China Said to Consider Merging Xinxing Cathay, First Heavy

  • The groups have total assets of about 170 billion yuan
  • Liu Mingzhong is chairman of the two industrial groups

China is considering combining Xinxing Cathay International Group Co. with the parent of China First Heavy Industries as part of an overhaul of state-owned enterprises, people with direct knowledge of the discussions said. Shares of the listed units jumped.

The plan is preliminary and subject to change, the people said, asking not to be identified because the discussions are private. The two unlisted heavy-industry groups had combined assets of about 170 billion yuan ($26 billion) last year, according company data.

China First Heavy Industries said its parent hasn’t drafted or discussed a restructuring proposal with Xinxing Cathay, or received any related documents, according to a Shanghai stock exchange filing made in response to the Bloomberg News story. Any decision on restructuring would be made by higher level government departments, the unit said.

A merger would follow similar moves in other heavy industries such as railways, with two train-equipment makers combining last year to form CRRC Corp. The government is consolidating state firms -- in industries as diverse as asset management, airlines and power-generation -- to make them more lean and nimble as China’s economy decelerates to its slowest pace in a quarter century.

The two groups didn’t respond to separate e-mailed requests for comment. China’s State-owned Assets Supervision and Administration Commission, the government arm overseeing the largest state enterprises, didn’t respond to a faxed request for comment.

Share Surge

Jihua Group Corp., a Xinxing Cathay unit that manufactures necessities such as uniforms and shoes for the People’s Liberation Army, reversed from earlier losses and closed 5.9 percent higher at 8.66 yuan in Shanghai, the largest gain since March 14. Shares of Xinxing Ductile Iron Pipes Co., which makes cast-iron pipes, rose 3.2 percent, the most in a month, to 4.91 yuan.

China First Heavy Industries advanced 3.9 percent to 5.37 yuan in Shanghai, also reversing from a loss earlier in the session.

Liu Mingzhong is chairman of both groups, which may facilitate discussions on any restructuring, the people said. It’s rare for state enterprises controlled by China’s central government to share the same chairman, they said.

Xinxing Cathay’s main businesses include metal smelting and processing, as well as textiles and garments, according to its website. First Heavy group provides products and services for industries such as steel and iron, electricity, energy, automobiles and mining, its website shows.

— With assistance by Steven Yang

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