Sat, Jul 02, 2016 - Page 12 News List

Chinese cement maker’s takeover bid fails amid glut


A deal for China’s largest cement maker to take over a major rival collapsed after failing to gain government approval, the company said yesterday, in a blow to Beijing’s pledges to tackle oversupply.

Anhui Conch Cement Co (安徽海螺水泥) offered nearly US$600 million for a controlling stake in struggling West China Cement Ltd (西部水泥) late last year, but China’s commerce authorities failed to approve it by the Thursday deadline, scuttling the deal, Anhui Conch said on its Web site.

Rumors the deal was in danger saw West China Cement shares plunge 33 percent in Hong Kong on Tuesday before they were suspended from trading.

The companies said in a joint statement on Thursday to the Hong Kong Stock Exchange that they would “continue to explore future opportunities for business collaboration in different structures or manners.”

The Chinese government has repeatedly pledged to tackle overcapacity in its inefficient, largely state-owned heavy industry. However, most major industrial firms have powerful political backers, making efforts to shutter or merge them particularly challenging in the face of vested interests.

China’s cement industry boomed during the country’s three decades of massive investment in highways, airports, apartment buildings and office blocks, bloating to more than 3,300 firms.

Beijing has said it wants to reorient the economy toward a consumer-driven model, but the transition has proven challenging.

Anhui Conch is a state-owned enterprise controlled by the Anhui Provincial Government.

Analysts said its easier access to financing as a state-run firm would have boosted highly-indebted West China Cement’s ability to borrow after it posted losses of 309 million yuan (US$46.4 million at the current exchange rate) last year.

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