Professional Reorganization Of Central Enterprises Reappears: The Merger And Acquisition Of 100 Billion Yuan Of Tianshan Shares Turns Into "China Shenni"

On the evening of March 2, Tianshan company (000887. SZ) issued 48 announcements in succession. It planned to purchase 100% equity of Zoomlion cement, 99.9274% equity of Nanfang cement, 95.7166% equity of Southwest cement and 100% equity of Sinoma cement from 26 trading parties such as China building materials, and paid consideration of 98.142 billion yuan.

It is worth mentioning that if this scheme is finally approved, it will become the third largest merger and reorganization case in the history of a shares, after China Merchants Shekou (145.8 billion yuan) and Changjiang Power (104.3 billion yuan). At the same time, it is also a major step for China Building Materials Group to realize the professional restructuring of its cement business.

On March 3, the share price of Tianshan stock opened with a limit of 18.58 yuan / share, and then fell back, closing up 6.63% to 18.01 yuan / share. China building materials (03323. HK) fell to HK $12.16 per share, down about 3.2%.

A-share "cement brother" changes ownership

After the completion of the transaction, the cement production capacity of Tianshan shares will increase greatly, with the total production capacity increased to about 430 million tons / year, the cement clinker production capacity to about 300 million tons / year, and the commercial concrete production capacity to more than 400 million cubic meters / year.

According to the previous announcement of conch cement (600585. SH), the company has a clinker production capacity of 259 million tons and a cement production capacity of 366 million tons. After merger and acquisition, Tianshan cement will surpass conch cement in terms of cement output, becoming a "king of cement" in a shares and the largest cement production enterprise in China.

According to the specific evaluation results announced, the assets of Zoomlion cement are valued at 21.96 billion yuan, those of Southern cement are valued at 48.77 billion yuan, those of Southwest cement are valued at 16.089 billion yuan, and those of Sinoma cement are valued at 11.32 billion yuan.

Among the total consideration of 98.142 billion yuan to be paid, 94.171 billion yuan was paid by Tianshan in the form of issuing shares, and 3.971 billion yuan was paid in cash. After negotiation, the price of the shares issued by Tianshan is 13.38 yuan / share, and the total number of shares issued is 7.038 billion shares.

In addition to China building materials, the counterparties include ABC investment and bocom investment. ABC investment holds 3.58295% equity of Southwest cement and 4.60172% equity of Nanfang cement, while bocom investment holds 2.30086% equity of Nanfang cement.

Before the acquisition, CNBM held 481 million shares of Tianshan shares, accounting for 45.87%. After the acquisition, CNBM will hold 7.077 billion shares of Tianshan shares, accounting for 87.51% of the shares without considering the matching fund-raising.

Therefore, the control right of listed companies has not changed, the controlling shareholder is still CNBM, and the ultimate actual controller is still SASAC of the State Council.

In July 2020, Tianshan company announced the suspension of trading, saying that in order to solve the problem of competition in the same industry, it is planning major asset restructuring with China building materials, demonstrating the equity of Zoomlion cement, southern cement, northern cement, southwest cement, Sinoma cement, etc., with a view to integrating the cement assets of China building materials.

In August of that year, the company announced the equity acquisition plan of Zoomlion cement, Nanfang cement, southwest cement and Sinoma cement. In the end, the cement assets of the three CMB companies under restructuring are Zoomlion cement, Southern Cement and southwest cement.

Conjecture of subsequent recombination

As the world's largest cement production enterprise, China building materials has already had the idea of restructuring its cement assets.

In 2016, China Building Materials Group Co., Ltd. and China National Materials Group Co., Ltd. held a reorganization meeting in Beijing, and the two companies merged and reorganized to formally establish China Building Materials Group Co., Ltd. At that time, song Zhiping, the chairman of the company, disclosed that the new company would promote restructuring in an orderly manner and release restructuring and integration dividends as soon as possible. "The new group will implement specialized restructuring in accordance with the basic method of optimizing resource allocation and integrating similar business resources, taking advantage of enterprises as the main body, building large listed companies as the goal, and avoiding horizontal competition and standardizing related party transactions as the principle."

The restructuring of Tianshan shares will be an important step in the professional restructuring of China building materials cement business plate.

According to China building materials, the restructuring is conducive to the integration of high-quality resources, consolidating the company's leading position in the cement industry, and promoting the solution of horizontal competition in cement business among its subsidiaries.

"The main reason for the restructuring of only three companies this time is that the volume of Tianshan shares as a listing platform is not large enough." A person familiar with China's building materials told the 21st century economic report that "after the market value of Tianshan shares returns to a relatively reasonable level, it is a more reasonable path to install other assets through the operation mode of issuing additional shares and rationing shares."

At present, other cement assets of China building materials include: Northern cement, Ningxia building materials, Qilian Mountain, Shangfeng cement and shanshui cement. Among them, northern cement has more than 50% of the shares.

In the past few years, China building materials carried out the strategy of joint restructuring, carried out the acquisition and merger of small cement plants in East China, Northeast China and southwest China, successively established Southern cement, northern cement and southwest cement, and merged Sinoma cement in 2017.

Meanwhile, through equity and strategic cooperation, China building materials has reached regional cooperation intention with conch, Asian cement, Jinyu, Yatai, Shanshui, taini, Tongli cement, Fujian cement, Wanqing, Jianfeng cement, Shangfeng cement and other regional cement, and has become the industry share leader from the industry recruits in 2005.

"Cement industry is an industry with strong regional nature and strong requirements for regional control ability." "In recent years, the reduction and replacement of building materials in China is gradually completed, and its efficiency will gradually increase. However, at present, the market does not have a reasonable valuation of building materials."

Weak supply and demand in the first quarter

From January to February this year, the cement market is in the off-season, and the construction in winter is reduced. Before the Spring Festival, there are also early work stoppages and holidays in the downstream areas, and workers return home early. At the end of January, the demand decreased rapidly, and did not recover significantly until before the Lantern Festival.

According to the data of Zhuo Chuang information, the average operating load rate of cement mill in January was 37%, and that in February was 10%. From the supply side, peak shifting production began in northern China in November last year, and the supply side began to tighten; while peak shifting production in southern provinces began in the middle and late January.

The average value of cement clinker storage location in China is the highest before and two weeks after the Spring Festival, which is more than 60%. In other times, it is between 55% and 58%, which is slightly lower than the average level of the whole year.

"However, changes in the supply side will still have a greater impact on the trend of cement prices in 2021 than on the demand side. Limited new production capacity is still more, and there is regional concentration, and the proportion of southern region is significantly higher. This will increase the competitive pressure in some provinces, leading to downward risk of prices. " Zhuo Chuang information analyst Wang Qi said.

Due to the weak state of supply and demand in the cement market in the first quarter, the national average price of P.O 42.5 bulk cement fell from 436 yuan / ton at the beginning of January to 413 yuan / ton at the end of February.

By the end of February, the annual production capacity of new dry process clinker line in China was 1.774 billion tons. 128 clinker lines are planned to be built, with an annual capacity of about 200 million tons. 42 of them are planned to be put into operation in 2021 with an annual capacity of about 68 million tons. In 2021, it plans to close 42 clinker lines with an annual capacity of 34.6 million tons. In 2021, the cement production capacity will increase by nearly 34 million tons, and most of the new capacity is expected to be put into production at the end of the year.

"It is predicted that in 2021, the cement demand will be 2.443 billion tons, with an annual growth rate of 3%, entering the post epidemic cycle. Infrastructure investment will be increased in 2020, and substantial construction will be carried out in 2021, and infrastructure demand will be significantly increased. In the second half of 2020, the situation of new real estate construction will improve, which will also increase the demand for real estate construction in 2021. " Wang Qi said.

In addition, due to the obvious increase of anti-monopoly efforts in 2021, cement enterprises may be constrained in pricing, and even affect the price rising space in peak season.

"Due to the strong growth expectation of demand, there is a possibility that prices in local markets where such key projects are concentrated are likely to rebound substantially, and the prices may return to the peak in 2019." Wang Qi said, "from the perspective of national prices, the price rise in peak season in East China and other import markets will increase, but the trend of resources from the north to the South will continue to strengthen, which will lead to an accelerated decline in prices in the off-season, and the price difference may widen in this year's low-season and peak season."

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