CHINA’S government is working on a plan to combine its two biggest shipbuilders to create an industrial giant that would dwarf its South Korean rivals, according to people with knowledge of the matter, reports Business times.
Merger not public
The state council, China’s cabinet, has given its preliminary approval to merge China State Shipbuilding Corp with China Shipbuilding Industry Corp,and the information isn’t public yet.
This would result in a combined annual revenue of Hyundai, Daewoo and Samsung’s shipbuilding units which are already the world’s top 3 by Beijing’s market value.
The giant resulting from the merger will have more than twice the combined annual revenue of South Korea’s Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries, the world’s three biggest shipbuilders by market value.
The two companies have combined revenue of at least 508 billion yuan (S$106 billion) making products ranging from aircraft carriers for China’s navy to vessels for carrying containers, oil and gas for commercial companies.
Move Affects subsidiaries
The move could be subject to change as many details need to be cleared by ministries and regulators. Also, both companies have subsidiaries, which trade on the stock exchanges in Shanghai and Hong Kong.
Representatives at the State-owned Assets Supervision and Administration Commission of the State Council (CSSC) and CSIC didn’t respond to fax or email requests.
Scale of this merger
CSSC and CSIC formed in July 1999 to increase competition and efficiency among the country’s defence companies, had 10.4 million compensated gross tons in order backlog as of February, which is equivalent to 13 percent of the market.
This is a significant number when compared with South Korea’s Hyundai Heavy which was at 7.72 million tons, according to the latest report by shipping services provider Clarkson.
Shares in uptrend
China Shipbuilding Industry, a subsidiary of CSIC that owns shipyards and other firms involved in the sector, climbed as much as 5.4 per cent in Shanghai trading on Friday.
On the other side, shares of Hyundai Heavy, Samsung Heavy and Daewoo Shipbuilding all fell more than 2.5 per cent.
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Source: Business Times