Chinese Cabinet Approves COSCO-CSCL Merger
China's cabinet has approved the merger of its two biggest shipping conglomerates, China Ocean Shipping Company (COSCO) and China Shipping Group Company (parent of CSCL), in the government's latest effort to make the industry more competitive globally.
The combined entity would become the world's fourth-largest container shipper, with a market share of roughly 8.1 percent. That would be far behind AP Moeller-Maersk A/S, Mediterranean Shipping Co SA and CMA CGM SA.
Denmark's Maersk warned last month that global demand for container transportation this year would grow at a slower pace than previously expected.
"With the approval of the State Council, COSCO and China Shipping will be restructured," the state asset supervisor said on its website on Friday, using a phrase commonly understood to refer to the merger. It gave no other details.
A listed unit of China Shipping, China Shipping Network Technology Co. Ltd, said the merger will focus on freight transport, container shipping, and oil transport services, in a stock exchange filing.
The listed unit also said that its shares will resume trading on the Shenzhen Stock Exchange on December 14.
Share trading in the listed units of the two state-conglomerates, including COSCO's flagship China COSCO and China Shipping's China Shipping Development , have been halted since Aug. 10.
No company representatives were immediately available for comment.
Collectively, COSCO and China Shipping control 488 billion yuan ($76 billion) in assets, Barclays analysts have estimated.
The merger also represents a massive reshuffling of central government-controlled assets just as consolidation of the country's state-owned industry gathers momentum.
Premier Li Keqiang last week said the government would spend the next two years dealing ruthlessly with overcapacity, with permanent loss-making companies going "under the knife".
Profits earned by China's industrial companies fell 4.6 percent in October on the year, declining for the fifth consecutive month, the National Bureau of Statistics said last month.
For central government-controlled state conglomerates, profits for the first 10 months of the year dropped 11.3 percent, the Ministry of Finance said in a separate statement.
The government already has driven the mergers of its two biggest nuclear power firms and top two train makers. Government regulators this week announced that Minmetals Corp of China would take control of Metallurgical Corp of China, which builds and designs mining and plant equipment. (Reporting by Beijing Monitoring Desk; Editing by Clarence Fernandez)