China's Ansteel quietly proceeding with merger of Bengang

Anshan Iron & Steel Group (Ansteel) in Northeast China's Liaoning province has been quietly progressing with its merger of Bengang Group (Bengang), another state-owned steel mill in the province, as more shares of Bengang's Shenzhen-listed arm have been transferred to the group company free of charge to facilitate the merger, a Bengang official confirmed on July 21.

The merger is proceeding smoothly, though the timeline of the completion has remained unclear," he commented briefly.

A release by Bengang Steel Plates Co (Bengang Plates), Bengang's listed arm, confirmed the official's comment, as it disclosed on July 17 that three shareholders, all being state-owned but not steel related, have agreed to transfer their total 14.28% shares in Bengang Plates to its group company free of charge, just to "support Ansteel's efforts in restructuring Bengang".

The transfer will grow Bengang's share in its listed company to 76.3%, and this will also reduce the number of the shareholders in Bengang Plates and at the same time simplify its ownership structure, Mysteel Global noted.

The renewed efforts in merger was first heard in April 2021 after staying dormant for after the initiative first emerged in 2005, but sketchy details have been heard in the market since then, and officials from both the companies declined commenting on the matter. For details, please check our other story via the link: https://www.mysteel.net/article/5022557/FEATURE-Ansteel-and-Bengang-to-be-one-after-16-years.html

Among the obstacles along the years of little progress were that although both being state-owned, Ansteel is ultimately owned by the central government while Bengang is owned by the Liaoning province, making it hard to align the interests.

M&As, however, have become one the main themes in China's steel development since the 13th Five-Year Plan period and it has been of paramount importance in the 14th Five-Year Plan period (2021-2025) for the country to enhance the concentration level in its domestic steel industry, Mysteel Global noted.

"Until now, Bengang has been still running independently and as per normal, and any changes will only be carried out when the merger is completed," the Begang official commented, adding that handsome steel profits among the Chinese steel mills have made it easier for the Ansteel's takeover of Bengang, as huge debts will not be a drawback for the new owner, unlike in the difficult days for the steel mills.

The new entity of Ansteel and Bengang, if materialized, will be the world's third largest after China Baowu Group and ArcelorMittal or China's second largest steel mill, as for 2020, Ansteel produced 38.2 million tonnes of crude steel and Bengang 17.4 million tonnes, according to the data of World Steel Association.

The two companies, however, are similar in steel product portfolios in that both are producing mainly flats such as hot-rolled and cold-rolled coils, galvanized and color-coated steel for auto and electrical home appliances manufacturing, and the merger will probably lead to reviewing and streamlining their production lines and delisting one of their listed companies in China, Mysteel Global understands.

Written by Olivia Zhang, zhangwd@mysteel.com, and Rong Zhang, zhangronga@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.