone technologies. And Rhodia's international marketing network can help introduce products into the global market and accelerate the implementation of internationalization strategy.
Zhejiang Wynca Chemical Group Co is striving to strengthen its organic silicone sector. Wynca is a budding young enterprise with its total productivity of 80 thousand tons/year. Wynca uses methyl chloride, a by-product of agrochemical, as raw material, getting an upper hand in the market, winning great economic benefits and realizing recycling economy. Moreover, Wynca has taken part in the production of downstream deep-processed products, and had been capable of producing 20 thousand tons of high-temperature silastic annually. In addition, Wynca plans to issue 5000 specialty shares in a non-public way to raise capital, which will be all invested into the project of 100 thousand tons/year methyl silicone monomers production.
