China outwits Korea buying Norwegian Silicon Giant Elkem in a $2 Billion Deal

China using its massive foreign exchange horde to buy commodity assets around the world is an old story by now. It is now also getting into the act in the Green Energy area as China’s state-owned chemical group Blue Star has bought Norwegian environment chemical company Elkem from the Orkla conglomerate. Elkem is one of the largest silicon metal producers in the world and makes solar-grade polysilicon through a specialized low-cost process. Orkla which is also the 40% owner of one of the world’s largest silane and polysilicon producers Renewable Energy Corporation (REC) had been looking out for some time to sell Elkem.China has not been a big producer of polysilicon which is the main raw material for producing silicon-based semiconductors and silicon-based solar panels. The massive demand for polycrystalline modules has resulted in them being the main demand driver for polysilicon.

With control of Elkem, China also gains control of crucial silicon metal production as well as propitiatory processes for making very low-cost polysilicon. South Korean Steel Giant Posco has also been in the running for buying over Elkem but Blue Star has evidently outsmarted the Koreans in taking over Elkem. Note REC is also a valuable company that has been trading at very low valuations as it expands with a massive gigawatt integrated factory in Singapore. It would make a good addition for another Chinese state-owned group to buy this asset as they look to aggressively expand in the Green Industry.

Orkla sells Elkem to China National Bluestar

Orkla ASA has signed a binding agreement with China National Bluestar (Group) Co., Ltd (Bluestar) for the purchase and sale of Elkem. The transaction comprises Elkem Silicon Materials, Elkem Foundry Products, Elkem Carbon and Elkem Solar. According to the agreement, the sales price is USD 2 billion for Elkem before closing- and capital structure adjustments. The agreement includes the 1.5 TWh/year power contract Orkla acquired last year which will ensure that Elkem’s smelting plants in Norway will have a secure and long-term competitive power base. Orkla will remain the owner of the shares in Elkem Energi AS, including its 85 % stake in AS Saudefaldene.Bluestar is a leading China-based international chemicals and new materials company, with 2010 sales in excess of USD 6 billion and Head Office in Beijing. The company is 80%-owned by the Chinese state-owned company ChemChina, with the remaining 20 % owned by the US private equity firm Blackstone Group. Since 2006 Bluestar has performed a number of international acquisitions, including Adisseo and Rhodia’s Silicones business in France, and the Australian company Qenos.