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State Firms Reorganize Across Sectors, M&A in Emerging Industries Heats Up
Recently, under the support of a series of new policies, the activity of state-owned enterprises (SOEs) in mergers and acquisitions (M&A) and restructuring has been continuously increasing. Major reorganizations have emerged in various fields such as energy and electricity, mineral resources, and strategic emerging industries like new energy vehicles, new materials, and artificial intelligence are heating up in terms of M&A and integration. From the relevant arrangements, it is expected that in the future, SOEs will intensify strategic reorganizations, professional integrations, and forward-looking layouts, carrying out more high-quality M&A around new technologies, fields, and tracks to create a second growth pole for the development of strategic emerging industries.
Gansu Energy announced on the evening of October 14th that the Shenzhen Stock Exchange's M&A Restructuring Committee reviewed and approved the company's share issuance to purchase asset project. The company previously announced its intention to purchase 66% of the shares of Gansu Electric Power Investment Changle Power Generation Co., Ltd., held by Gansu Electric Power Investment Group Co., Ltd., through the issuance of shares and cash payment, and at the same time, it plans to issue shares to specific objects to raise supporting funds. After the implementation of the reorganization, the company will expand into the business field of peak load power sources related to new energy power generation, significantly enhancing the profitability of the listed company.
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This reorganization is the first M&A and restructuring project approved by the A-share market after the release of the "Opinions on Deepening the Reform of the M&A Restructuring Market of Listed Companies," and it is also a microcosm of SOEs leveraging integration to power new tracks.
In fact, whether it is based on the development of new quality productive forces or from the perspective of deepening the reform of SOEs and optimizing and adjusting the layout of the state-owned economy, M&A and restructuring are important means.
On September 30th, the State Power Investment Corporation launched two "arrows" in succession, successively defining the integration platforms for nuclear power operation assets and domestic hydropower assets; on September 18th, the restructuring plan of China Shipbuilding to absorb and merge China Shipbuilding Heavy Industry was announced, which is expected to become the largest M&A transaction in the history of A-shares; on September 8th, Salt Lake Co. announced that its controlling shareholder, Qinghai State Investment, and China Minmetals planned to jointly establish China Salt Lake Group, with China Minmetals indirectly taking over the listed company.
The intensity of local SOE reorganizations and integrations has also been further increased. For example, Sichuan Province recently clarified that it will promote the optimization and structural adjustment of the layout of the state-owned economy, with greater intensity in the layout of characteristic advantage industries and strategic emerging industries, and orderly promote the strategic reorganization and professional integration of SOEs. The integration and establishment of Sichuan Science and Technology Innovation Investment Group and Sichuan Data Group.
"With the full promotion of the new round of SOE reform deepening and upgrading actions, the integration and reorganization of SOEs will continue to accelerate, and emerging industries will become an important direction. SOEs will promote the rapid development of emerging industries by integrating advantageous resources and technical forces, injecting new momentum into the economy," said Zhou Lisa, a researcher at the China Enterprise Reform Research Association, when accepting an interview with a reporter from the Economic Reference News.
This trend can also be seen from the relevant policy orientations and actions. At the recent Central Enterprise Professional Integration Promotion Meeting, Wang Hongzhi, a member of the Party Committee and deputy director of the State-owned Assets Supervision and Administration Commission of the State Council, said that it is necessary to aim at key fields and core products, innovate integration methods, grasp the strategic direction and timing according to the characteristics of industry development, use M&A methods well, and achieve substantial breakthroughs as soon as possible to create a second growth pole for the development of strategic emerging industries.
On the same day, 12 groups of 26 units' professional integration projects were signed in a centralized manner, most of which belong to strategic emerging industries such as new energy vehicles, new materials, and artificial intelligence. These include the cooperation project between China FAW, Ordnance Equipment Group, Dongfeng Company, and China Chengtong New Energy Vehicle Power Battery, the cooperation project between Aviation Industry Group and China Aero Engine Composite Materials, and the artificial intelligence cooperation project between China Green Development and iFLYTEK Co., Ltd.
"The professional integration and reorganization of this time can form a central enterprise power battery industry resource platform that synergistically implements national major strategies and undertakes the tasks of the emerging industry, further enhancing the innovation, research and development, control, and discourse power of the central enterprise new energy vehicle industry chain," said a person in charge of China FAW.Subsequently, at the third special advancement meeting of the 2024 Deepening and Enhancing Action for State-owned Enterprise Reform, the State-owned Assets Supervision and Administration Commission of the State Council once again emphasized the need to increase the intensity of strategic reorganizations, professional integrations, and forward-looking layouts. More high-quality mergers and acquisitions should be carried out around new technologies, new fields, and new tracks, and the integration and integration after mergers and acquisitions should be well managed. Actively promote the orderly exit of "two non" and "two capital", improve the green channel for exits, and free up more resources to develop emerging industries and promote scientific and technological innovation.
Zhou Lisha suggested that the integration and reorganization of state-owned enterprises should focus on practicality and sustainability. The actual situation of enterprises and market environment should be fully considered to ensure that the integrated enterprises can continue to develop healthily and enhance overall competitiveness.
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