A fruit grower in China’s Xinjiang province announced this month that it has reached a tentative agreement to acquire Tongyi Petroleum Chemical Co., one of the largest private lubricant producers based in the country.
Xinjiang Korla Fragrant Pear Co. said the deal is still conditioned on its findings from due diligence that is still underway. Korla said it will pay cash for the purchase and that the final price will be calculated after due diligence, but the companies estimated Tongyi’s value at ¥1.4 billion (U.S. $223 million) when the agreement was announced Oct. 12.
Tongyi, whose name translates as Monarch, has lubricant blending plants in Beijing in northeastern China; in northwestern Xianyang; and on the central eastern coast in the city of Wuxi. Control of the company has changed hands several times since it grew rapidly in the mid-2000’s to become a major player in China’s market.
Royal Dutch Shell bought a 75% stake in the business in 2006 but sold it nine years later to American venture capital firm Carlyle Group and Huos Group, the original owners.
Now Korla wants to buy all of Tongyi’s stock shares, which according to an Oct. 12 filing on the Shanghai Stock Exchange are divided between three entities. Taiden Investment Holding Co. owns 92% of shares, Huos Group Holding Co. 3% and Weining Co. 5%. Taiden and Huos are both based in the Cayman Islands, while Weining is located in Hong Kong. Korla is based in the city of the same name, which is the largest city in Xinjiang.
The deal raised eyebrows among Chinese business news organizations. Currently its activities are entirely in the agricultural industry as it is a large owner of orchards producing fragrant pears, a variety for which Xinjiang is famous. It also produces other fruits such as figs and raisins.
Korla said it expects to announce a final plan for the acquisition in December.