Chinese independent refiner and petrochemicals producer Hengli Petrochemical has agreed to restructuring deals worth a total of up to $1.89 billion for its subsidiary Kanghui New Material Technology, filings showed on Monday.
Under the restructuring, Kanghui will effectively become a separately listed company via transactions involving power and heating firm Dalian Thermal Power, which will buy 100% of Kanghui for 10.15 billion yuan ($1.39 billion) in shares.
This will optimize Kanghui’s structure and expand its funding channels, Hengli said in a filing to the Shanghai Stock Exchange. Hengli also said it will become indirect controlling shareholder of Kanghui after the transaction, retaining its control over the firm.
Dalian Thermal will issue 2.3 billion shares to Hengli and a unit of the company which makes chemical fibre, said the filing.
The restructuring will also require Dalian Thermal to sell 652.2 million yuan worth of assets and liabilities to its current controlling shareholder, and to raise no more than 3 billion yuan in a private share placement to fund a new project for Kanghui’s unit to manufacture materials such as polyester film, the filing showed.
After Dalian Thermal’s purchase of Kanghui – which produces a variety of materials used in products such as lithium batteries, auto parts and shopping bags – the buyer will focus on the new materials industry and will exit the heating and power businesses, a sector with increased costs in recent years due to higher coal prices, Dalian Thermal said in separate filing.
The transactions will change Dalian Thermal’s controlling shareholder from a firm backed by the state asset regulating authority in the city of Dalian to Hengli Petrochemical, Dalian Thermal said.
The deal is pending approvals from regulatory bodies including China’s securities regulator and anti-monopoly watchdog, Hengli said.
