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Mergers & Acquisitions

Sinotrans & CSC chief sees benefits in potential merger with tolls-to-shipping conglomerate China Merchants

Sinotrans & CSC Chairman Zhao Huxiang comments on the potential benefits of a merger with fellow state-owned China Merchants

PUBLISHED : Tuesday, 17 November, 2015, 8:16pm
UPDATED : Tuesday, 17 November, 2015, 8:27pm

A potential merger between Sinotrans & CSC and China Merchants shouldn’t be seen as beyond reason in spite of the sprawling scale and seeming overlap between the two state-owned companies, according to Zhao Huxiang, chairman of Sinotrans & CSC, who speculated publically on the concept at a press briefing Tuesday.

“Not many of our businesses overlap and we are not competitors in most areas, it will be a group level integration,” Zhao told a press gathering in Hong Kong.

State-owned China Merchants is in talks to take over Sinotrans & CSC, with the intent of making the logistics group into a subsidiary, according to a report by financial magazine Caixin on Monday.

Zhao said that the structure of Sinotrans & CSC’s listed platforms won’t be changed significantly in the event of a merger.

Sinotrans Ltd. and Sinotrans Shipping Ltd., the listed units of Sinotrans & CSC, said last week the group is planning a “strategic restructuring”.

Zhao stressed that a possible merger would be assessed on merit and was expected to strengthen the combined group’s competence in terms of capital, resources and other potential synergies.

In the wider scheme, Zhao said a merger would be relatively simpler to execute than the talks underway between China Shipping and Cosco, the shares of which were suspended from trading in August after the companies said merger discussions were underway.

“The process could be easier than the merger of Cosco and China shipping, as it won’t have listed companies’ asset swap,” Zhao said in reference to the ongoing merger discussions.

However, one industry analyst said he was less than convinced that a merger would proceed smoothly, especially given the length of time it has taken for other mega-mergers in the logistics and shipping industry to be completed.

“The merger won’t be easy and may take long,” the analyst said.

The merger between Sinotrans and Changjiang National Shipping Corp (CSC) was completed in 2008, however, the full operational integration of business operations took an additional six years.

Any merger plan involving a state-owned entity must be submitted for approval to the State-owned Asset Supervision and Administration Commission.

Sinotrans & CSC’s business include freight forwarding by water, land and air, and for shipping sectors, are dry bulk, oil tanker and container shipping. China Merchants focus on ports, toll roads and energy shipping. The business of China Merchants is much more diversified as it also includes finance and real estate . By the end of 2014, the total asset of China Merchants exceeded 600 billion yuan, six times of Sinotrans & CSC’s asset.

The two groups have cooperated in the past, using their subsidiaries to establish a venture involving a fleet of very large crude carriers in 2014.