China's state-owned assets regulator, the Assets Supervision and Administration Commission (SASAC) of State Council, has approved a merger between China Ocean Shipping Holdings Company (COSCO Group) and China Shipping Group.
The move is part of the country's reform plan to restructure its state-owned enterprises in a bid to boost competitiveness in overseas markets.
It will divvy up the businesses of the two shipping groups into four entities focused on container shipping, ports and terminals, oil and gas transportation, and financing.
According to an exchange filing, Hong Kong-listed China COSCO Holdings plans to consolidate the container-shipping operations by acquiring a total of 33 container shipping units and affiliates from China Shipping Container Lines for CNY1.14 billion (€162 million; $176 million) and leasing its container boxes and ships through COSCO Container Lines.
Meanwhile, it will sell all its dry-bulk shipping businesses to its holdings parent for CNY6.77 billion.
COSCO Pacific, COSCO Group's port-operating arm, has agreed to buy all the shares of China Shipping Ports Development, China Shipping's terminals arm, for CNY7.63 billion, while it also plans to sell its container leasing business, Florens Container Holdings, to a subsidiary of China Shipping Container Lines for CNY7.78 billion.
The proposed transaction will result in COSCO Pacific becoming the world's second-largest container terminal operator and turning China Shipping Container Lines into a container ship and box leasing company from operator.
Upon completion of the acquisition, container shipping, terminal operation and financial services will become a principal business of COSCO Group, COSCO Pacific and the China Shipping Group, respectively, according to Slaughter and May, the legal advisor for COSCO Pacific's transaction.
It is understood that China Shipping Group's oil-and-bulk-shipping unit, China Shipping Development Company, will buy the oil shipping business from COSCO Group.
The combined entity, to be named China COSCO Shipping Group and based in Shanghai, will have more than CNY530 billion in assets and become the fourth-largest player in shipping industry, after AP Moller Maersk Group, Mediterranean Shipping Company and France's CMA CGM SA.
COSCO Group said in a statement that it expects to start the business integration early next year and complete the transition within one year.
It is also reported that Beijing is pushing two other state shipping companies, China Merchants Energy Shipping and Sinotrans & CSC Holdings, to merge some units, though talks are at an early stage.
Earlier this year, Chinese government merged two of its biggest high-speed train manufacturers – China North Locomotive and Rolling Stock Industry (Group) Corporation and China South Locomotive and Rolling Stock Corporation – into China Railway Rolling Stock Corporation, the largest railway manufacturer in the world, in an effort to gain an edge when bidding for overseas contracts.
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