Another shipping conglomerate born as Beijing approves merger of Sinotrans and China Merchants

Beijing has approved the merger of Sinotrans & CSC and China Merchants Group as part of wider restructuring of state-owned companies and consolidation of the shipping industry reeling from slowing global trade and overcapacity.

The two state-owned transportation and logistics majors’ merger proposal was cleared by the State Council, China’s cabinet, State-owned Assets Supervision and Administration Commission (Sasac) said in a statement on Tuesday.

“Sinotrans & CSC will be wholly merged into China Merchants Group and it will no longer be directly supervised by Sasac,” it said.

The two groups have been in merger talks, financial media Caixin reported late month. Sinotrans and Sinotrans Shipping, the listed units of Sinotrans & CSC, had separately said their parent was planning a “strategic restructuring”.

Sinotrans & CSC chairman Zhao Huxiang had later said a merger would not immediately involve complicated asset swaps between listed units under the two groups, such as in the recent merger of China Ocean Shipping Group and China Shipping Group.

Daniel Meng, an investment analyst at CLSA, said the merger of Sinotrans & CSC and China Merchants Group could potentially enlarge Hong Kong-listed ports operator China Merchants Holdings’ (International) asset portfolio in the long term but since the latter’s management has not indicated that its parent has any imminent plans to inject Sinotrans & CSC’s assets into it, any potential impact cannot be assessed immediately.