Henan Billions completes US$1.47bn acquisition of Lomon

Henan Billions has successfully acquired a 100% equity stake in rival Chinese titanium dioxide producer Lomon for US$1.47bn (RMB9bn), the company announced late on June 5. The deal will make Henan Billions the largest TiO₂ manufacturer in Asia and the fourth largest worldwide.

The company financed the deal by issuing 380M shares through a non-public offering. The shares were valued at US$4.41 share (RMB27/share), raising Henan Billions a total of US$1.68bn (RMB10.26bn), according to the announcement.

Xu Gang, President of Henan Billions, has become the largest shareholder of the merged company, increasing his stake from 13.57% to 20.13% during the non-public offering, while Vice President Tan Ruiqing now holds 17.60% of the shares.

However, the former President and actual controller of Lomon, Li Jiaquan, did not attempt to gain control of the merged company, a move that has surprised industry analysts. His daughter, Li Ling, became the company’s third-largest shareholder during the non-public offering and now owns 13.66% of the shares.

As Henan Billions reaffirmed in its announcement, this means that no individual will be able to control the company by holding shares directly or indirectly.

This deal is a counter to the maxim that the ‘big fish eats the small fish’. By almost any measurement, Lomon has been China’s leading TiO₂ producer since the company was established in 2001 and it comfortably outstripped Henan Billions in 2014 in terms of production capacity, total assets, gross revenues, and net profits.

In addition, Lomon has a large-scale titanium mining and processing business. In 2014, the company was estimated to control 184Mt of recoverable deposits of vanadium titano-magnetite and 36.25Mt of titanium concentrate ore (grade: 46.5%), and the company has a titanium concentrate ore mining and dressing capacity of over 600,000t/yr.

CCM predicts that Henan Billions will be able to reduce production costs thanks to its access to these resources.

Henan Billions also disclosed in its announcement that it plans to set up a new company in the USA with US$300,000 of registered capital, which will be named Billions (America) Co Ltd. The new company will be primarily engaged in selling Henan Billions’ TR52 printing ink TiO₂, which the company purchased from Huntsman for US$10M in September 2014.