New Characteristics of Active Mergers and Acquisitions by State-Owned Holding Listed Companies: "Focus on Core Business" Becomes a Key Driving Force

Log in to the Sina Finance APP and search for [Information Disclosure] to see more evaluation levels.

Securities Daily reporter Du Yumeng

Since the beginning of this year, mergers and acquisitions (M&A) among state-controlled listed companies in the A-share market have continued to accelerate.

For example, China National Materials Group Corporation completed the acquisition of 100% equity of Jiangsu Jingong Clean Energy Co., Ltd.; Xiamen Port Development Co., Ltd. completed the acquisition of 70% equity of Xiamen Container Terminal Group Co., Ltd. held by Xiamen International Port Development Co., Ltd.; China Shenhua Energy Co., Ltd. (hereinafter referred to as “China Shenhua”) completed the purchase of equity in 12 core enterprises under its controlling shareholder, State Energy Investment Group Co., Ltd.

According to data from Tonghuashun, based on the announcement date and excluding failed transactions, as of March 23 this year, there have been a total of 224 M&A events among state-controlled listed companies (whose actual controllers are the State-Owned Assets Supervision and Administration Commission of the State Council and local state-owned assets supervision and administration commissions) in the A-share market, covering multiple fields such as air transportation, energy, and electronics. Among them, 43 central enterprise-controlled listed companies are involved. From the M&A targets disclosed by several central enterprise-controlled listed companies, “focusing on main business” has become an important driving force.

For instance, to enhance the core competitiveness of its main business and further promote the optimization of domestic capacity layout, in February this year, China National Investment and Guota Juice Co., Ltd. plans to acquire 70% equity of Luochuan Lingxian Apple Deep Processing Technology Development Co., Ltd. through a package transaction of purchasing equity and increasing capital. Additionally, China Eastern Airlines Corporation Limited (hereinafter referred to as “China Eastern Airlines”) subsidiary Eastern Airlines Import and Export Co., Ltd. will transfer its 49% equity in its affiliated company, Eastern Airlines Supply Chain, to Eastern Airlines Logistics Co., Ltd. to fully leverage its advantages in the field of aviation material supply chain transportation and management, thus providing more efficient and high-quality aviation material supply chain management and logistics support services for China Eastern Airlines.

In practice, the current M&A and restructuring among central enterprises are transitioning from past scale expansion to focusing on main business or strategic focus, which highly aligns with the policy orientation of “three concentrations” of state-owned capital.

To better play the backbone and pillar role of central enterprises in the national economy, Zhang Yuzhuo, Secretary of the Party Committee and Director of the State-owned Assets Supervision and Administration Commission of the State Council, further clarified during this year’s National Two Sessions that during the “14th Five-Year Plan” period, new breakthroughs should be achieved in promoting the “three concentrations” of state-owned capital. The goal is to change the situation where the layout of the state-owned economy is long and widely distributed but lacks high-end and has many low-end elements, concentrating central enterprise assets into 20 key industries among the 97 major categories of the national economy and central enterprises’ operating income of over 88% into these 20 industries.

Li Xiao, Deputy Director of the Capital Market Regulation and Reform Research Center at Central University of Finance and Economics, stated in an interview with Securities Daily that the current direction of central enterprise M&A and restructuring has shifted from scale expansion to strategic focus. This is specifically manifested in: focusing from comprehensive coverage to future key areas, strengthening the control of the state-owned economy in these areas. From traditional industry integration to the transformation of new and old kinetic energy, the restructuring targets are shifting from cost reduction and efficiency enhancement to technological breakthroughs and ecological construction. From administrative dominance to market dominance, encouraging central enterprises to integrate external innovative resources through market-oriented means (such as equity cooperation, joint research and development) to improve resource allocation efficiency.

Li Xiao expects that from an industry distribution perspective, central enterprise restructuring and integration may revolve around energy security (such as clean utilization of coal, new power systems), high-end manufacturing (such as aerospace, semiconductor equipment), and digital economy (such as industrial internet, computing power infrastructure) fields, with instances of cross-group and cross-regional industrial chain integration. Furthermore, strategic emerging industries and future industries are also expected to become hot spots for restructuring; for example, central enterprises may acquire or merge with companies that possess key core technologies (such as chip materials, hydrogen energy storage and transportation) or establish industrial funds to incubate cutting-edge technologies (such as brain-computer interfaces, controllable nuclear fusion).

It is worth mentioning that with the registration of the consideration shares involved in the restructuring of China Shenhua completed at the Shanghai branch of China Securities Depository and Clearing Co., Ltd. on March 16, this asset restructuring worth hundreds of billions not only set a record for the scale of issuing shares to purchase assets in the A-share market but also enjoyed the policy dividend of “first order applicable simplified review process,” providing a “sample” experience for subsequent restructuring and integration of central enterprise-controlled listed companies in the A-share market.

According to Zhu Changming, a partner at Sunshine Era Law Firm and head of the State-Owned Enterprise Mixed-Ownership Reform Center, this restructuring clearly conveys the regulatory orientation of “compliance is efficiency.” That is, high-quality listed companies with long-term good information disclosure, standardized governance, and outstanding main businesses will obtain more efficient capital operation channels. This is expected to form a market incentive ecology of “compliance—efficiency—more compliance” for the subsequent restructuring and integration of central enterprises in the A-share market, guiding central enterprise-controlled listed companies to further focus on their main businesses and enhance governance, thus incentivizing more central enterprise-controlled listed companies to actively utilize capital market tools, boosting the activity of the M&A market, forming a virtuous cycle of “quality players having smooth access,” and promoting the optimization of state-owned capital layout and structural adjustment.

Zhu Changming predicts that during the “14th Five-Year Plan” period, M&A and restructuring among central enterprises are expected to usher in a new cycle of strategic leadership and value creation, while the synergy effects and growth expectations brought by restructuring and integration will drive the revaluation of central enterprise value.

Massive information and precise interpretation, all in the Sina Finance APP.