Qenos’ Chinese owner had been in talks over sale and closure of the company for at least nine months

A deal to buy Australian plastics major Qenos for the land value of its NSW and Victorian operations had been under discussion for at least nine months, documents show.

An aerial view of Qenos’ Port Botany operations in Sydney.

Qenos owner ChemChina was talking to property developers at least nine months ahead of the sale of the Australian chemicals maker, it has emerged.

And administrator McGrathNicol this week confirmed to Qenos employees the total closure of its operations was the most likely outcome for the plastics manufacturer.

Documents circulated to creditors this week suggest that ChemChina was as far back as July 2023 negotiating a deal that would almost certainly result in the company’s closure but kept its plans secret from the company’s customers and workers. The Victorian government has said it was not asked for assistance by Qenos before it entered administration.

Qenos was put into administration on April 17, only two days after the sale of the Australian plastics maker to companies associated with industrial property developer Logos.

McGrathNicol will run a fresh sales process in the hope of finding a buyer wanting to continue operating the company’s plastics business, but documents circulated to Qenos employees by administrator Jason Preston say it will also be preparing plans for the safe closure of both facilities in Sydney and Melbourne.

Qenos’ Altona plant in Victoria will keep operating as normal in the short term. Mr Preston told Qenos’ NSW workers no major redundancies were imminent as the site’s workforce would be needed for closure work.

But Qenos’ gas and other key supply contracts expire at the end of 2024, and are unlikely to be renewed after that point.

The extent of Qenos’ financial problems will not be clear until McGrathNicol presents its initial report to the company’s creditors.

But any permanent closure is likely to come at considerable cost to new owner Logos, which has committed to guarantee the payment of worker entitlements and will also be likely required to pay for the clean-up of the heavily contaminated sites before the land can be used for other purposes.

The Australian understands Qenos’ 700-strong workforce, which includes many long-serving staff, could be owed more than $100m in leave, redundancy, and other entitlements. The cost of cleaning up the sites is likely to be expensive.

McGrathNicol’s declaration of independence, sent to Qenos creditors this week, shows the company’s Chinese owner was talking to Logos about the possible sale by mid 2023 despite pushing ahead with plans to refurbish a water cooling tower at Qenos’ Sydney plant, and signing new agreements to keep gas and other supplies coming to its Melbourne factory through to the end of 2024.

The Australian understands ChemChina engaged PwC to find a buyer for Qenos in early 2023. Despite canvassing the cheap sale of the company with dozens of potential buyers, property developer Logos firmed as the most likely option by mid year after Qenos’ advisers could not find a buyer prepared to make the investment needed to keep the plastics maker operating in the long term.

By July Logos was conducting detailed due diligence investigations on the acquisition, and its legal advisers had fired McGrathNicol to “ to review and consider the cashflow

position of the Qenos Group in circumstances where Logos was undertaking its own diligence regarding a prospective acquisition and working capital funding of the

Qenos Group”.

Those investigations included work to identify any commercial issues that might affect a decision to put Qenos into administration should Logos close an acquisition, according to the McGrathNicol declaration of independence, relevant relationships and indemnities (DIRRI). McGrathNicol said its work involved only checking Qenos’ books and forecasts, and it was not involved in providing any advice on the transaction to Logos, or to Qenos management or directors.

Although McGrathNicol was engaged by Logos, the accounting firm said it had contact with some Qenos management and directors over the seven months it was engaged in the due diligence work.

But the company’s workers were still caught by surprise by Qenos’ decision to cancel the restart of its Sydney manufacturing plant in March, despite the completion of work rebuilding a water tower that collapsed in February 2023.

That rebuilding worth, estimated to have cost up to $60m, was funded by Qenos’ insurers. In a circular to employees this week, McGrathNicol administrator Jason Preston noted that restarting the plant would have incurred “significant” costs – most likely around the need to restock consumables after Qenos ran down inventories during the Botany plant’s closure.

And, while Qenos’ Altona plant in Melbourne is still operating, Mr Preston warned workers that McGrathNicol’s brief included the need to plan for the manufacturing facility’s closure.

“The administrators have been working with key customers and suppliers to determine whether acceptable terms can be reached to continue operations in the short term, whilst planning for shutdown and make safe is undertaken,” he said.

“As such, the intention is to continue trading the Altona plant in the near term. We will provide further updates as the timing for the shutdown of Altona becomes clearer.”

Documents filed with the corporate regulator show that all of Qenos’ directors – including managing director Stephen Bell and representatives of ChemChina – quit the board on April 15, the day the sale deal was finalised with Logos.

They were replaced by Brisbane restructuring specialist Jon Howarth, who called in administrator McGrathNicol two days later.