Noble Deal Ups Ante as China Chemical Kings Vie for Global Prize

(Bloomberg) -- It’s a battle of two great deal makers and the prize is potentially the chance to run the world’s largest chemical company.

On one side is Sinochem Group boss "Frank" Ning Gaoning, who is said to be in talks for a second major deal with Richard Elman’s global commodities trader Noble Group Ltd.

On the other is Ren Jianxin, chairman of China National Chemical Corp., or ChemChina, whose $43 billion offer to buy Swiss pesticides-and-seeds maker Syngenta AG is currently wending its way through official reviews in China, Europe and the U.S.

Between them, they’ve struck dozens of deals over the last three decades to build giant resources companies with businesses in everything from oil refining to dairy cows. Now, China wants to merge Sinochem and ChemChina as part of the central government’s drive to streamline state-owned enterprises and to create a national champion to secure commodity supplies.

The combination may occur after the Syngenta acquisition, the biggest-ever overseas purchase by a Chinese company, according to people familiar with the matter, who asked not to be identified because the plan hasn’t been made public.

But who would run the mega-company, Ren or Ning?

“Buying a Noble stake, in addition to the other Noble related deals Ning guided in Cofco, will certainly leave a impression that Ning knows when and how to buy up meaningful assets,” said Tian Miao, a Beijing-based analyst at North Square Blue Oak Ltd. “That being said, Ren also has a strong record of international acquisitions and is known as an executive who can deliver. ”

Other Factors

Tian said the State-owned Assets Supervision and Administration Commission of the State Council, the government body that would oversee the merger, would also have to assess many other factors in deciding who would lead a combined group. Sinochem and ChemChina spokesmen said no talks are underway to merge the two state entities. Ren and Ning did not respond to requests to their companies for comment.

Their paths to the top were very different. While Ning was one of the first to join the elite ranks of Chinese students to gain an MBA in the U.S., Ren was cleaning kettles for less than three pennies each on the fringes of the Gobi desert.

Both were born in 1958, at the start of Mao Zedong’s ill-conceived Great Leap Forward, in which tens of millions starved to death.

Ren’s mother was a school teacher in Gansu, one of the poorest provinces in northwestern China. At 15 he packed the "Selected Works of Mao Zedong" and was sent to work on a farm during the cultural revolution.

Ning, the son of a doctor from the coastal province of Shandong, birthplace of Confucius, also headed to the collective farms as a teenager, dreaming of becoming an author. Later, he read economics at Shandong University, before heading to the Katz Graduate School of Business at the University of Pittsburgh in the 1980s to gain his MBA, a rare feat in China at the time.

Ning joined China Resources Group, helping it become one of the first Chinese companies to list a subsidiary in Hong Kong. His familiarity with global capital markets helped him move up the ranks to become vice chairman of China Resources (Holdings) Co. by the age of 40. He streamlined the conglomerate to focus on sectors where it could be a major national player, such as energy, beer and retail. As he put it: "26 cats have no chance of beating a tiger."

In 2004, he was appointed chairman of Cofco Group and spent the next 11 years transforming the state trading business into a "farm to table" conglomerate that added milk production, wine and dozens of other related businesses.

"Ning would likely win out against Ren in running the merged company given his political status and connections, as well as his background, which suggests that he has done a good job at Cofco and was therefore promoted to Sinochem,” said Michal Meidan, a China expert at Energy Aspects Ltd. in London.

Ning published articles on management techniques, including one entitled "Can you?" that asked managers 138 questions, such as: “Do you know something of astronomy, geography and ancient Chinese and western science and technology?” or, “Are you ready to be removed tomorrow?”

Company Loan

Ren gained his master’s in economics at Lanzhou University and joined state-run Chemical Machinery Research Institute. He was headed for a career as an anonymous rural bureaucrat when, in 1984, he borrowed 10,000 yuan ($1,400) from his employer to start the BlueStar Chemical Cleaning Group.

While his first employees scrubbed teapots, Ren began an ascent to power using the traditional mechanism of the Communist Party. He became BlueStar’s party secretary and befriended powerful allies such as Gu Xiulian, then head of the Chemical Industry Ministry and a member of the party’s central committee for two decades.

The common thread in both their careers is their success in cutting a deal. At Cofco, Ning bought a stake in China Mengniu Dairy Co. and made a series of multi-billion-dollar overseas acquisitions, including Dutch food trader Nidera BV and Noble Group’s agricultural business.

Sinochem is interested in the international energy trading business of Noble, which includes oil, coal and natural gas, though negotiations are at an early stage, people familiar with the talks said, asking not to be named because the discussions are private. Noble said it was in talks with a potential investor but no binding agreement had been made.

French Art

ChemChina’s Ren orchestrated more than 100 deals, including the merger that created the state-owned group in 2004. He’s snapped up French and Norwegian chemical makers and an Israeli agrochemicals company. In one instance, he bought copies of paintings from France for about 3 euros ($3.19) each -- and put them on every floor of ChemChina’s headquarters in Beijing to make visiting French employees feel at home.

“My goal is to expand ChemChina to be the world’s most competitive chemical company,” Ren told China Daily in an interview in 2010.

It may also be the biggest. China’s Ministry of Commerce and other government offices reviewing ChemChina’s planned takeover of Syngenta are likely to clear the deal by the end of June, according to people familiar with the matter. Syngenta has said the U.S. review of the proposal should be completed in time to close the deal in the first half of the year. That would mean a subsequent merger of ChemChina and Sinochem could take place this year.

With the addition of Syngenta, the total combined group may have to reorganize and shed some businesses, said Meidan at Energy Aspects. “A combined behemoth would find it very hard to gain regulatory approval globally and may need to be broken up into several units."

--With assistance from Sarah Chen and Aibing Guo

To contact Bloomberg News staff for this story: Prudence Ho in Hong Kong at pho83@bloomberg.net.

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Adam Majendie

©2017 Bloomberg L.P.