A Case Study On The Effect Of BAOsteel’s M&A With Wuhan Iron And Steel Group

The iron and steel industry is the basic industry of China’s national economy.The health and stability of the steel industry has a close bearing on the development of the national economy.With the rapid development of the steel industry,the steel industry has been increasingly exposed to problems such as low concentration,unreasonable industrial structure,excess production capacity,low economic efficiency,and insufficient international competitiveness.Since 2012,China’s steel enterprises have shown an overall economic downturn.In view of these conditions,the Chinese government has issued a series of policies to adjust the structure of China’s steel industry,encouraged China’s steel companies to carry out mergers and acquisitions and reorganization,and increase the capacity concentration and market competitiveness of China’s steel industry.Both Baosteel and Wuhan Iron and Steel,which are giant companies in the steel industry,occupy an important position in China’s steel industry.The merger and reorganization of the two have opened the prelude to a new round of China’s merger and reorganization of the steel industry,and also provided a template for mergers and acquisitions to reduce production capacity of central enterprises.This article focuses on the incident of the acquisition of WISCO shares by Baosteel Co.,Ltd.After briefly introducing the background of the industry and the basic conditions of the merger and acquisition,the reason for the merger and acquisition of the two parties and the specific process of the merger and acquisition are explored and analyzed.This article uses the event research method to analyze the stock price volatility before and after the merger of Baosteel Co.,Ltd.and Wuhan Iron and Steel Co.,Ltd.,and studies the short-term performance of the merger and acquisition.Through the financial analysis method,the financial indicators before and after the merger and acquisition from the solvency,operating capacity,profitability A comparative analysis of the four aspects of development capabilities was conducted.It can be concluded that the two parties acquired a positive cumulative excess returnin the short term,indicating that the merger is relatively successful in the short term,and the market’s M&A performance is positive.From the perspective of the analysis of financial indicators,in the short term,the mergers and acquisitions brought the positive effect of mergers and acquisitions.Baosteel’s acquisition of Wuhan Iron and Steel(Group)Corp.has played a synergistic role in mergers and acquisitions in terms of company size,product structure,and technical resources.Through mergers and acquisitions,the new Baowu Iron and Steel Group has not only optimized its product structure,improved the international competitiveness of China’s steel industry,but also complied with it.