Chinese State-Owned Shipbuilders Announce Merger
In a move that could be interpreted as preparation for military action, two Chinese state-owned shipbuilders have announced plans to merge. This news comes from a recent report by Nikkei Asia. The merger is expected to enable the companies to better serve the military, although key details such as pricing, asset management, employee treatment, and protections for dissenting shareholders are yet to be disclosed.
Merger Details
According to the Nikkei report, China CSSC Holdings and China Shipbuilding Industry (CSICL) announced their merger plans in nearly identical filings to the Shanghai Stock Exchange. The merger will see CSSC Holdings absorb CSICL through a stock swap. As of Monday, shares of CSSC Holdings closed at 34.90 yuan, while CSICL's closed at 4.98 yuan.
Market Cap and Future Plans
Based on the current prices, the market cap of CSSC Holdings is 156.08 billion yuan ($22 billion), while that of CSICL is 113.55 billion yuan. The companies plan to focus more on major state strategy following the merger. The filings also mentioned "promoting equipment for a strong military" as a priority.
Parent Company and Government Policy
The two companies are part of the China State Shipbuilding Corp. (CSSC), a central state-owned conglomerate overseen by the State-owned Assets Supervision and Administration Commission (SASAC). Recently, SASAC has been pressuring listed arms of central companies to enhance market value through improved governance, higher disclosure standards, share buybacks, and increased dividends. If the merger results in increased efficiency and profitability, it would align with these government policy goals.
Historical Background
CSSC has a complex history, originating from a 1950 government organization for shipbuilding. It was reorganized in the 1970s and later split into "North Ship" and "South Ship" entities in 1999. These entities merged in 2019 to form the current CSSC, but CSSC Holdings and CSICL, from the original north and south entities, remained separate listed companies with overlapping businesses until the recent merger announcement.
Bottom Line
This merger of two major Chinese state-owned shipbuilders could potentially be a strategic move to bolster China's military capabilities. However, the exact implications of this development remain to be seen. What are your thoughts on this merger? Do you think it signals a shift in China's military strategy? Feel free to share this article with your friends and engage in a discussion. Don't forget to sign up for the Daily Briefing, delivered to your inbox every day at 6 pm.
