China’s two largest shipyards, whose customers include the People’s Liberation Army Navy, will pool their resources in response to government orders to streamline operations, strengthen management and accelerate the sector’s development.
China CSSC Holdings said it plans to issue yuan shares to acquire China Shipbuilding Industry Company (CSIC), it said in a Shanghai Stock Exchange filing Tuesday, without disclosing merger terms. Both stocks fell before trading was halted for the announcement.
Both listed shipyards are subsidiaries of China State Shipbuilding Corp., the world’s largest shipbuilding conglomerate with a third of the global market based on shipbuilding orders.
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The pending merger will create a shipyard with combined annual revenues of 122 billion yuan (US$17.1 billion/HK$133.1 billion), nearly double the size of South Korea’s Hyundai Heavy Industries. The merged entity would be capable of building a variety of vessels, from warships such as aircraft carriers to commercial vessels such as container ships, very large crude oil carriers and even passenger ships.
Guangxi, China’s Type 075 Landing Helicopter Dock LHD. Photo: People’s Liberation Army Navy alt=Guangxi, China’s Type 075 Landing Helicopter Dock LHD. Photo: People’s Liberation Army Navy>
“A consolidation will help optimize their business structure with enhanced capacity to take orders for more advanced vessels,” Man Zaipeng, an analyst at Sinolink Securities, said in a note to clients. China’s growing share of the global shipbuilding market “bodes well for the new entity’s earnings,” he added.
The shipyard merger will complete China State Shipbuilding Corp.’s restructuring of its core manufacturing assets to spur new growth, from building and maintaining large ships to marine engineering. China is now the world’s largest builder of merchant ships, helped by a boom in global trade since joining the World Trade Organization in 2001.
Hyundai Heavy Industries, the world’s largest shipyard, built this 10,000 TEU-class container ship for China’s COSCO in 2007. Photo: EPA/STR alt=Hyundai Heavy Industries, the world’s largest shipyard, built this 10,000 TEU-class container ship for China’s COSCO in 2007. Photo: EPA/STR>
The Beijing-based conglomerate previously merged with China Shipbuilding Industry Corp in 2019 when China consolidated the two state-controlled shipbuilders. Before 2019, they operated separately, with the former covering the eastern and southern regions while the latter focused on the northern and western regions.
They have built hundreds of military ships in recent years as the Chinese navy seeks to rapidly modernize, including aircraft carriers, Type 055 destroyers, Type 075 amphibious assault ships, and Type 094A nuclear submarines.
China CSSC Holdings fell 9 percent to 34.9 yuan before the trading halt on Tuesday, giving the shipyard a market capitalization of 156 billion yuan. CSIC is worth 113.5 billion yuan after its shares fell 6.4 percent to 4.98 yuan.
Assuming a full share buyout, CSSC would need to issue 330 million new shares to acquire 100 percent of CSIC, which would increase its capital base by 42 percent based on current market prices.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, explore the SCMP app or visit the SCMP Facebook page and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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