Companies

Wanhua Industrial turns gaze to Europe

By Wang Ying (China Daily)
Updated: 2011-02-11 10:45

Hungarian purchase will help consolidate its global position

SHANGHAI - Wanhua Industrial Group Co Ltd consolidated its global footprint by purchasing a 96 percent stake in the Hungarian isocyanate producer BorsodChem Zrt, according to an announcement on Thursday by Shanghai-listed Yantai Wanhua Polyurethanes Co Ltd, a wholly owned subsidiary of Wanhua Industrial.

In a notice filed with the Shanghai Stock Exchange, Yantai Wanhua said the acquisition was worth 1.26 billion euros ($1.72 billion). It is the largest investment a Chinese company has made in Hungary, underscoring Wanhua Industrial's determination to become a global leader in the industry.

Operating Asia-Pacific's largest methyl di-phenylene isocyanate (MDI) producer - Yantai Wanhua - Wanhua Industrial Group wants to enlarge its global presence because it commands only a 2 percent market share in the world's largest MDI market, Europe.

MDI is used mostly in polyurethane foams. The rigid foams are used in construction, refrigeration, packaging and insulation. MDI is also used to make binders, elastomers, adhesives, sealants and coatings.

"The integration of BorsodChem into the Wanhua Industrial Group creates the third-largest isocyanate producer in the world by transforming both companies from regional players into a single global company. I am convinced of the future benefits of our partnership, sharing industry know-how and driving genuine synergies," said Ding Jiansheng, chief executive officer of Wanhua Industrial Group.

The injection of BorsodChem's output including 180,000 tons of MDI will help Wanhua Industrial Group become the world's third-largest MDI producer, after BASF SE and Bayer AG, as well as bolstering its position as a global industry leader, said Gao Li, an industrial analyst from Huachuang Securities.

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Over the years, the domestic market has been saturated. The European market accounts for 35 percent and the US market for 30 percent of global MDI consumption - China accounts for 33 percent. Wanhua Industrial Group holds only 3 percent of the combined US and European MDI market, a stark contrast to the Shandong-based company's 30 percent market share at home, said Gao.

BorsodChem's existing 180,000-ton manufacturing facility will serve as a great platform for Wanhua Industrial Group in exploring the European market. The integration of BorsodChem into the group is expected to take two years.

BorsodChem is an important European chemical producer, selling more than half of its output in Western Europe. A significant amount of its production is sold in Central and Eastern Europe. BorsodChem is also increasingly gaining a foothold outside Europe.

Wanhua Industrial is a global technology leader in the industry with the world's largest and most integrated isocyanate manufacturing complex, which started production in 2010. It sells its products in 40 countries across North America, Western and Eastern Europe, Japan, the Middle East and Southeast Asia.

Shares of Yantai Wanhua jumped 7.49 percent to 21.67 yuan ($3.29) a share at the integration news on Thursday in Shanghai.