“In terms of international merger & acquisition, our objective is to acquire the company at a reasonable price and then try our best to manage and improve economic returns as well as expand our international influence,” Ren Jianxin said. Cooperation between BlueStar and Blackstone will set an example of integration between foreign capital and Chinese industry, Ren said, adding he considers the combination to be “the investment of a global leading private investment fund in China’s leading chemical company”.
On September 10 2007, the 23 year-old BlueStar Group embraced its first foreign cooperator.
On that day, ten days after its 23rd anniversary, China National BlueStar (Group) Co, Ltd (BlueStar), a wholly-owned subsidiary of ChemChina, ushered in overseas investment.
ChemChina and Blackstone Group announced a strategic cooperative partnership. Blackstone subscribed for BlueStar’s 20% shares by investing 600 million dollars. The project was submitted to related government sectors for approval, as support from the Ministry of Commerce and the SASAC are crucial.
On August 14, Su Shimin, president and CEO of Blackstone, officially met with Li Wei, the deputy director of SASAC, in Beijing. Li talked about cooperation between Blackstone and Chinese central companies. Su said Blackstone would like to cooperate with Chinese central companies in multiple ways in order to internationalize both sides.
When Li Rongrong, the director of SASAC was asked about the cooperation with Blackstone, he said the SASAC was positive toward the project.
1. “10,000 yuan & 0.2 yuan”
The deal attracted everyone due to the market’s special attention in the strategic investor—Blackstone. The first Forex investment of China Investment Corporation was in Blackstone at a total of 3 billion US dollars, while Blackstone planned to invest 600 million US dollars in a Chinese company, counting 20 percent of the total.
“BlueStar values Blackstone’s rich experience in the global chemical industry very much, especially its investment in Celanese Corporation and Nalco Company,” Ren said.
The person in charge of the cooperation with Blackstone, Zhang Kun, said: “BlueStar’s innovation capability and technology enable it to become a leading chemical company in China. We hope we can use our global network to speed up its growth both at home and abroad.”
Why does Blackstone think so highly of BlueStar?
Among many state-owned enterprises (SOEs) administered by the central government, China National Chemical Corporation, founded on May 9, 2004, is not the largest company. It was reorganized based on companies which belonged to the former Ministry of Chemical Industry.
The biggest shareholder, BlueStar, is different from most SOEs in terms of history and development.
BlueStar was established by Ren Jianxin and his seven young peers with a 10,000 yuan loan.
There are many stories about Ren, the founder of BlueStar and ChemChina, but the most famous one is the story of “10,000 yuan & 0.2 yuan”.
In 1984, 24-year-old Ren Jianxin assumed the position of Communist Youth League secretary at the Institute of Chemical Machinery. When he was attending a training class on the acid pickling process for scale removal technology, he stumbled upon the fact that the coal output of China increased by 8.5 million tons annually, with an increase of 17.5 million tons of wasted coal due to the boiler scale. At that time, cleaning technology in China was nonexistent.
Meanwhile, a pickling technology developed at the institute sold for 250 yuan.
He made up his mind to register the state-owned BlueStar Cleaning Company with seven peers, which later became BlueStar Group.
The original starting fund was 10,000 yuan which Ren borrowed from the Institute. He mortgaged all of his property and started his business in a bomb shelter. The first deal Ren conducted was cleaning a teapot on a Xining street, earning him his first income—0.2 yuan.
Later, his company began cleaning industrial equipment. In three months’ time, BlueStar gained a net profit of 240,000 yuan and paid off their 10,000 yuan loan.
In 1986, BlueStar successfully bid on Yangzi Petrochemical Company and contracted the 300,000-ton ethylene and 450,000-ton aromatic hydrocarbon equipment cleaning projects.
In 1987, it completed the cleaning project of Shanxi Fertilizer Plant’s 300,000 ton-synthetic ammonia equipment, which an international cleaning company failed to do seven times.
From then on, BlueStar undertook almost all cleaning projects of ethylene and chemical fertilizer equipment during the period of “the Seventh Five-Year Plan” and “the Ninth Five-Year Plan”. It began to enter the world stage.
At this critical time, Ren decided to move BlueStar’s headquarters to the Chinese capital of Beijing for better development opportunities. Soon, the Ministry of Chemical Industry approved BlueStar’s move to Beijing.
2. Mergers and acquisitions
After the relocation of ChemChina, Ren Jianxin started implementing a series of mergers and acquisitions.
The acquisition of Xinghuo Chemical Company’s organic silicone business in 1996 is a milestone of BlueStar’s development. Known as a high-tech material widely used in advanced technological fields, organic silicone has been the main source of BlueStar’s profits.
Xinghuo Chemical Company was deep in debt and forced to stop production. The 10,000-ton organic silicone unit, which was the only one in China, was quietly put away in a corner.
At that time Xinghuo had more assets than BlueStar. Many in the industry doubted the feasibility of BlueStar’s acquisition.
But Ren made up his mind to acquire Xinghuo. In order to make the acquisition successful, Ren bought several related foreign technical materials and asked about 100 experts for advice.
Four months after acquiring Xinghuo, the 10,000-ton organic silicone units passed test. BlueStar mastered the production technology of organic silicone and made a profit instead of suffering a loss in the second year.
Between 1996 and 2003, BlueStar merged and acquired 76 large and medium-sized stated-owned companies, such as Nantong Synthetic Material Company and Wuxi Petrochemical Company, involving assets of 17 billion yuan and 50,000 employees.
The mergers and acquisitions helped some companies out of the difficult financial situations and successfully transformed BlueStar into a chemical company focused on new chemical materials. Today BlueStar’s total assets and annual sales revenue are both worth 30 billion yuan.
3.Preparations for overseas acquisition
After expansion, Ren Jianxin had to accept the challenge of internal integration. He proposed the company to pay attention to “Five Work” principles with a focus on personnel and debt reduction.
In 2003, BlueStar divided and integrated its more than ten specialized companies into companies of new chemicals, petrochemicals and vehicle repair, cutting 44 percent of its work force. Ren’s wife was one of those laid off.
“Personnel and debt reduction are preparations for the internationalized operation and overseas acquisitions of ChemChina,” Ren said.
On May 9, 2004, China National Chemical Corporation (ChemChina) was established with the approval of the State Council through the reorganization of China National BlueStar (Group) Corporation, China National Haohua Chemical (Group) Corporation and other companies directly under the former Ministry of Chemical Industry.
Ren Jianxin took up the post of President in the newly-established ChemChina, providing an even bigger stage for the ambitious Ren.
Immediately after he took office, Ren announced that ChemChine woulde be a leading company with international competitiveness within three to five years. “Through construction of ten specialized companies and ten production plants, ChemChina strives to build itself into a World Top 500 with assets and sales revenue exceeding 100 billion yuan,” Ren said.
In the following year, ChemChina invested 10.6 billion yuan to conduct the reform of acquired companies, with 46 projects successfully set up. ChemChina's sales revenue amounted to 15.8 billion yuan with profits of 1.6 billion yuan, a sales ratio of 10%. A Three-year-long reform enabled ChemChina to become a capital tycoon in the domestic capital market, possessing the most listed companies.
4. ‘Bringing in and going out’
According to Ren Jianxin, ChemChina’s international operation sticks to the motto “bringing in and going out”, and actively participates in international cooperation and competition.
In 2006, BlueStar acquired Adisseo, the world’s second largest producer of methionine. Adisseo processes technologies to produce solid and liquid methionine. The deal was BlueStar’s first international acquisition and the first international acquisition in the chemical industry.
That same year, BlueStar acquired Qenos, the largest polyethylene producer in Australia with products occupying 70% of the local market.
On October 26, 2006, BlueStar acquired Rhodia’s organic silicone and sulfide business.
“As for international acquisition, to acquire the company at a reasonable price is just the beginning. More importantly, we must be able to manage the company well and make it perform well in business. To realize this, we have to improve the business performance of acquired companies in order to synergize with them and drive up our international popularity,” said Ren.
At the Hainan Boao International New Chemical Material Development Forum, Ren came up with a new meaning for “traditional chemicals, new materials”: develop harmoniously and not compete with upstream monopoly enterprises for resources, nor compete with downstream products for market share.
In May 2007—the third anniversary of the founding of ChemChina—Ren wrote an article featuring the following comments:
“Since last year, the capital market in China has been thriving, attracting investment from home and abroad. We will follow the guidance of the related government policy, striving to reform specialty companies, restructure ChemChina and make them listed companies. A key task in the future is to restructure ChemChina’s capital structure and organizational structure, through which management will be promoted. BlueStar is making efforts in terms of introducing investment into specialty companies and putting specialized business sectors on the market. We not only want to finance, but also aim to set up a new administration system with the help of various investors. With investors’ full support, we can do our utmost in business.”
The man behind the company
Ren Jianxin is a low-profile person. For about ten years, he seldom accepted interview requests, saying: “I believe one should always be prepared for danger in times of peace. Also, I hold one should do business without ballyhoo. This is because we are in a market full of competition while our company is still growing in its infancy.”
Highlights of Ren Jianxin’s career:
●In September 1984, Ren led seven peers with a 10,000 yuan loan to start China’s first professional cleaning company
●In 1996, with the support of the former Ministry of Chemical Industry, BlueStar moved to Beijing. It changed its previous development mode of “self-accumulation and self-development” to “Combination of Entity Management and Capital Operation”.
●In April 2000, BlueStar Group was transferred to the central government.
●In 2004, the State Council approved the set-up of China National Chemical Corporation and BlueStar became its subordinated specialized company.
●In 2005, BlueStar acquired the organic silicone and sulphide business of Adisseo France S.A.S and Rhodia.
BlueStar Philosophy
Everything is good for something.
Product quality is as important as people’s morality.
Keep an open mind, strive for excellence.
Serve the corporate world with loyalty.
Money is rewarded with recognition from society, for one’s diligence and intelligence.
Development comes before allocation.
A hedge between keeps friendship green.
The deepest disdain goes to those who forsake principle for profit.
Loyalty counts most.
Presence assures sales and diligence helps markets.
Detail is the Key of Success.
