Steelmakers given merger green light
Baosteel’s takeover of Wuhan mill part of country’s long-term plan to cut capacity
Shanghai Baosteel Group Corp has been given the green light to take over Wuhan Iron & Steel Group Corp, which will help create the world’s secondlargest steel smelter, according to a statement by a Baosteel subsidiary on Thursday.
The State-owned Assets Supervision and Administration Commission has approved the merger of the two groups, said regulatory filings made by Baosteel's listed units Bayi Iron & Steel Co and Shanghai Baosteel Packaging Co.
The merger is going to be done through a share swap. Baosteel will issue 5.65 billion shares to Wuhan Iron & Steel. The share prices are set at 4.6 yuan (69 US cents) per share for Baosteel and 2.58 yuan per share for Wuhan Iron & Steel.
Baosteel, China's largest steel company, will change its name into China Baowu Steel Group. Wuhan Iron & Steel, China's sixth-largest steelmaker, will become a wholly owned subsidiary of the new company.
The new company, with annual crude steel output of around 60 million metric tons, is going to become the secondlargest in the world next to Luxembourg-based ArcelorMittal.
The merger is seen as a major move toward downsizing China’s steel capacity.
According to the State Council Information Office, the production capacity of China’s steel industry declined by 21.3 million tons as of the end of July, accounting for 47 percent of the target this year.
The China Iron and Steel Association said that the country will be able to achieve the goal of cutting steel capacity by 100 to 150 million tons in the next five years, according to a report by wallstreetcn.com on Thursday.
Beijing-based National Business Daily quoted an executive of the CISA as saying on Wednesday that by 2025, the output of China’s steel industry will be concentrated in about 10 groups.
These groups will include three to four with an annual capacity of 80 million tons, six to eight companies with annual capacity of 40 million tons, and companies with specialized products such as seamless steel tube and stainless steel.