ChemChina announced here Monday that Blackstone will make a strategic investment of US$600 million in Bluestar, the wholly-owned subsidiary of ChemChina, to take a 20-percent share in the chemical giant.
The announcement said that Bluestar would become a limited company with investment of foreign capital, allowing ChemChina and Blackstone will work together to develop Bluestar into a global leader in new material and chemical specialties.
Bluestar, China's leading new materials group, instructed all three of its listed companies on Thursday to suspend trading as the group company was "negotiating with related sides on important issues", and trading would not be resumed until these issues were clarified.
Market observers believe the "related sides" are Blackstone Group, since cooperation between the two sides has been widely talked about in the market since early June.
This is the first purchase of a stake in a Chinese mainland company by Blackstone. The last time Blackstone made big news in China was in June when China's state foreign exchange investment company bought three billion yuan worth of shares in Blackstone Group.
This move has put Bluestar on to the center stage in the market, with many analysts guessing and explaining why Blackstone chose Bluestar as its first target of acquisition in China.
Bluestar is a leader in China's cleaning engineering, water treatment and new materials industries, with both sales revenue and assets expected to reach 30 billion yuan (US$3.95 billion) in 2007. Currently it controls 25 factories and four R&D institutions at home and 15 factories and seven R&D and technological service institutions overseas.
Compared with other state-controlled big companies, Bluestar is quite young with a history of just 23 years. In 1984, its founder, Ren Jianxin, started the company with 10,000 yuan and "seven and a half people (one of whom was part time)", mainly producing a kind of anti-erosion detergent. In 10 years, it became the world's top cleaning engineering company in terms of scale, technologies and equipment.
In the field of cleaning engineering, Bluestar has made notable achievements: from the equipment of chemical plants and crude transmitting pipes to retired nuclear facilities, with quite a number of world records made over the past few years.
In water treatment, Bluestar has become the country's most important player with advanced membrane technologies. It has built more than 1,000 membrane water treatment projects throughout the country, with the latest being the "Bird Nest", the main stadium for the 2008 Beijing Olympic Games.
A landmark move in the company's history was taken in May 1997, when Bluestar entered the new materials field by acquiring Jiangxi Xinghuo Organic Silicon Factory. Now it is China's top and the world's third largest organic silicon producer with an annual output of 420,000 tons.
In addition, it is also the country's top producer of biethanol A, epoxies, PBT synthetic resins and some other new materials. It has intellectual property rights in a number of new material fields.
Over the past few years, Bluestar began to seek overseas acquisition. On January 17, 2006, it successfully purchased outright the world's second largest methionine producer, France's Adisseo, which has been the largest acquisition so far by a Chinese company in France.
On October 26, 2006, Bluestar acquired a stake in the silicones business of Rhodia Group to become the world's third largest organic silicon producer. It also bought Australia's largest ethylene producer and only polythene producer Qenos in April 2006.
"Overseas purchases have helped Bluestar to set up an international operating platform, on which Bluestar can develop with domestic advantages in low-cost raw materials and market potential, and overseas advantages in technologies," said Ren, now president of ChemChina Group.
Having obtained state-of-the-art patent technologies via these acquisitions and combined them with the domestic advantage of low-cost material, Bluestar plans to build at home a methionine factory so as to become the top producer in the world.
It also plans to build a silicon factory with an annual output capacity of 400,000 tons, which will bring Bluestar's total capacity of organic silicon to one million tons, jumping to second in the world.
Bluestar has been renowned as the most successful Chinese company in acquiring and operating European companies, especially after some of its peers bought into Europe and became trapped in operating difficulties there.
Ren attributed its overseas success to its unique corporate culture, which highlights the quality of managers, common view of value and communication between different national cultures.
Every time Bluestar acquired a foreign company, Ren would write letters to foreign senior managers and staff to introduce the history, development prospects, corporate value and other information about Bluestar, and announce the company's employment plans in a timely way, so as to increase the understanding and identity of the new staff.
"The key for fusing corporate cultures is to study and respect local cultures of the purchased companies," Ren said. "Every nation has its own unique culture, different cultures should complement each other to reach win-win results."
Now comes Blackstone, the first foreign investor that Bluestar will cooperate at home.
Xi Yuxin, spokesperson for Bluestar, said, "It's a good choice to cooperate with an overseas strategic investor when you want to improve management level and develop overseas markets."
(Xinhua News Agency September 11 2007)