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our reporters zhuang linghui and lu zhikun report from beijing

five years after the merger of the "north and south ships", the country will see the merger of two "giant ships" again.

recently, two flagship listed companies under china shipbuilding industry corporation (601989.sh, hereinafter referred to as "china shipbuilding industry corporation") simultaneously issued an announcement stating thatchina heavy industry”) and china state shipbuilding corporation limited (600150.sh, hereinafter referred to as “chinese shipbuilding”) is planning a merger transaction, in which china shipbuilding will absorb and merge china heavy industry by issuing a shares to all shareholders of china heavy industry.

china business news reporter noted that when the "south ship" and "north ship" merged in 2019, they were praised as "china's magic ship". the industry generally believes that a series of adjustments will be made in the future. in addition to routine adjustments such as group personnel and functions, the competition and specific positioning of the major listed companies under the group also need to be further optimized. the planned merger of the two listed companies is a continuation and deepening of the previous "south ship" merger.

"this is not a simple merger, but an economic layout, structural adjustment and strategic reorganization." li jin, an expert in state-owned enterprise reform and development research, told reporters that the planned merger of the two companies is a major move in the structural adjustment of central enterprises. it can optimize the operating structure of listed companies, enhance their influence in the capital market, and fully demonstrate the trend and direction of professional reorganization and integration of state-owned central enterprises and capital market integration.

the continuation and deepening of the merger of "north and south ship"

five years ago, the "north and south ship" merger attracted widespread attention from both inside and outside the industry.

in fact, the merger of "north and south ship" is also a matter of "long-term separation and inevitable reunion". the two companies were split from the former china state shipbuilding corporation in 1999.

among them, the former china shipbuilding industry corporation is commonly known as "beichuan", which has china heavy industry,china power（600482.SH）、china haiphong(600764.sh), china emergency (300527.sz),jiuzhiyang（300516.SZ）、cssc hanguang(300847.sz) and other listed companies; the former china state shipbuilding corporation is commonly known as "nanchuan", which has china shipbuilding,cssc defense(600685.sh) andcssc(600072.sh) and other listed companies.

in 2019, 20 years after the split, the "north and south shipyards" implemented a joint reorganization, and the two companies were transferred to china shipbuilding group as a whole. in the following two years, all of the above listed companies were incorporated into china shipbuilding group, and the strength of "china's shenchuan" continued to grow.

when the "north and south ship" merged, the industry generally believed that after the merger, in addition to the regular adjustments to the group's personnel, organizational structure and functional departments, a series of adjustments would be made in the future, among which further optimizing the positioning of each company and the competition among peers would be an important direction. therefore, the planned merger of china shipbuilding and china heavy industry is also considered by the industry to be a continuation and deepening of the "north and south ship" merger five years ago.

"both listed companies were core listed companies under the previous 'north and south shipbuilding'. if the integration is successful this time, the total assets of the new company will be close to 400 billion yuan, with annual revenue exceeding 100 billion yuan, and it will become the world's largest shipbuilding listed company." zhang renyuan, director of the industrial and commercial enterprise rating department of s&p global ratings, told reporters that the merger of the two major companies is a continuation and deepening of the previous merger of "north and south shipbuilding". if the merger is successful, it will help china shipbuilding group to more efficiently integrate and allocate resources within the group and enhance its global competitiveness.

"what is clear is that this is not a simple merger, but an economic layout, structural adjustment and strategic reorganization." li jin also said that if the reorganization is successful, the absolute value of the production capacity of the surviving listed companies will not expand, but the controllability of the allocation will be enhanced, which will be more conducive to complementary advantages, optimizing resource allocation and achieving the goal of becoming better and stronger.

the reporter learned that before the announcement of the reorganization, the share prices of china shipbuilding and china heavy industry both fell sharply. the reorganization announcement was released on the evening of september 2, and the share prices of the two companies fell sharply during the stock trading period of that day. as of the close of september 2, the share price of china heavy industry fell 6.39% to 4.98 yuan per share; china shipbuilding fell 9.04% to 34.90 yuan per share.

in response to this, relevant persons from china shipbuilding responded to investors' concerns and stated that they were not quite sure the reason for the stock price drop, and that the company's production and operations were currently normal; the company's performance in the first half of the year was good, and its main financial indicators all increased year-on-year.

in fact, the stocks of the cssc companies fluctuated at the opening of the day, and the stock prices of many of the above-mentioned listed companies fluctuated and fell. by the close of the day, jiuzhiyang fell 5.35%, cssc technology fell 4.34%, china power fell 5.17%, and cssc defense fell 6.53%.

re-emergence of the “strong alliance”

five years ago, the merger of the north and south shipyards was called a "strong alliance", and thus the china shipbuilding group, the "chinese magic ship", was born.

five years later, the two listed companies are the largest asset integration of china shipbuilding group after the merger of "north and south ships". it is seen by the outside world as another "strong alliance". while strengthening the group's resource allocation capabilities, it also shows a new trend in the integration of central enterprises.

the two companies planning to merge are both large shipbuilding companies with a market value of more than 100 billion yuan. as of the close of the day when the restructuring news was announced, the market value of china shipbuilding and china heavy industry was 156.088 billion yuan and 113.554 billion yuan respectively.

"this is the largest m&a transaction in the a-share capital market in the past decade." li jin said that after the completion of this reorganization, the surviving listed company will become the world's largest flagship shipbuilding listed company leading the world in asset scale, operating income scale, and number of ship orders on hand.

various data also verify this statement.

in the first half of this year, both china shipbuilding and china heavy industry achieved growth in both revenue and net profit, and the delivery of shipbuilding business and the volume of orders in hand also increased.

among them, the number of civilian ships delivered by china shipbuilding and the average price of each ship increased year-on-year. a total of 48 civilian ships with a deadweight tonnage of 4.0345 million tons were completed and delivered, 10 more than the same period last year. the tonnage completed 59.87% of the annual plan, an increase of 3.20% year-on-year.

during the same period, china heavy industry received orders for 68 civilian ships with a total deadweight tonnage of 11.671 million and a total value of rmb 43.6 billion, representing year-on-year growth of 83.8%, 230.6% and 130.2% respectively; a total of 26 civilian ships with a total deadweight tonnage of 2.773 million (a year-on-year decrease of 7.1%) and a total gross tonnage of 843,000 (a year-on-year increase of 10.5%) were completed.

as of the end of june 2024, china shipbuilding has a total of 322 civilian ship orders with a total of 23.6218 million deadweight tons and a total value of rmb 199.639 billion; china heavy industry's marine transport equipment business has a total of 216 orders with a total value of 28.783 million deadweight tons. among the orders, the proportion of mid-to-high-end and green ship types continues to increase.

"the planned merger of the two companies is of great significance and is a major move in the structural adjustment of central enterprises." li jin believes that if the two companies can merge this time, it will further optimize the operating structure of listed companies and enhance their influence in the capital market; at the same time, it will also achieve the integrated development of industrial operations and capital operations, which is a new trend for state-owned capital to be injected into the capital market.

"structural adjustment, reorganization and mergers are the main themes of the new round of state-owned enterprise reforms. we believe that strengthening the influence of state-owned capital in the stock market will become a major trend." li jin said that currently china's stock market has a high proportion of private forces and weak control by state-owned enterprises. therefore, the value of the stock market deviates from the actual situation. it is necessary to strengthen the control and influence of state-owned capital to rationalize the value of the stock market.

"the integration of the industrial chain by central soes through mergers and acquisitions will help improve the development of new productivity and may continue to accelerate, and the integration of new economy and traditional industries is also expected to receive greater attention from the market in the future." li jin said that as of mid-july, the number of central soe restructuring and integration events has increased by 120% year-on-year this year. focusing on deepening reforms to optimize resource allocation, it is expected that "encouraging listed companies to focus on their main businesses and comprehensively use mergers and acquisitions, equity incentives and other methods to improve the quality of development" and "supporting mergers between listed companies" will become a trend in the future.

"the planned merger of the two companies is also in line with the context and ideas of state-owned enterprise reform." zhang renyuan said that historically, the reform of state-owned enterprises can be divided into two stages: splitting and integration.

"the first stage is splitting, that is, in the process of separating government and enterprises, large groups will be split into multiple state-owned enterprises." zhang renyuan pointed out that the splitting aims to increase market competition, promote market-oriented operations of enterprises, and enhance the competitiveness of state-owned enterprises.

"the second stage is integration, that is, integrating different groups with the same mature business into a stronger group company." zhang renyuan said that this move is mainly to optimize resource allocation under the premise of market-oriented operation, reduce unnecessary competition among peers and "internal friction", and further promote the growth and strength of state-owned enterprises.

regulating competition among peers

similar to the "north and south ship" incident five years ago, while strengthening the competitiveness of the companies in a coordinated manner, this merger is also intended to regulate competition among peers.

both companies made it clear in the announcement that the purpose of planning this transaction is to further focus on the country's major strategies and main responsibilities of building a strong military, accelerate the high-quality development of the ship assembly business, standardize competition among peers, and improve the operating quality of listed companies.

"eliminating and avoiding competition in the same industry and achieving complementary advantages is the internal driving force behind the merger of the north and south shipyards and is also the internal driving force behind the merger planning of the listed companies this time." li jin believes that the north and south shipyards themselves have problems with duplicate investments in many areas, which have not been completely resolved over the years.

"through a similar merger approach, we can complete the professional integration of relevant assets and businesses and eliminate and avoid competition among peers." li jin said that the reorganization of the two listed companies will also integrate the two companies' advantageous scientific research and production resources and supply chain resources, promote the deep integration and upgrading of advanced shipbuilding and repair technologies, and steadily advance the integration of relevant assets and businesses that are eligible for injection into listed companies to resolve the problem of competition among peers.

previously, the "north ship" was more military-oriented, focusing on ship design and supporting equipment, while the "south ship" was more civilian-oriented, focusing on ship manufacturing, but the two still had some overlaps in some business areas such as ship assembly and power, as well as competition in the same industry. the situation of the two listed companies, china shipbuilding and china heavy industry, is similar.

in terms of main business, both listed companies are involved in shipbuilding business, and both involve military and civilian products.

among them, china shipbuilding's shipbuilding business mainly involves military ships, various special ships, large/ultra-large container ships, liquefied gas ships, large cruise ships, bulk carriers, public law enforcement ships, etc. china heavy industry's shipbuilding business mainly involves military products such as aircraft carriers, surface ships, conventional-powered submarines, military auxiliary ships, public law enforcement equipment, and civilian products such as bulk carriers, container ships, oil tankers, gas tankers, offshore engineering ships, and scientific research ships.

in the first half of this year, among china shipbuilding's main products, revenue from shipbuilding and repair and marine engineering accounted for more than 97% of the main business revenue, and revenue from electromechanical equipment accounted for about 2.5%.

during the same period, among china heavy industry's main products, the revenue of the marine transport equipment segment accounted for approximately 37.87% of the main business revenue, the ship supporting and electromechanical equipment segment accounted for 20.88% of the main business revenue, the marine defense and marine development equipment segment accounted for 15.66%, the deep-sea equipment and ship repair and modification segment accounted for 14.83%, and the strategic emerging industries and other segments accounted for 10.76%.

"regarding the listed companies under the 'north and south shipyards', it is expected that the specific plan for the subsequent asset restructuring will mainly focus on the integration of the two major businesses of ship assembly platform and power." li jin said that the planned merger between china shipbuilding and china heavy industry mainly involves the integration of the ship assembly platform business. in the future, it may also absorb and merge china shipbuilding defense, while injecting hudong-zhonghua, an unlisted company with good ship delivery quality, and gradually divesting non-performing assets.

"the integration of the power business may involve the divestiture of the power business and its overall integration into china power, making the company a platform for power and supporting businesses," said li jin.

"after the completion of this reorganization, the surviving listed company will become a flagship shipbuilding listed company that leads the world in asset scale, revenue scale and number of ship orders on hand." li jin believes that after this reorganization, the surviving listed company will seize industry opportunities with its strong scientific research and innovation capabilities, advanced management level, exquisite manufacturing technology, and rich product lines, enhance the company's influence in the global market, and continue to lead the development of the global shipbuilding industry.

state-owned assets reform is advancing in depth

represented by the various integrations around the "china magic ship", the industry believes that the subsequent integration of new economy and traditional industries will be further accelerated, which will help the development of new quality productivity and will inevitably receive greater attention from the market.

"problems such as competition among the two shipyards are particularly detrimental to the concentration of resources for innovative breakthroughs and the formation and development of new quality productivity." li jin believes that the restructuring of emerging industries will be further strengthened.

"since the joint reorganization of the two shipbuilding companies in the north and south, china shipbuilding group has optimized its scientific research and production systems and capacity layout, and integrated the scientific research and production resources originally belonging to the two major shipbuilding groups." li jin said that this reorganization aims to solve the problem of intra-industry competition between the two listed companies in the field of general assembly business, integrate and merge the scientific research and production systems and management systems, promote the professionalization, systematization and coordinated development of each member unit, implement the three-year action plan for deepening reform, and promote the preservation and appreciation of state-owned assets.

"deepening reform around optimizing resource allocation, adhering to the principle of enterprise as the main body and marketization as the means, highlighting the main business, focusing on industry, paying more attention to strengthening and improving, promoting the integration and reorganization of state-owned enterprises, orderly advancement and retreat, improving quality and efficiency, and actively laying out new industrial tracks are the needs of developing new quality productivity in accordance with local conditions and vigorously cultivating new development momentum." li jin pointed out that since the beginning of this year, there have been nearly 40 professional integration and reorganization events related to local state-owned enterprises, focusing on real estate management and development, chemical industry, and transportation infrastructure. as an important position for reform, central enterprises and their listed companies have also hadchina tungsten high-tech、avic electro-mechanical testand many other companies are promoting mergers and acquisitions and restructuring.

in july this year, the third plenary session of the 20th cpc central committee reviewed and passed the "decision of the cpc central committee on further comprehensively deepening reforms and promoting chinese-style modernization", which made systematic arrangements for deepening the reform of state-owned assets and state-owned enterprises, and clearly stated that it would push state-owned capital to concentrate in important industries and key areas related to national security and the lifeline of the national economy, in public services, emergency response capabilities, and public welfare areas related to the national economy and people's livelihood, and in forward-looking strategic emerging industries.

not long ago, zhang yuzhuo, secretary of the party committee and director of the state-owned assets supervision and administration commission of the state council, pointed out in an interview with xinhua news agency that the sasac will focus on implementing the corresponding arrangements in five aspects: firmly grasping the overall goals, fundamental requirements, clear orientation, key tasks and political principles of deepening the reform of state-owned assets and state-owned enterprises.

among them, the clear orientation is mainly to accelerate the formation of production relations that are more compatible with the new quality of productive forces. specifically, we must grasp the general trend of the new round of scientific and technological revolution and industrial transformation, adapt to the new expectations of the people and new changes in market demand, and accelerate the transformation of corporate organizational forms, operating mechanisms, and management systems.

regarding the reorganization, the reporter called china heavy industry for an interview, and the other party said that all relevant matters are subject to the announcement. in addition, the reporter called and wrote to china shipbuilding for an interview, and the other party said that the feedback had been given to the leadership and would be replied as soon as possible. as of press time, the reporter has not received a reply.