China’s largest agricultural seed and fertilizer company, Sinochem Group, is in the midst of negotiations to acquire Singapore listed, natural rubber giant, Halcyon Agri, reports the Wall Street Journal, in a deal that could be complete by the end of the month. The deal, which will be advanced through Sinochem’s Sinochem International Corp. unit, and is reportedly valued at US$300 million, is indicative of China’s continued hunt for commodities acquisitions despite an economic slowdown.

 

Admittedly, China’s state-run oil companies have faced challenges with some recent acquisitions, including oil producer, Cnooc Ltd. which ran into cost overruns, and Canada’s Nexen Inc. which was acquired in 2013 for $15 billion and suffered an oil spill. These events have cooled overseas purchases in the sector, but the vacuum has been filled by agricultural and chemical deals, according to Fidelity Investments.

 

At the close of 2015, China’s state-run grains trader, COFCO, paid $750 million for the remaining 49% stake in Noble Agri, after paying $1.5 billion in 2014 for a 51% stake in the group. On the heels of this deal, Sinochem is poised to become a much more major force within China’s commodities space, after Beijing appointed the former head of COFCO, and international deal veteran, Ning Gaoning as Sinochem chairman earlier in January.

 

The Wall Street Journal reports that as of 2014, Sinochem owned 80,000 hectares of natural rubber plantations and 22 processing plants with a capacity of over 700,000 tons located across China, Thailand and West Africa. Halcyon controls 14 rubber processing plants across Southeast Asia in Indonesia and Malaysia, and sales offices and distribution infrastructure in Southeast Asia, China, the U.S., and Europe. In 2014, Halcyon reported revenue of $479 million representing a year on year increase in revenue of more than 100%.

 

If the deal is completed, Sinochem will likely integrate Halcyon’s operations with its previously acquired rubber assets to create a single entity of scale, according to a source familiar with the deal. Sinochem had acquired a 51% stake in Singapore-listed rubber company, GMG Global Ltd in 2008, and in 2010 acquired Thailand-based rubber company, Teck Bee Hang Co. Ltd.