(Bloomberg) -- China is nearing a long-mooted megamerger of China National Chemical Corp. and Sinochem Group after top executives completed preparatory work for the deal, people with knowledge of the matter said.

Significant issues around how the companies will be combined have largely been resolved, according to the people, who asked not to be identified because the information is private. A deal is ready to be announced as soon as the coming weeks, the people said.

The merger, in the works for at least two years, would change the landscape of the nation’s chemicals industry and add to a wave of consolidations aimed at shaking up China’s vast state-owned sector. The planned combination would produce an oil-to-chemicals giant with more than $100 billion of assets.

“This merger could create the kind of economies of scale that hopefully will eventually improve efficiency,” said Tian Miao, a Beijing-based analyst at Everbright Sun Hung Kai Co. “The scale advantage will be more apparent when the group tries to compete internationally, as its strong government support and financial resources would be almost unrivaled everywhere it goes.”

It’s not clear whether authorities have made a final decision on when to formally unveil the transaction. If the government opts to take action against ChemChina or any executives following a lethal chemical explosion last month at one of its facilities, those sanctions could be announced first, the people said. Any such move might delay the merger announcement, according to the people.

Merger Approval

Chinese authorities have already granted preliminary approval for the merger and tasked Frank Ning, who heads both companies, with working out implementation details, Bloomberg News reported in September. Ning has been studying potential asset sales at both firms as he reviews areas of overlap and potential synergies, people with knowledge of the matter said at the time.

Proceeds from any divestitures would help reduce the debt ChemChina took on through its record $43 billion purchase of Swiss pesticide producer Syngenta AG. Sinochem has more than 300 subsidiaries including Sinochem International Corp., a Shanghai-listed chemical trader, and phosphate producer Sinofert Holdings Ltd.

Shares of Sinochem International rose 1.3 percent at the midday trading break in Shanghai Wednesday, headed for their highest close in more than three weeks. The benchmark Shanghai Composite Index rose 0.2 percent.

Stake Sales

Talks could still be delayed or fall apart, the people said. A spokeswoman for ChemChina said the company has nothing to disclose, while a representative for Sinochem didn’t answer phone calls seeking comment. China’s State-owned Assets Supervision and Administration Commission, which oversees the biggest government-owned companies, didn’t reply to faxed queries.

Sinochem has considered selling stakes in its five business units -- petrochemicals, energy, agriculture, real estate and finance -- Ning said in October 2017. The group filed for a Hong Kong listing of its oil trading and refining unit in July.

ChemChina’s operations, which encompass agrochemicals, rubber tires and chemical equipment, have expanded through acquisitions over the past few years. Its overseas purchases have included deals for Italian tire firm Pirelli & C. SpA, German machinery maker KraussMaffei Group GmbH and Swiss commodity trader Mercuria Energy Group Ltd.

(Updates with analyst comment in fourth paragraph.)

--With assistance from Sarah Chen and Aibing Guo.

To contact Bloomberg News staff for this story: Manuel Baigorri in Hong Kong at mbaigorri@bloomberg.net;Vinicy Chan in Hong Kong at vchan91@bloomberg.net;Steven Yang in Beijing at kyang74@bloomberg.net

To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, ;Jessica Zhou at jzhou75@bloomberg.net, Timothy Sifert, Ramsey Al-Rikabi

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