Sinofert Holdings, the mainland's largest fertiliser importer and distributor, has agreed to buy its parent Sinochem Corp's 18.5 per cent stake in Shenzhen-listed potassium fertiliser producer Qinghai Salt Lake Potash for 6.73 billion yuan.
The deal, Sinofert's first asset injection since 2005, came after Qinghai Salt Lake Potash's share price gained more than five times in value since the start of last year, in line with gains in the Shenzhen Composite Index.
In a statement to the Shenzhen Stock Exchange yesterday, Qinghai Salt Lake said Sinofert would buy 141.9 million of its shares at 47.49 yuan per share, or a 22.6 per cent discount to Tuesday's close, and become its second-largest shareholder.
Despite the deep discount, Sinochem is expected to reap a massive profit from the sale as its investment in Qinghai Salt Lake was only 460 million yuan.
The acquisition is part of a bigger asset injection plan started in 2005, including a 40 per cent stake in urea and methanol producer Tianji Sinochem Gaoping Chemical Engineering and a 60 per cent interest in complex fertiliser maker Sinochem Shandong Fertiliser.
Qinghai Salt Lake is the mainland's largest maker of potash or potassium-based fertiliser. The company made 1.73 million tonnes of potash last year and had a 20 per cent share of the mainland market. It planned to raise output by 10 per cent this year.
The country is the world's second-largest potash consumer and relies on imports for 66 per cent of its potash consumption.