CCI Approves transfer of 100% Shareholding of Sinochem Group Company Limited and China National Chemical Corporation Limited to a New Company Wholly Owned by China State-owned Assets Supervision and Administration

On November 12, 2020, the CCI approved the transfer of 100% shareholding of Sinochem Group Company Limited (‘Sinochem’) and China National Chemical Corporation Limited (‘ChemChina’) to a new company wholly owned by China State-owned Assets Supervision and Administration Commission of the State Council (‘Central SASAC’).[1]

The proposed transaction involved an internal restructuring of Sinochem and ChemChina, both of which are wholly-owned by Central SASAC. Central SASAC will incorporate a new holding company and transfer 100% shares of both Sinochem and ChemChina to the new company. Effectively, Sinochem and ChemChina would amalgamate into the new company and ultimately still belong to Central SASAC. The new company would be the sole shareholder of Sinochem and ChemChina. (As per the laws applicable in China, Sinochem and ChemChina are regarded as independent economic entities with independent decision-making power and thus, belong to two independent economic groups).

Sinochem is incorporated under the laws of the People’s Republic of China. Globally, its businesses are spread across energy, real estate, finance and chemical sectors. In India, it is directly or indirectly engaged in the sale of crude oil, natural rubber and rubber antioxidants, a variety of chemicals, including agrochemicals, and pharma and health products. Sinochem operates in India through Sinochem India Company Pvt. Ltd. (‘Sinochem India’) in the agrochemicals sector.

ChemChina is also incorporated under the laws of China and its business units are divided into oil and processing refined products, chemical equipment, tyre and rubber products, new chemical materials and specialty chemicals, R&D design and agrochemicals. ChemChina is present in the agrochemical sector in India through Syngenta India Limited (‘SYT-IN’) and Adama India Private Limited (‘ADA-IN’). They are also required to operate as independent competing entities till January 3, 2026 (pursuant to the CCI’s approval order dated May 16, 2017, for Combination Registration No. C-2016/08/424).

SYT-IN is engaged in the business of manufacture and sale of various agrochemicals including herbicides, insecticides and fungicides, and vegetable seeds. ADA-IN is also present in the business of sale of various agrochemicals including herbicide, insecticide, fungicide, and growth regulators. Both SYT-IN and ADA-IN sell active ingredients and formulated products in the agrochemicals sector in India.

The CCI noted the parties’ submission that the proposed transaction is only an internal strategic restructuring of Sinochem and ChemChina in China without any plans to alter the business operations either in China or outside, including India.

The overlaps identified in relation to the proposed transaction related to sale of formulated crop protection products (‘CPPs’) in India. Sinochem, SYT-IN and ADA-IN sell certain similar products in CPPs and more specifically in (i) herbicides; (ii) insecticides; (iii) fungicides; and (iv) bio-stimulants.

The CCI observed that CPPs can be normally sub-divided based on crop and class of pest. In respect of herbicides, there is a distinction between selective and non-selective herbicides. The CCI noted that in each of the segments of overlap, except ‘herbicide-rice’, ‘herbicides-rice-preemergent’, ‘herbicides-General weed control’, and ‘fungicides-rice-blast, sheath blight’, the market share of Sinochem was less than 3% and therefore the incremental market share post-combination would be insignificant. In the segments for herbicide rice, herbicides-rice-post emergent, herbicides-general weed control, and fungicides-rice-blast, sheath blight, the market shares of Sinochem range between 2-12%. However, the CCI noted that these markets are fragmented in nature and characterised by the presence of several other players. In the segment for bio-stimulants, only Sinochem and SYN-IN are present in India, where Sinochem had a market share of less than 1%.

As such, the CCI concluded that in each segment with overlaps, the incremental market share as a result of the combination would be insignificant and not likely to cause any AAEC. In light of this, the CCI approved the proposed transaction. However, the CCI highlighted that the relevant parties should continue to comply with its commitments under the CCI’s approval order for Combination Registration No. C-2016/08/424.

 

[1]Combination Registration No. C-2020/09/776.

Published In:Inter Alia Special Edititon - Competition Law - March 2021 [ English
Date: March 15, 2021