By Dmitry Zhdannikov, Freya Berry and Ron Bousso
LONDON (Reuters) - Chemical giant ChemChina [CNNCC.UL] approached BG Group (LON:BG) with a possible bid late last year, just as Royal Dutch Shell (L:RDSa) was preparing to close a $52 billion deal to buy the British energy company, seven banking and industry sources with knowledge of the matter said.
Working with investment bank HSBC (L:HSBA), China's most acquisitive company of the past year flew a delegation to Britain in December and approached BG Chairman Andrew Gould with plans for a full cash bid, two sources close to ChemChina said.
Shell and HSBC declined to comment. ChemChina did not immediately respond to requests for comment. Reuters could not reach Gould for comment.
That trip was eight months after Shell announced the energy sector's largest deal in a decade and just weeks before the BG purchase received final anti-trust and shareholder clearances.
The Anglo-Dutch oil major's biggest-ever acquisition was eventually completed in February and made Shell the world's top LNG producer and a major deepwater oil player.
ChemChina said the bid would be all in cash, in contrast to Shell's cash and share offer, two sources close to the state-owned firm said. But how much it was prepared to pay is unclear, they added, as the Chinese firm attached a string of conditions that made a price dependent on its getting financing for a deal.
ChemChina's offer did not impress Gould, who deemed it insufficient to bring before BG's board as a viable alternative to Shell's offer, sources said. One source called the approach "half-baked".
Shell, BG and the companies' bankers -- Bank of America Merrill Lynch (N:BAC) and Goldman Sachs (N:GS) -- could hardly believe the development, three people close to the parties said.
BofA Merrill Lynch declined to comment. Goldman Sachs did not immediately respond to requests for comment.
ChemChina was already reportedly interested in Swiss seeds and pesticides giant Syngenta (S:SYNN), which it would eventually buy in February for $43 billion.
The Syngenta deal -- also advised by HSBC -- demonstrated ChemChina's firepower. But most of the sources said that the chemical firm's interest in BG and its readiness to outbid Shell displayed the sheer extent of its ambition.
It also highlights Beijing's revived appetite for resources following a collapse in commodities prices and the conclusion of corruption probes.
After a period of intense merger and acquisitions activity earlier this decade, energy acquisitions have been virtually suspended since 2013 as China launched an anti-corruption sweep. Chinese outbound oil and gas deals peaked at $33.3 billion in 2012. Last year they totaled just $1.13 billion, according to Thomson Reuters data.
RACE AGAINST TIME
Shell and BG had been ironing out the details since announcing the offer in April, and both firms' shareholders were due to vote in January for the deal.
ChemChina itself had to decide whether to buy Syngenta, after news of its interest leaked in November. As such, its BG approach was put together in too much of a hurry, two banking and industry sources said.
ChemChina would not have been able to buy BG and Syngenta at the same time, they noted. The Syngenta deal alone required a $50 billion financing package syndicated out to a number of banks.
On discovering the approach from ChemChina, Shell threatened to walk away from the deal, one of the sources close to ChemChina said. Gould never took the approach to the board and shortly afterwards ChemChina bought Syngenta.
The readiness of ChemChina -- short for China National Chemical Corp -- to go head-to-head with one of the world's biggest and oldest oil companies shows just how far it has come.
Since its beginnings as an industrial cleaning venture founded just over two decades ago, it has mushroomed into China's largest chemical company, with 140,000 employees and business holdings spanning animal feed nutrients, oil refineries and rubber.
It has embarked on a foreign spending spree. In 2015 it bought Italian tyre maker Pirelli in a 7.1 billion euro deal. Syngenta followed less than a year later, and bankers said that ChemChina remains hungry for acquisitions.
The purchases have been seen as part of a campaign by China to build global corporate champions as domestic economic growth slows from its previous breakneck pace.
ChemChina's oil ambitions were given a boost in 2013 when it won the right to import crude oil. China regulates its oil imports via a quota system to ensure supply is stable and Sinopec and PetroChina have traditionally had the lions' share.
The move helped boost ChemChina's oil division to account for nearly half of revenues, which it said in 2014 were around 300 billion yuan ($46.32 billion).