From seven employees to a staff of 150,000, 10,000 yuan in assets to 100 billion yuan, 0.2 yuan in sales revenue to 100 billion yuan—all these figures deliver a message that BlueStar has created a phenomenon in China's chemical industry.
Twenty-three years ago, a 26-year-old led his seven peers to sit on a hillside near a mine in northwest China. Looking at the sky, they shared their happiness of their first successful business. Upon seeing the miners' lamps around the hill, twinkling like stars, they made up their minds to build their company into a nation-wide and world-class enterprise, known by all in the chemical industry.
Thirteen years ago, the young man expanded his business and moved the headquarters to Beijing, capital city of China—a big breakthrough for his company. From then on, he successfully led his staff to enlarge the company scale by merging and acquiring 107 bankrupted and almost-bankrupted state-owned enterprises.
Three years ago, he assumed the task of establishing China National Chemical Corporation, the last state-owned enterprise (SOE) administered by the central government of China. Facing both opportunities and challenges, he kept an open mind and began an aggressive cross-border merger & acquisition of international well-known corporations. Adisseo France S.A.S, Rhodia and Qenos (Australia) Pty Ltd were all acquired by China National Chemical Corporation.
This young man, the founder of BlueStar Group and current general manager of China National Chemical Corporation, is Ren Jianxin.
Overseas operation legend in the making
The morning of April 20, 2006:
Ren Jianxin was on a Canberra to Beijing flight full of excitement. He was on his way back from the signing ceremony of acquiring Qenos (Australia) Pty Ltd. Five hours later, he walked out of Beijing Capital International Airport and rushed to the China Chemical Building, where China National Chemical Corporation is located.
Cultural integration and synergy effects
Ren Jianxin, President of ChemChina, started business on 10,000 yuan loan, and established ChemChina, a large state-owned enterprise with assets worth about 100 billion yuan. The past decade has witnessed his successful mergers and restructurings of 107 state-owned enterprises facing difficulties. Now Ren is working on implementing a series of overseas acquisitions.
Qenos (Australia) Pty Ltd, the biggest ethylene manufacturer in Australia, was recently acquired by Ren. Just three months before that, Ren completed the acquisition of Adisseo France S.A.S, the biggest methionine supplier in France and second biggest in the world. And within half year after his acquisition of Qenos, Ren, together with his team, successfully acquired Rhodia's organic silicone and sulphide business. All the overseas acquisitions are worth100 percent of shares.
These series of mergers and acquisitions have attracted the attention of the international media and the chemical industry.
According to his team, Ren values the acquisition strategy of cultural integration and synergy effects and believes values and enthusiasm are instilled when merged companies are influenced by corporate culture. The sales revenue and profit of BlueStar's four overseas subsidiaries all broke a record in 2006.
"International acquisition is not only a business activity, but is also about communication and cultural integration," Ren said in an issue of company magazine. He emphasized that acquisition is the cooperation between people with the same values to expand industry and share market opportunities. "To learn and respect the culture of the country where the enterprise is located is the key of corporate cultural integration," said Ren.
BlueStar always considers corporate culture as its core competitiveness, and spreads the corporate culture to its overseas subsidiaries. BlueStar's spokesman Xi Yuxin said, Ren often writes letters to the senior executives and staff of overseas subsidiaries to increase their understandings of corporate culture, development prospects and personnel plans. Meanwhile, through staff seminars, investigations and the English-language company newspaper, Ren displays the traditional Chinese culture and BlueStar's charm to his overseas staff. As a result, staff members of the overseas companies become appreciative of the corporate culture.
The acquisition of Adisseo France S.A.S was the first successful case of cultural integration and synergy effects.
Adisseo France S.A.S is the world's second biggest methionine company with global market share of 29%. As a widely used major nutritional additive for animals, methnionine plays a vital role in china with a market demand of at least 10,000 tons per year. But due to the lack of related technology, the manufacture of methnionine has been a challenge in China's chemical industry for years.
Ren realized the importance of methnionine manufacture, and started to plan the introduction of technology and establishment of a joint venture. As an outstanding methnionine company, Adisseo France S.A.S boasted advanced technology and an excellent management team and staff, which was needed in China's chemical industry. Ren thought the 100 percent acquisition of Adisseo meant mutual benefits, bringing cost reduction and market expansion to both BlueStar and Adisseo.
Ren contacted Adisseo senior management to illustrate the prospects of an acquisition. Through constant contact and communication, Ren became friends with the management and developed a mutual respect.
Gradually, Adisseo management were moved and impressed by Ren. Both sides started several rounds of negotiation, and finally, at an Adisseo shareholders conference, an acquisition agreement was reached. Adisseo said they believed the Chinese company would bring them into a brighter future.
At the Qenos acquisition ceremony, Ren gave out commemorative stamp albums to Qenos staff members, which were tailor-made for them.
Some may consider acquisitions extremely complicated, but Ren handles them smoothly.
In his acquisition report, Ren concluded: "In the art of management, to manage people is the first step, which highlights the importance of cooperation with the administration and supervision authorities. BlueStar paid much attention to the management personnel of the acquired company from the beginning. We need people who have similar value orientation with us. Therefore, an important issue in the negotiation is to continue employing outstanding management personnel who have similar value orientation with us."
Competing with international brands
Behind a series of successful merger & acquisitions, many are unaware that Ren Jianxin competed with some international brands 20 years ago.
At that time, BlueStar had gained a reputation in the chemical industry through Ren's hard work, especially after BlueStar completed the cleaning process of various big equipment. However, most domestic factories and companies lacked a sense of the cleaning process and preferred turning to international brands. When faced with the situation, Ren made up his mind to compete with those international brands and show BlueStar's professional capability.
In 1986, an opportunity arose. When the 300,000 ton-level ammonia equipment of Shanxi Chemical Fertilizer Company needed system cleaning, its cooperator, a German cleaning company, was unavailable to help for a few months. Upon learning this, Ren led his elite team, and rushed to Shanxi, which surprised the deputy minister of the Chemical Industry Ministry at that time, Pan Liansheng. BlueStar completed the task successfully in 10 days' time at one tenth of the German company's price. Even the German rating professor could not believe the rust cleaning rate reached 100 percent and wrote "ok" on the pipeline.
Ren was elated and gained more confidence in BlueStar and himself after successfully completing this task. He was also clear about BlueStar's advantage of excellent technology as well as low cost. At that time, BlueStar gained "Blue 5" and "Blue 826" national patents of cleaning technology. Ren hoped to improve BlueStar's technological system through international communication and cooperation, targeting Japan and Germany, which were strong in the cleaning technology field.
In 1989, Ren visited Japan and established a friendship with the BC Industrial Cleaning Company. At that time, BC had sales revenue of 60 billion yen, which was 500 million yuan more than that of BlueStar. Ren later sent several technical and operational staff to Japan every six months to learn advanced technical know-how and management experience. Due to open-minded learning and communication, BlueStar achieved great strides in cleaning development.
Based on this, a Japanese professor recommended BlueStar to provide cleaning services for the Yangzi Petrochemical Company. This time, BlueStar defeated foreign competitors with one tenth of the competitor's price in 10 days less than before, which became a milestone in BlueStar's cleaning service history.
Since then, BlueStar has become No 1 in the cleaning service field. Former vice general manager and professor of Beijing University of Chemical Technology Liu Xianqiu recalled, "BlueStar changed the foreign companies' monopoly situation in China's cleaning industry."
Central enterprises' perfect competition strategy
BlueStar has been successful in several international acquisitions, which has captured attention from the theoretical circle.
The following is an interview with Ren Jianxin and an expert from the theoretical circle.
Expert: It is said that ChemChina is operated in a different style from state-owned companies. Do you have any comments on that?
Ren Jianxin: But ChemChina is a state-owned company. As for the saying you quote, I think the reason may be that we are more likely working for ourselves. Take BlueStar for example. Lanzhou Chemical and Machinery Co (later renamed BlueStar) was small 20 years ago, which is totally a part of ChemChina today. We only had 10 thousand yuan when the business was set up. We struggled and strived step by step to be who we are today. That's why we set our core value as "efforts achieve anything".
Expert: In China, some large-scale central enterprises monopolize in some fields. But you said ChemChina is an enterprise that lives on competition. Why?
Ren: The market economy was born to be full of competition. ChemChina lives on competition. We grow and thrive by competing in the market. It is said that the whole society of China is competing for a higher status; that's right. In my opinion, a company should independently compete to find a place in the market rather than relying on the government. Only independent competitors can win the game.
Take ChemChina for instance. ChemChina was born against the background of China's entry into the WTO. The establishment of ChemChina aimed to seize opportunities and meet challenges brought by the WTO market. Economic globalization means a violent storm of competition, in which only competent companies can live and grow. We don't like to compete but we have to. Competition means only the fittest survive. It is also a way to optimize resources in the market and realize maximum profit.
Expert: What has ChemChina done for those international acquisitions?
Ren: Long before, I suggested focusing on "five tasks": staff reduction, liabilities reduction, reform, development, and internationalized operation. Staff and liabilities reduction is to revitalize assets of some old chemical enterprises that we took over and restructure the liabilities structure. Reform and development are aimed at setting up a management and operation system of modern enterprises, which is to modify equipment and enlarge the original scale of plants to gain an advantage in the development of new chemical materials. The basis of internationalized operation is to stick to the motto of "bringing in and going out" and participate in international cooperation and competition. The "five tasks" are an integrated whole. Staff and liabilities reduction, reform and development are preparations for ChemChina's international acquisitions.
Expert: In your opinion, what is ChemChina's advantage in international acquisition? What has ChemChina learned?
Ren: As for international acquisition, to acquire a 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 international popularity. I maintain that a win-win solution is critical for international acquisition. The Western chemical industry system is mature, and the only way to maintain sustainable development is to enter the market of developing countries. Here, China is their best choice.
Host: How are the four overseas chemical enterprises acquired by ChemChina doing now?
Ren Jianxin: Through international acquisition, ChemChina obtained a whole set of methionine production technologies which was a non-existent field in China. ChemChina acquired the largest ethylene and polyethylene production resources at a comparatively low cost. International acquisition enabled ChemChina to rank third in the world in terms of domestic methyl silicone monomers productivity. The acquisition of Rhodia's organic silicone business enables us to explore a new field of deep-processed downstream organic silicone products. Also, thanks to international acquisition, the technology of producing high water-absorption fibers was introduced into China.
Many efforts have been made in terms of corporate culture communication, operational structure optimization, motivating administrative authorities, transferring high-class authorities to overseas companies, and market synergy. Through resource consolidation, they have laid the first stone for further development. According to the latest statistics, the total sales revenue of the four companies we acquired in 2006 was 14.7 billion yuan with total profits of 740 million yuan. It is estimated that both figures should increase by over 15% this year.
