As the steel industry policies are gradually introduced in the second half of the year, corporate mergers and acquisitions are expected to reach the fast lane.

As an important basic industry and pillar industry of the national economy, the iron and steel industry has eliminated the backwardness and joint restructuring as the focus of its structural adjustment. Industry experts told reporters that tax allocation and other issues are the biggest difficulties for corporate restructuring. With the publication of documents such as the 12th Five-Year Plan for the steel industry and accelerating the guidance for the joint restructuring of steel companies in the second half of the year, some key issues have been clarified and answered. Afterwards, the pace of industrial restructuring will accelerate and new investment opportunities will also emerge.

Industry restructuring continues to advance

Since the beginning of 2000, the merger and reorganization of steel enterprises in China began to gradually increase, especially after the National Development and Reform Commission released the “Iron and Steel Industry Development Policy” in July 2005, and the pace of mergers and reorganizations was even faster.

Since the beginning of this year, the merger and reorganization of the iron and steel industry has continued to advance. Compared with previous years, mergers and reorganization events have become richer in terms of form and content, cross-regional corporate restructuring, and simultaneous corporate restructuring in the same region.

On June 15, the State Ministry of Industry and Information officially replied the Fujian Provincial Government and Anshan Iron and Steel Group, agreeing in principle to the joint reorganization plan of Anshan Iron and Steel Group and Fujian Sansteel Group.

Also in June, the steel companies in the Central Plains adopted the intra-regional and trans-regional approaches, respectively, to reopen the reorganization. On June 26, Anyang Iron and Steel reorganized three private steel mills. On June 30th, Anyang Yongxing Iron & Steel, a subsidiary of Jiangsu Shagang Group, took control of three companies and established Henan Sha Steel United Steel Group.

On July 13th, the Tianjin State-owned Assets Supervision and Administration Commission, Tianjin Steel Group, Tianjin Iron and Steel Group, Tianjin Tiantie Metallurgy Group and four state-owned steel companies jointly established the state-owned sole company, Bohai Iron & Steel Group Co., Ltd. was formally established. As a result, iron and steel enterprises with an annual output of 10 million tons of crude steel have emerged.

At the same time, private steel companies in Hebei are taking a step forward on the reorganization road.邯郸 7 private steel companies, Baoxin Steel, Hexin Steel, Pengxin Steel, Hengfeng Shunzhu Pipe, Rongxi Steel, Xinfang Foundry and Hongtai Foundry formed the Hebei Baoxin Iron & Steel Group through joint autonomy. Afterwards, a intensive industrial chain of coking, ironmaking, steelmaking, and steel casting will be formed, which will help improve the company's ability to withstand market risks and accelerate product structure adjustment.

Top ten steel companies will increase their concentration

The joint restructuring of enterprises has always been considered as an important means to increase the degree of concentration. Su Bo, the vice minister of the Ministry of Industry and Information Technology, disclosed that during the “Twelfth Five-Year Plan” period, China will focus on eight industries including autos, steel, cement, machinery manufacturing, electrolytic aluminum, rare earth, electronic information, and pharmaceuticals to promote the combination of superior enterprises and regions. Mergers and acquisitions, overseas mergers and acquisitions, and investment cooperation to increase industrial concentration.

Jia Yinsong, Director of the Department of Raw Materials of the Ministry of Industry and Information Technology, said that during the “12th Five-Year Plan” period, China’s steel industry will speed up the pace of mergers and reorganizations. The state supports the dominant large-scale steel companies to carry out cross-regional, cross-industry, cross-ownership joint reorganization, and encourages regional iron and steel enterprises to regroup together. To increase industrial concentration and strive to increase the concentration of the top ten steel companies to more than 60%.

Raising industry concentration is also one of the core contents of the “Iron and Steel Industry Adjustment and Revitalization Plan”, but from the perspective of implementation, the effect is not satisfactory.

According to the data of the Ministry of Industry and Information Technology, there are currently more than 500 crude steel producers in China, with an average size of only 1 million tons. The top 10 companies account for only 48% of the country's total crude steel output.

In addition, in 2010, Hebei Steel, Baosteel, Wuhan Iron and Steel, Anshan Iron and Steel and Shagang produced a total of 165 million tons of steel, which accounted for only 29% of the country's total output over the same period. This is in line with the “Top 5 Domestic Ranks” proposed by the “Iron and Steel Industry Adjustment and Revitalization Plan”. The goal of a steel company whose production capacity accounts for 45% of the country's total is far from the target.

In fact, many experts pointed out that simple expansionary restructuring does not benefit from the increase in concentration.

The reporter learned that a report on the “Study on the Restructuring of Iron and Steel Enterprises” (hereinafter referred to as the “Report”) written by Li Yongjun, a senior analyst of China Iron and Steel Association, was published on the second standing meeting of the Fourth Session of the China Steel Association. The report pointed out that simply blaming many industrial development issues on the issue of concentration, and then promoting corporate reorganization in order to increase the degree of concentration, does not in itself contribute to the solution of industrial development issues.

The "Report" pointed out that the current domestic restructuring of steel companies is often combined with the elimination of backward production capacity, and has been given more expectations. However, in fact, the significance of mergers and reorganizations of large-scale iron and steel companies to individual enterprises is to increase market competitiveness and obtain a more ideal market competition position, thereby expanding market share and increasing the profitability of enterprises; the significance of the steel industry is to cultivate steel enterprises. Improve the industrial control of the dominant enterprise groups and optimize the industrial organization structure.

Luo Bingsheng, executive vice president of the China Iron and Steel Association, also stated that the purpose of the joint reorganization of the steel industry is to become stronger rather than bigger. If it is just to make it bigger, it is tantamount to bringing together some small problems and turning it into a big problem. It is also a problem that needs attention in the process of corporate reorganization.

Insufficient attention to enterprise resource integration

With the deepening of China's economic system reform and rapid economic development, the reorganization events of China's steel companies have gradually increased, but the performance after reorganization is not obvious.

In this regard, the "Report" believes that the main reason is that there has been no substantial progress in resource integration after reorganization. In the restructuring of steel companies, only low-level external alliances were formed, and there was no scale and synergy effect. The reorganization did not result in a win-win result.

In fact, the Chinese enterprises pay more attention to the reorganization of the previous period, and have not paid enough attention to the reorganization of the enterprise resources. In many cases, the restructured new companies cannot only achieve corresponding synergies from mergers and reorganizations, but also develop by themselves. Moreover, due to the integration frictions of reorganization parties, the management costs are increased, even affecting their own original development ideas. For the serious may delay the original advantage of steel prices.

In addition, due to the complex nature of the capital structure of China's steel companies, there are large-scale central-level enterprise groups represented by Baosteel, Anshan Iron and Steel, and Wuhan Iron and Steel, and local steel enterprises such as heavy steel, Bengang, etc., Shagang, Rizhao Steel, etc. Private steel enterprises, in addition to city/county steel companies, small private steel companies.

"The complexity of the capital structure of China's iron and steel enterprises is not comparable to any country. The nature of the capital institutions of enterprises is different, and the representative interest groups are different. The most difficult aspect of mergers and acquisitions and restructuring of enterprises is how to resolve conflicts among various stakeholders, such as tax conflicts. , Personnel arrangements after the reorganization, etc." Experts from the China Iron and Steel Association pointed out.

Qu Xiaoxi, deputy secretary-general of the China Iron and Steel Association, also told reporters that reorganization is mainly an enterprise’s behavior. Apart from solving the problem of tax distribution, the government should formulate some other indicators such as environmental protection and access, and sort out the distribution of such large corporate restructuring interests. Clearly, some small and backward companies do not have the space to survive, so that mergers and reorganizations can go faster.

Miao Miao, Minister of the Ministry of Industry and Information Technology, also pointed out at the recent national enterprise merger and restructuring work experience exchange meeting that, in order to do a good job of mergers and reorganization of enterprises, we must give full play to the main role of the enterprise, fully respect the will of the enterprise, and respect the decisions made by the company. In promoting the merger and reorganization of enterprises, the main responsibility of the government is to improve the relevant industry planning and policy measures, standardize administrative actions, strengthen and improve the services for mergers and acquisitions of enterprises, create a good environment for mergers and acquisitions of enterprises, can not go back and can not Intervene in business.