Rubber processor Halcyon Agri Corporation is set to merge with China's state-owned Sinochem International Corporation in a move that will create the world's largest listed rubber company.
Halcyon Agri will remain listed on the Singapore Exchange (SGX) once the deal has been completed, with Sinochem as the combined entity's majority shareholder.
Sinochem has offered to acquire a 30.07 per cent stake in Halcyon Agri for 75 cents a share in cash - a premium of 2.7 per cent on the stock's last traded price of 73 cents last Wednesday before a trading halt was called, the firms announced in a joint statement yesterday.
It will make a mandatory general offer to shareholders of Halcyon Agri at the same price as well.
"Certain shareholders of Halcyon Agri have also provided undertakings such that Sinochem International's shareholding in Halcyon Agri following completion of the (offer) will be no less than 53.98 per cent," said the statement.
The deal involves Halcyon Agri making a voluntary general offer for Singapore-listed GMG Global, a subsidiary of Sinochem. This will be done at an exchange ratio of 0.9333 Halcyon shares for each GMG Global share, which last traded at 61.5 cents last Wednesday.
Sinochem has already agreed to accept this offer in respect of its 51.1 per cent shareholding.
Halcyon Agri will also acquire Sinochem's natural-rubber processing assets in China and Malaysia as well as its trading businesses for a consideration of 280 million Halcyon Agri shares.
The combined business will have 153,000ha of land in Africa and South-east Asia and 35 processing facilities across Indonesia, Thailand, Malaysia, China and Africa, with an annual processing capacity of about 1.5 million tonnes.
The transactions, which are subject to approval by Halcyon Agri shareholders, are expected to be completed by the end of the third quarter this year.
Halcyon Agri chief executive Robert Meyer told The Straits Times in a statement that the merger comes at an "opportune" time, given the new entity's prospects as the industry leader while the rubber market continues its recovery off 13-year lows. He added that the firm is also "well placed to benefit from the scale economies that our combination brings".
Shanghai-listed Sinochem ranks as one of the world's largest rubber suppliers by production capacity.
The proposed merger comes as more Chinese companies are buying into battered commodity assets amid a push from the Chinese government for firms to look overseas.
This month, Cofco Corporation completed a US$750 million (S$1 billion) purchase of the remaining 49 per cent stake in agricultural joint venture Noble Agri from Singapore- listed Noble Group, which has been dealing with high debt levels and losses, along with short-seller attacks and credit-rating downgrades.
Halcyon Agri yesterday morning asked that the trading halt be lifted.