A new round of enterprise merger and purchase has occurred throughout the world since 1990s and it has become a development tendency for the reorganization and integration of enterprises. As for the TiO2 industry, there have been many merger cases in the past few years. Recently, it is revealed by industry insiders that Hunan Yongli Chemical Company (the former is Zhuhua Chemical Company) intended to purchase Hengyang Tianyou Chemical Company (the former is Xinhua 272 Factory) and the negotiation on this issue has gained great progress. It has touched the nerve of the whole TiO2 industry of our country.
 

Now let us have a general description of the two enterprises above. Hunan Yongli Chemical Company is a chemical enterprise reorganized from a large-sized group company——Hunan Zhuzhou Chemical Group Company. It has set up four branch companies: a TiO2 factory, a sulphuric acid factory, a phosphate fertilizer factory and a magnetic materials branch company, as well as seven functional departments. The company has 1,300 employees, including 200 technical personnel, with total assets worth 300 million yuan. It mainly produces nearly twenty kinds of products such as TiO2, sulphuric acid, superphosphate fertilizer, highly-pure magnetic ferric oxide, liquid sulfuric dioxide, ferrous sulphate, ammonium hydrogen sulfite, etc. and the output of its leading products sulphuric acid, superphosphate fertilizer, TiO2 and liquid sulfuric dioxide ranks in the front in our country. Through innovative design and research, the company developed the production technology of rutile TiO2 and make its product reach the national standard; some of its products won the prize of high-quality product. The company smoothly received certification of GB/T19001-2000idt9001:2000 Quality System in October, 2003, and was identified as a high and new technological enterprise by Hunan Province in April, 2004. With good quality, its leading products occupy a large market share in China＇s market and TiO2 is exported to southeast Asia, Europe and America. Located in Zhuzhou, Hunan Province, which is the biggest railway hub in south China, the company has convenient transportation and favorable environment for investment and has comprehensive ability from production R&D, design, construction to production and business. Hengyang Tianyou Chemical Company (the former is Hengyang Xinhua Chemical Metallurgy Company, China National Nuclear Corporation) is large chemical metallurgy company affiliated to CNNC, a first-grade measurement company and an outstanding company in equipment management. It was selected as one of the top 1000 key enterprises by China National Economic and Trade Commission in 1995, acquired certification of ISO9002 Quality System in December, 2009, and ranked as one of the "top ten key advantageous enterprises" by Hunan People＇s Government in 1999. The company introduced advanced technology from developed countries in 1991 and established a production line with yearly output of 5,000 tons of anatase TiO2 and later set up a branch TiO2 factory. Through efforts for ten years, the branch factory has developed to be a large TiO2 manufacturer in the country and annually produces 25,000 tons of pigment TiO2; it took the lead in acquiring certification of ISO9002 Quality System in 1998. Its leading products, "Tianyou" TiO2 and ferric sulphate enjoy a high reputation in the domestic market and as well are exported to EU, USA, southeast Asia and the Middle East. Occuping a space of 5 km2, situated in the southeast suburb of Hengyang, with Beijing-Guangzhou Railway, National Highway 107 and Beijing-Zhuhai Expressway running through and a speical 15km railway within the factory, the company owns a favorable location and good transportation conditions.

Through the introduction above we know that these two companies all have strong strength, and if they are amalgamated, the core competitive ability of the new company will be greatly improved and most probably it will become a powerful TiO2 manufacturer in China. Why are we so optimistic? It is because that according to the general law of the market economic development, only through constant development and expansion can an enterprises survive in the fierce market competition. There are mainly two approaches for the expansion of an enterprise. One is to develop gradually by accumulation of the internal capital, and the other is to expand the capital and realize rapid development through amalgamation. The second approach, that is, the amalgamation will bring much benefit for the enterprise.

First of all it will bring good economic benefit for Hunan Yongli Chemical Company. It mainly includes two aspects. One is the expansion of production capacity. Through amalgamation, the enterprise is able to reorganize the assets and optimize the economic scale and reduce production cost; it can also make production more centralized and professional. The second aspect is improvement of the business scale of the enterprise. After merger, the company is able to provide costomized products and services for different customers and markets; it can also spend enough capital on research and development, design and technological renovation of titanium dioxide so as to produce more new products with higher quality.

Secondly, this amalgamation will bring remarkable market benefit for Yongli. Vertical merger will help the company have an effective control on competitors through the control of raw materials and sales channels, improve the market access and the disparity advantage; by horizontal amalgamation, the company can increase its market share and on the other side, Hengyang Tianyou is willing to be affiliated to Yongli to get more benefit. This is a win-win action.

The global financial crisis still has great influence on China＇s TiO2 industry, so under this situation how to minimize the influence and help the enterprises out of difficulty is what the leaders and experts in this industry have to think over. The move of Hunan Yongli follows the development tendency and its successful amalgamation will surely bring a new pattern for China＇s TiO2 enterprises. It is proved by many facts that merger and reorganization is a new way out for the sustainable development of our TiO2 enterprises, because it can speed up the optimization and upgrading of the industrial structure and strengthen the market competitive ability of enterprises. Our country has provided many favorable conditions to encourage the enterprise merger and we believe that more and more enterprises will be involved in the new round of merger and reorganization under the spur of financial crisis.

written by Xu Gaodong (徐高栋) and translated by Yang Chunling (杨春玲)

References: From www. tio2.net.cn