China approves second shipping-related merger this month

BEIJING (BLOOMBERG) - China has approved another strategic restructuring of two state-owned shipping-related conglomerates, the second such move in the state sector this month as the government steps up efforts to shrink industries plagued by overcapacity and create globally competitive businesses.

Sinotrans & CSC Holdings Co. will become a wholly owned subsidiary of China Merchants Group Ltd. and will cease to be directly controlled by the State-Owned Assets Supervision and Administration Commission, the agency also known as SASAC, said Tuesday on its website. Sinotrans Ltd. said Sinotrans & CSC Holdings will remain its controlling shareholder, but it will be a listed subsidiary of China Merchants. No financial details were provided.

"The reorganisation aims to achieve economies of scale and synergies in particular in the areas of logistics, energy and bulk shipping, property development, ports and marine and off- shore engineering between the two groups to speed up the development of an internationally competitive leading enterprise," Sinotrans Ltd. said in a filing to the Hong Kong Exchange.

The announcement comes after SASAC on Dec. 11 approved a reorganisation of China Ocean Shipping Group and China Shipping Group, with combined revenue of more than US$40 billion (S$56.26 billion). Shipping companies in other countries also are exploring mergers and acquisitions amid a slump in global freight rates.

Sinotrans & CSC Holdings counts Sinotrans Ltd. and Sinotrans Shipping Ltd., which provides vessel chartering services, among the listed units it controls. State-owned China Merchants Group, whose interests range from transportation to financial services, controls China Merchants Bank Co., China Merchants Holdings International Co.and China Merchants Property Development Co.

China Merchants Group is applying to the Hong Kong Exchange to confirm that it's under no obligation to make a mandatory general offer for Sinotrans Ltd. shares other than those already owned, while doing the same to the Shanghai Exchange for Sinotrans Air Transportation Development Co., Sinotrans Ltd said in its filing. No other listed units have made announcements.