Securities Regulator Reaffirms Support for Merger Deals

(Beijing) — China’s securities regulator signaled greater support for mergers and acquisitions involving listed companies, indicating an easing of curbs on stock market transactions that were installed in mid-2016.

Mergers and acquisitions in capital markets have provided crucial support for China’s economic growth, the China Securities Regulatory Commission said in a statement Tuesday. The statement further indicates the regulator may allow more publicly traded firms to carry out such deals.

The CSRC said mergers and acquisitions help stimulate market vitality, improve the efficiency of state-owned enterprises (SOEs) and reduce excess industrial capacity.

In June, CSRC chairman Liu Shiyu at a securities industry meeting called on brokerages to put more effort into facilitating corporate M&A and restructuring to rejuvenate the market. Liu’s statement was seen as a signal of easing control on market merger deals.

The CSRC in mid-2016 curbed fundraising through acquisitions of shell companies and strengthened scrutiny on backdoor-listing plans in a bid to contain risky and speculative deals in the financial market.

Since June, Chinese-listed companies have picked up the pace of merger deals. The CSRC gave a green light to 20 listed companies to merge, acquire or restructure their businesses in July and 24 in June, up from 11 in April and 10 in May. Deal approvals in the past two months reached the highest level this year.

Last year, listed Chinese companies carried out merger and acquisition deals worth a total of 2.39 trillion yuan ($360 billion), making China the world's second largest M&A market behind the United States, the commission said.

A total of 118 companies in industries including steel, coal, cement and shipbuilding launched merger deals worth 233.7 billion yuan last year, indicating efforts to consolidate industries with excess capacity. Deals included the merger of Shanghai-based Baoshan Iron and Steel Group with its rival Wuhan Iron and Steel Group in December to create China’s the biggest crude steel producer, Baowu Steel Group.

Deals made by SOEs totaled 678 in 2016, involving 1.02 trillion yuan or 43% of the overall value of mergers and acquisitions deals, the CSRC said. The moves were part of efforts to reform inefficient SOEs through consolidation, the regulator said.

Cross-border acquisitions by Chinese listed companies totaled 111.8 billion yuan, the CSRC said.

The Tuesday statement reaffirmed analysts’ expectations of the securities regulator’s latest policy direction to support deal-making in capital markets after almost a year of tightened controls.

Contact reporter Han Wei (weihan@caixin.com)