Current Situation of Chinas iron and steel enterprises and Mamp; Mamp; A Strategies

1、 Current Situation of China's iron and steel enterprises and M & M & A Strategies Abstract: The merger and reorganization to achieve large-scale operation has been the main theme of the worlds steel industry. In Chinas iron and steel industry from a big strong today, the arti

2、cle against the merger and reorganization of Chinas iron and steel enterprises the status quo and problems, and learn from and absorb domestic and foreign steel industry mergers and acquisitions experience and lessons for Chinas iron and steel enterprises to develop the acquisition strategy for impl

3、ementing the scientific reference. Keywords: iron and steel enterprises; industrial concentration; M & A 1, through the realization of large-scale merger and reorganization is the worlds iron and steel industry development trend of the times M & A has been the worlds largest iron and

4、 steel within the theme of the development of iron and steel enterprises. The European steel industry after several rounds of mergers, joint, and has formed Arcelor (now merged into Mittal), LNM Group, Thyssen Krupp, sheaville four feet Dingli situation; in 2002 in North America into the merger and

5、reorganization phase to date, forming the United States Steel Corporation, Nucor Steel and ISG Group (now merged into Mittal) 3 giant pattern; the original post-war Japan more than 50 steel companies, through mergers and acquisitions continue to re-integrate into the new Japan of iron and JFE the fr

6、amework of the two groups; in South Korea, POSCO one of South Koreas total steel output accounts for more than 65%. Expansion of the international steel giant Mittal, history is a history of mergers and acquisitions. In July 2006, after 5 months of long and fierce battle, the Mittal Steel, the price

7、 of 34 billion U.S. dollars swallowed by Arcelor, the worlds number two after the birth of the first capacity of 100 million tons of steel giant . Acquisition of ISG by Mittal Steel Group and Arcelor have groups on four continents to the layout of globalization, through its worldwide allocation of r

8、esources and market penetration of the global iron and steel enterprises, especially the formation of iron and steel enterprises in China under siege situation. South Koreas POSCO Group, Thyssen Krupp, Xie Virgin Iron and Steel Company and other large steel companies to be outdone, began to implemen

9、t their own global strategy. POSCO in resource-rich, the market has great potential to build 10 million tonne steel plant in India; ThyssenKrupp to buy Dofasco into the North American Automotive Market; sheaville following after entering the United States also has a place in Europe. Iron and steel e

10、nterprises began four offensive to seize the market, the worlds steel industry, the climax of the coming merger integration. Second, through the merger and reorganization to improve industry concentration degree is to enhance the development of Chinas steel industry, a must (A) The merger and reorga

11、nization is the large-scale iron and steel enterprises an effective way to World steel production is saturated, with production capacity mainly concentrated in China. In 2006, the State in order to prevent the risk of fluctuations in demand for new capacity and export of iron and steel enterprises i

12、n China issued a series of restrictive measures. On the other hand, the overall situation of Chinas steel industry is a big but not strong, the performance of the overall size of large, small-scale individual enterprises, industry concentration is low. In 2006, Chinas crude steel output of 421 milli

13、on tons, accounting for 34.66% of the worlds crude steel production. Only Baosteel Group into the world top ten iron and steel enterprises; to achieve the steel industry from a big strong, first of all have a few world-class steel companies. In the world steel production is saturated, through the me

14、rger and reorganization is to raise industrial concentration degree, has become a national and the domestic steel industry consensus. (B) The merger and reorganization of Chinas iron and steel enterprises to change the status of the supply chain, the only way for the vulnerable For a long time, as t

15、he upstream steel industry, the global iron ore supply 70% of Vale do Rio Doce, Australia, Rio Tinto and BHP Billiton three companies to master. And its downstream industries occupied the top six automobile industry market share of about 70%, in 2006 the worlds top ten shipping companies were the ma

16、rket share of 60%, compared to 2006, Chinas steel industry in the top 5 large firms The market share of only 24.8%. Relatively low concentration of enterprises to link in the supply chain in a relatively weak position. This is a direct result of the 2005 2007 iron ore prices have soared 71.5% and 19

17、% and 9.5%, while iron and steel enterprises were forced to accept this fact. In 2007, the international shipping company has its focus on the scale in the maritime field advantage, manipulating the price of iron ore shipping. In order to change the current straitjacket imposed by the passive situat

18、ion of iron and steel companies must compete for the supply chain restructuring through mergers and acquisitions leading role. Baosteel chairman Xu Lejiang also believes that increased industry concentration, the implementation of merger and reorganization is to solve the fundamental way of iron ore

19、 supply. (C) the merger and reorganization is to improve the product mix and the degree of concentration of iron and steel industry, an effective way to The productivity of Chinas steel industry are irrational, self-innovation capability is not strong, the product structure, low and so on, are relat

20、ed to industry-wide low degree of industry concentration has a direct relationship. Industry concentration is low, resulting in excessive competition in the steel market, steel prices more volatile. In 2005, Chinas steel enterprises have more than 1440, but the steel production in enterprises with m

21、ore than 10 million tons of only 8. A large number of small and medium iron and steel enterprises is relatively backward technology level, the main production of ordinary wire, twisted steel and other common products, resulting in iron and steel products sector imbalances, manifested in the low-end

22、steel products, the overall excess capacity, while the high-tech, high value-added iron and steel products worry about capacity shortages. Industry concentration is low in iron and steel industry also resulted in excessive energy consumption ratio. While Chinas iron and steel enterprises large and m

23、edium energy level and the gap between the international advanced level is only 10-15%, but because a large number of technical equipment behind the low level of SMEs in energy consumption, total energy consumption, the gap with the international advanced level of about 50%, making iron and steel in

24、dustry energy consumption accounted for 14.71% of the total energy consumption. To this end, the State Council put forward in 2007 to phase out backward production capacity 30 million tons iron, backward steel production capacity 35 million tons target. The simple elimination of backward production

25、capacity, it will affect the local fiscal revenue has also affected production company behind the employment of workers. Will be merger and reorganization with the elimination of backward production capacity can be combined so as to promote Chinas steel industry upgrading and structural optimization

26、, is a path worth exploring. In this context, re-Meishan Steel of Baosteel, Wuhan Iron and Steel re-E Steel, have achieved a successful precedent. Third, the status quo of Chinas steel industry merger and reorganization (A) The International Iron and Steel giants are eager to enter China through mer

27、gers and acquisitions Arcelor Mittal merger of tons of steel cost 1055 euros, while the acquisition cost of Valin tons of steel piping is only 2984 yuan. Chinas iron and steel enterprises is relatively low acquisition costs and huge market space for the international steel giant has great appeal. Cu

28、rrently, Mittal, POSCO, Nippon Steel and other steel giants in the world has passed shareholding, joint ventures, etc. into China, the implementation of its strategic layout in China. In theory, the acquisition of Chinas largest steel company Baosteel, need only 26.7 billion yuan. Although limited b

29、y short-term protection of Chinas steel industry policy, foreign investment can not be controlled temporarily. However, if Chinas steel companies are not bigger and stronger as soon as possible, there is no relevant anti-monopoly law to protect Chinas steel industry will completely lose their defens

30、e. (B) support of national policies M & steel enterprise In July 2005 introduced the “Steel Industry Development Policy”, clearly proposes to adjust the organizational structure of the steel industry through the implementation of merger, reorganization, has a comparative advantage to expand

31、the backbone of the scale of enterprise groups, improve industrial concentration. This marked the beginning of Chinas steel industry merger and reorganization of the prelude. In 2005 years, there have been mergers and acquisitions Hubei Wuhan Steel, Liuzhou Iron and Steel, Kunming Iron and Steel; An

32、shan Steel and Benxi Iron and Steel restructuring; Tangshan Iron and Steel and public awareness campaigns steel, bearing steel restructuring of the joint; Shougang Holding Water Steel, Shougang Group and Tangshan Iron and Steel was established in Beijing Shougang Tang Iron and Steel Company. Saddle

33、after the reorganization of the Iron and Steel Groups production capacity reached 20 million tons; reconstituted Liuzhou Iron and Steel Co., Wuhan Iron and Steel Company, annual production capacity of 16 million tons; integrated declare steel, bearing steel new Tangshan Iron and Steel has a 10 milli

34、on tons of capacity. Reposted elsewhere in the paper for free download . (C) of horizontal mergers and acquisitions to mergers and acquisitions mainly defensive in nature, the lack of overall strategy for the layout-based M & A Under international steel giant under siege, the supply chain co

35、ntrolled by others of the trend, Chinas steel enterprises were forced to scale reorganization through mergers and acquisitions in order to enhance the defense capabilities. M & A with defensive, the lack of long-term overall strategic planning. For example, restructuring of Bayi Iron &am

36、p; Steel Baosteel, initially motivated by the intended acquisition of 81 Mittal Steel, Baosteel being forced to wage. Due to lack of strategic planning and implementation of rules, making mergers and acquisitions more than a mere formality, “and” rather than and. And public awareness campaigns by th

37、e Tangshan Iron and Steel steel, bearing steel re-formed a new joint reorganization of Tangshan Iron and Steel Group, although in February 2006 listing, but the personnel and finance has made slow progress in the integration of questions still remain fragmented. (D) acquisition of interest in the co

38、mplex process of making mergers and acquisitions slow On the one hand, the local and national interests conflict makes the process of restructuring is very complicated. Large national steel companies hope that the national and even worldwide through strategic acquisitions to achieve optimal allocati

39、on of resources. On the other hand, iron and steel industry, capital intensive nature of making iron and steel enterprises are generally the backbone of the local economy enterprises, local governments hope to achieve in the region are generally more bigger and stronger, or even to the introduction

40、of foreign capital to upgrade its performance. In April 2005, at the Handan Iron and Steel Baosteel to plan the occasion of mergers and acquisitions, Hebei Province Development and Reform Commission submitted to the State Development and Reform Commission of Hebei Province, iron and steel industry c

41、onsolidation programs, so that Baosteels acquisition plans have fallen flat. In addition, mergers and acquisitions among enterprises of different ownership, is also very difficult, in 2007, private steel giants is almost the acquisition of Ling Sha Steel steel, but fell short of success at the last

42、moment, because in his private capacity as a local government to think twice. Fourth, Chinas iron and steel mergers and acquisitions strategy, selection and implementation of the (A) through M & A to speed up the formation of internationally competitive large-scale iron and steel enterprise

43、group In order to protect Chinas steel industry, industrial safety, and promote a rapid escalation of iron and steel industry, it is necessary to accelerate the formation of merger and reorganization of large internationally competitive iron and steel enterprises. At present, the domestic steel indu

44、stry merger and reorganization despite already begun, but it is precisely the lack of inter-provincial city, cross-regional with a powerful combination of meaningful restructuring of Chinas steel industry development policy on the formation of large iron and steel enterprises made specific guidance

45、in support of the first Steel, Tangshan Iron and Steels joint reorganization, support for the reorganization of Anshan Steel and Benxi Iron and Steel in support of companies such as Baoshan Iron and Steel right-clad steel merger and reorganization and so on. Related to iron and steel enterprises sho

46、uld establish the overall situation awareness, global awareness, to complement the implementation and accelerate the formation of iron and steel enterprises with international competitiveness of the large-scale iron and steel enterprise groups. (B) mergers and acquisitions to take into account local

47、 interests In order to coordinate cross-regional mergers and acquisitions during the central and local interests, on the one hand, the state should introduce some policies to support the maintenance of local vested interests of the vested interests to take care of inter-provincial. On the other hand

48、, large central enterprises to use their own technology, products, financial advantage, to help local steel companies together and stronger. Hubei Wuhan Iron and Steel in the steel after the completion of restructuring, according to the agreement, the Hubei Wuhan Steel into their management system a

49、nd support the development of E-steel. The E-Gang continue to enjoy great autonomy: independent production and management rights; after-tax profits retained in full, as the production source of funding for the development and transformation; and even can be adjusted according to the operation of the

50、ir own wages. Today, Wuhan Hubei Wuhan Steel not only to help companies achieve profitability, but also to use its technological advantages to help set up E-1500mm cold-rolled steel sheet production line. (C) to encourage upstream and downstream industries to the iron and steel industry, vertical me

51、rgers and acquisitions To change the iron and steel enterprises in the industrial chain, subject to the predicament of iron ore suppliers, iron and steel enterprises should take the initiative to strive upward own iron ore resources by investing in mergers and acquisitions. May also be expanded upst

52、ream and downstream steel industry, such as a car factory to provide parts. Mittal owns through its acquisition of iron ore in Brazil and India, Valin pipeline has been Mittal merger, the Mittal Valin pipeline to provide 3 million tons of low-cost global sourcing of iron ore. Iron and steel enterpri

53、ses to participate in upstream and downstream industries should be characterized according to their own products, financial status to implement. (D) mergers and acquisitions with the elimination of backward production capacity, to achieve technological progress and industrial upgrading, combined Bac

54、kward production capacity of Chinas iron and steel enterprises focused on local small and medium iron and steel enterprises, backward production capacity of the entire industry, about 20% of total capacity. Deng Qilin, general manager of Wuhan Iron and Steel Group, said that only the stronger, bigge

55、r national team, can we truly eliminate backward production capacity. The central enterprises in mergers and acquisitions process, through technical assistance and support to help SMEs to eliminate backward production capacity, to achieve common bigger and stronger. (E) To formulate a scientific and M & A strategy and resolutely implement the M & A success rate of Chinas steel industry is not high, “and” instead of “synergy” of the phenomenon more