——A significant step towards becoming a world-class comprehensive building materials enterprise
On December 6, China National Building Material Company Limited (hereinafter referred to as CNBM; stock code: HK3323) and China National Materials Company Limited (hereinafter referred to as Sinoma; stock code: HK1893), both under China National Building Material Group Co., Ltd. (hereinafter referred to as CNBM Group), respectively held shareholders' meetings and jointly announced that the merger of CNBM and Sinoma was approved by over 99% of shareholders of both companies. This marks a key step in the merger of the two listed companies with strong support from shareholders of both sides, opening a new era of development. A brand-new "aircraft carrier" in the world building materials industry is setting sail.
It is understood that after the merger, CNBM will remain listed on the Main Board of the Hong Kong Stock Exchange as usual, while Sinoma will withdraw its listing status on the Main Board of the Hong Kong Stock Exchange and be deregistered. All its assets, liabilities, businesses, personnel, contracts, qualifications and all other rights and obligations will be assumed and inherited by CNBM. After the merger, CNBM Group will directly or indirectly hold a total of 42.20% of the merged CNBM, the original public holders of CNBM H shares and Sinoma H shares will hold a total of 45.69%, and the original other holders of non-listed shares of CNBM and Sinoma will hold a total of 12.11%.
In August 2016, the merger of CNBM Group and Sinoma Group was approved, creating a super-large group with the largest scale, strongest assets and most concentrated talent in China's building materials industry. In January this year, the reorganized new group started the integration of its listed companies. CNBM and Sinoma went all out and cooperated closely, actively communicated with government departments and intermediary agencies, repeatedly studied and demonstrated, and compared merger models of comparable companies. Finally, the integration plan of CNBM's proposed share swap absorption merger of Sinoma was determined, and was approved by the group and the boards of directors of the two listed companies in September. In September, the two companies signed a merger agreement and issued a joint announcement. The management conducted a global roadshow to fully report the merger to investors and media. In November, the merger plan was approved by the State-owned Assets Supervision and Administration Commission of the State Council. Next, the merger will be implemented after obtaining approval from relevant domestic and overseas regulatory authorities.
CNBM and Sinoma are two leading listed companies under CNBM Group and are first-class in China and important globally in the building materials industry. This strong alliance is a substantial step in the integration of flagship listed companies after the group's reorganization. The new company after the merger will have total assets of over 460 billion yuan and rank first in the world in six fields: cement clinker, commercial concrete, gypsum board, glass fiber, wind turbine blades, and international cement engineering and waste heat power generation engineering markets. It will have 7 A-share listed companies and more than 160,000 employees. The new company will have more comprehensive and integrated competitive advantages in industrial layout, production capacity scale, marketing, operational control, technological innovation, etc., which will help further consolidate its leading position in the industry, enrich regional and product layouts, optimize procurement, production and operation systems, integrate overseas resources, achieve integration and sharing of R&D resources, and improve the financing structure.
Song Zhiping, Chairman of CNBM Group and Chairman of the Board of CNBM, said that the merger plan being approved by a high vote is gratifying and congratulatory. He sincerely thanked shareholders for their long-term support, thanked all intermediary agencies for their outstanding performance and hard work during the merger process, and thanked the directors, supervisors and management for their extensive and meticulous work. He said that the smooth implementation of the reorganization of the "two major building materials" at the group level is a milestone event in the development of the building materials industry and the new group. Following the pace of China's entry into a new era, the reorganized group has clearly defined the strategic vision of "from big to great" and building a world-class building materials enterprise, and clarified the strategic positioning of being a leader in industry integration, an innovator in industrial upgrading, and a pioneer in international production capacity cooperation. It has solidly carried out a series of integration and optimization work. Over the past year or more, with the joint efforts of all cadres and employees, the two building materials companies have quickly achieved seamless docking and produced a 1+1>2 synergy effect.
He emphasized that the merger of the two H-share listed companies is an important measure for the group to implement the State Council's approval of the merger of the two building materials companies, implement the SASAC's requirements for deep integration, and implement the requirements of the implementation plan for the reorganization of the two building materials companies. It is an important measure for the group to implement the new development concept proposed by the 19th National Congress of the Communist Party of China. It conforms to the objective needs of the group's own development, the requirements of the majority of investors, and the development trend of the building materials industry, especially the cement industry. It also fits the themes of the times such as China's stable growth under the new normal, supply-side structural reform, the Belt and Road Initiative, and international production capacity cooperation. It will surely bring new development opportunities to the enterprise and will also profoundly affect the global building materials industry pattern, providing valuable experience for the merger and reorganization and transformation and upgrading of the world's basic raw materials industry. The new company will further leverage the synergy and叠加 advantages of the reorganization, integrate culture, innovate models, share technology, learn from each other's strengths, strive to create better benefits, and continue to shoulder the important task of leading the healthy development of the industry. It will use its further enhanced market position to participate in reshaping the industry landscape: actively promote industry structural adjustment, fully promote capacity reduction, promote products to high-end, expand effective and high-end supply, and set an example for the country's supply-side structural reform; actively implement the Belt and Road strategy, participate in international competition, strengthen global market cooperation, and improve the global competitiveness of China's building materials industry; accelerate the integration of advantageous resources, lead the industry to transform to the medium-high end, and contribute to the transformation and upgrading of China's materials industry.
Liu Zhijiang, Vice Chairman of CNBM Group and Chairman of Sinoma, said that the merger of the two H-share listed companies is the beginning of the group's deep business integration, is the general trend of the group's development, is conducive to the group's industrial transformation and upgrading, and will bring new opportunities for the group's development. After the merger of the two H-share listed companies, multi-faceted integration will be achieved, maximizing the synergy effect of resources and creating better benefits for shareholders and society. Standing at a new historical starting point and on a higher development platform, the new company can better implement the requirements of international production capacity cooperation, leverage overseas competitive advantages, accelerate the pace of "going global", and explore new industries, new business forms, new models, and new markets; it can better leverage the group's advantages in scientific and technological innovation, industrialize scientific research achievements, and help promote the quality, efficiency, and动力 transformation of the group's industry and economic development, continuously enhancing the group's economic innovation and competitiveness.
Cao Jianglin, General Manager of CNBM Group and President of CNBM, said that the merger of the two listed companies is a major event for the industry, the capital market, and the management. The new company will have 9 cement companies and 13 EPC companies, and will further build a more competitive world building materials "aircraft carrier", greatly enhancing the position of the building materials industry in the market. The management teams of the two companies will also have broader career platforms and development opportunities. Regarding the next development plan after the merger, Cao Jianglin said that this merger has taken an important step in resolving horizontal competition. In the future, the new company will, in accordance with the established strategy, accelerate the promotion of corporate governance and integration optimization from multiple dimensions such as management integration, market synergy, centralized procurement, streamlining and optimization, and capital structure optimization, and promote operational improvement and release of synergy effects: first, accelerate the completion of the merger at the legal and financial statement levels; second, comprehensively review the company's business and implement subsequent professional integration; third, accelerate organizational and personnel integration; fourth, create good benefits.
The merger of the two companies opens a new era and a new journey for China National Building Material. Standing at a new historical orientation of China's development, the new company will, in accordance with the spirit of the 19th National Congress of the Communist Party of China, national strategic requirements and group deployment arrangements, be committed to building a world-class comprehensive building materials enterprise and creating a globally leading listed company in the building materials field, forming a development pattern of cement, new materials, and engineering services as three pillars.
In the cement segment, after the merger, the company will have a cement capacity of 530 million tons and a commercial concrete capacity of 425 million cubic meters, further consolidating its position as the world's largest cement producer and comprehensive cement technology service provider. The two companies actively optimized cement capacity during the merger process, contributing to the supply-side structural reform of the industry. The new company will continue to hold high the banner of industry integration, take the lead in implementing Document No. 34 of the General Office of the State Council, actively participate in the formulation of industry policies and standards, unswervingly restrict new capacity, eliminate backward capacity, implement staggered production, promote market competition and cooperation, promote joint reorganization, and carry out international production capacity cooperation, and be the mainstay of maintaining the healthy development of the industry.
In the new materials segment, after the merger, the company will have a gypsum board capacity of 2.1 billion square meters, wind turbine blade capacity of 16GW, and glass fiber capacity of 1.8 million tons, becoming a world-class champion in the new materials field and creating leaders in different sub-sectors. The new company will further consolidate the market position, technical capabilities and profitability of its new materials business, pool scientific research strength to develop cutting-edge technology, concentrate efforts on completing the research and innovation of high-end new materials related to the national economy and people's livelihood, accelerate global market layout, seize the advantageous position in the global new materials field, and lead the industry to transform to the medium-high end.
In the engineering services segment, after the merger, the company will have world-leading cement production design and engineering general contracting capabilities, and will occupy a leading position in the international waste heat power generation market. The new company will continue to deeply integrate in accordance with the principles of "unified business philosophy, unified competition and cooperation, unified benchmarking system, unified coordination mechanism" and the requirements of "intensive market cultivation, precise services, refined technology, and fine management". By leveraging synergies in the international engineering field, strengthening equipment manufacturing, innovating business models, extending the industrial chain and other means, it will achieve new increments in operation management and investment, and strive to move from the world's largest building materials manufacturer and single cement and glass general contractor to a world-class comprehensive building materials service provider.
At the shareholders' meetings, shareholders, directors, supervisors, intermediary agencies and management of the two companies had in-depth exchanges on industry trends, the company's operating strategy after the merger, and future development plans. They highly affirmed the positive role of this merger in consolidating the company's market position, releasing synergies, integrating internal management, and promoting the healthy development of the industry, and expressed great expectations and confidence in the future prospects of the industry and the subsequent development of the merged company. Morgan Stanley and CICC, as financial advisors to the merger, believe that the success of this merger mainly depends on four points: first, the merger of the two companies is in line with the will of the people and the general trend; second, the management teams of the two companies worked together and did a lot of solid and meticulous work; third, they fully grasped the best timing of the industry market in recent years and won widespread support from the capital market; fourth, on the basis of repeated demonstration, they formulated the plan most conducive to the smooth implementation of the merger.
The management of the two companies stated that the SASAC, associations, peer enterprises, the capital market, and all sectors of society have high expectations for the merger of the two companies. In the future, the new company will spare no effort to build a world-class building materials enterprise with global competitiveness, create more brilliant achievements on the new journey from big to great, and repay shareholders and society with better performance.
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