SASAC Encourages SOEs to Spin Off and List Units on the Star Market
The first mover has already emerged – CRCC announced its board has passed the proposal to spin off listing its construction machineries subsidiary on the Star Market.
As the State-owned Assets Supervision and Administration Commission of the State Council (SASAC, 国务院国资委) clarifies that companies that are in line with national strategies, possess core technologies and mainly rely on these for production and operations, and have good social image and strong growth potential, are encouraged to actively apply for listing on the STAR Market.
The above is stated in the ‘Guidelines on the mixed-ownership reform to the State-owned Enterprises (SOEs)’ (‘Guidelines’ for short) they issued on November 8.
Meanwhile, on December 13, the China Securities Regulatory Commission (中国证监会) filed ‘Several provisions on pilot domestic listing of subsidiaries of the spin-offs of listed companies’ (‘Spin off provisions’ for short), to further specify the practical rules for listed companies’ spin-off IPOs.
The policy suggests that the group enterprises’ subsidiaries with strong innovative capabilities and independent businesses are suitable to take part in spin-off listing. It is expected that the main board listed companies to spinoff their subsidiaries to seek IPOs on the other boards – in particular, the Star Market – will become a normal practice.
Moreover, it is expected that – in the future – the majority of spin-off listing cases will come from SOEs. It lies in their characteristics that they tend to have a large scale of assets, rich in segments that can possibly be split, along with their relatively high incentives to participate in spin-off listing – owing to their needs in conducting mixed-ownership reform.
Technology SOEs, owing to their outstanding status in the industry and correspondence with national strategies, have always been granted the priority in carrying out mixed-ownership reforms.
The launching of the Star Market this year has provided these technology SOEs a suitable field to implement mixed-ownership reform, and thus to bring new vigor into their business. It is hardly surprising – to some extent –that they witnessed these favorable policies.
On December 18, the China Railway Construction Corporation (CRCC, 中国铁建 [601186:SH]) announced that it plans to spin off its subsidiary, China Railway Construction Heavy Industry (铁建重工), to the SSE Star Market for listing. This represents the first company – and also the first SOE, for sure – to participate in a spinoff listing after the issuance of the ‘Guidelines’ and ‘Spin off provisions’.
Stimulated by the announcement, stock of CRCC opened up 3.52% the following day.