Cosco and China Shipping commence integration plans as merger looms
China’s two state run shipping conglomeates Cosco Group and China Shipping have started the planning of an integration of operations with the listed companies of the two groups, Cosco Limited, Cosco Shipping, China Shipping Development and China Shipping Container Lines all suspending stock trading for the planning of a major restructuring deal.
China’s local financial media has reported that the potential restructuring is promoted by the central government, and two groups are going to establish a “reform team” to work on restructuring plans. The government has requested the two groups to submit a plan in the next two to three months.
An official at Cosco Group told Splash that he believes the restructuring between the two groups could be very complex and difficult as the two groups have lots of similar assets.
The rumors about the integration have been around since April this year although both Cosco and China Shipping have continued to officially deny it.
In May, Cosco Bulk Shipping and China Shipping Development established a joint venture China Ore Shipping in Singapore to jointly operate a fleet of valemaxes. The two companies also signed a framework agreement in February 2014 to start cooperation in areas of shipping, logistics, port terminals, and shipbuilding.
Lin Yuan, a shipping analyst from Guotai Junan Securities told Splash that Cosco might integrate its oil shipping arm Cosco Dalian into the listed China Shipping Development, and Cosco Container Lines into the listed China Shipping Container Lines, however, Lin believes it is a huge effort which couldn’t be completed within two years.
Liang Jing, a shipping economist in Dalian Maritime University said the integration of container shipping assets between the two groups might change the competition scene on the international market. Currently Cosco Container Lines is in the CKYHE alliance while China Shipping Container Lines is in Ocean Three alliance.
“From a long term view, I think it is a positive move for the development of the shipping industry in China, but let’s see,” Lin said.
China’s other two state-run shipping giants Sinotrans and Changjiang Shipping Corporation (CSC) merged together as Sinotrans & CSC Group at the end of 2008, and the merger has generally been unsuccessful. Nanjing Tanker, the oil shipping arm of the group, was delisted from the stock exchange due to consecutive losses, and the group recently also got rid of its domestic bulk shipping arm CSC Phoenix by selling its entire shareholdings at the company to private company Tianjin Shunhang Shipping.
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