An Analysis On The Motivation And Performance Of Central Enterprises’ Acquisition Of Local State-owned Enterprises

In recent years,the theme of SOE reform is to promote the mixed ownership of SOE and to introduce private capital on the basis of guaranteeing the holding of state-owned capital,the aim of which is to unlock the vitality of SOE.In 2020,The State Council deployed a three-year master plan for SOE reform,with enhancing the competitiveness,innovative power,controlling force,influence and risk resistance of the state-owned economy as the primary goal.In this context,powerful central enterprises have been actively building connection with local governments and local SOE to enhance their own strength and integrate industrial chains,setting off a wave of merger and acquisition of local SOE by central enterprises.It is necessary to reflect and summarize the deep-seated motivation of the M&A of local SOE by central enterprises in the current macro backdrop,to evaluate the performance of their M&A,and to analyze the problems in such a process,all of which are of great significance for the future reform of SOE and the strengthening of state-owned economy.In the field of energy and chemical industry,Sinochem Corporation is a leading enterprise,whose acquisition of Luxi Chemical Group is one of the most representative examples of a central enterprise acquiring a local SOE.On May 6,2021,Sinochem Group and China National Chemical Corporation amalgamated into Sinochem Corporation.For confidentiality concerns,there are certain limits to the acquisition of relevant financial data of this newly-built large-scale central enterprise.Thus,this paper focuses on non-financial performance in evaluating the M&A of the merged party,and for the combining parties,the analysis is conducted from two dimensions,namely,financial performance and non-financial performance.Findings of this paper show that during the M&A,Sinochem Corporation has achieved the strategic goal from the perspective of the industrial chain and will be able to exert the scale effect and synergistic effect in the future;before the M&A,the financial performance of Luxi Chemical Group,a local SOE controlled by SASAC in Liaocheng City,has not been markedly improved in the short term,and although the merger and reorganization has alleviated its debt pressure and removed the bottleneck of capacity expansion,its profitability and development capacity still need to be strengthened due to the industry cycle.Combining the motivation of central enterprises’ acquiring local SOE,this paper adopts the market power theory and efficiency theory to evaluate the realization of Sinochem Corporation’s strategic goals.And also,financial indicators analysis,stock price change method and EVA analysis are used to evaluate the performance of Luxi Chemical Group after the M&A,which enriches the study on central enterprises’ acquisition of local SOE in China.This paper not only pays attention to the assessment of the market value and enterprise value,but also takes the long-term strategic goals of enterprises into account,which reflects the performance of Sinochem Corporation’s acquisition of Luxi Chemical Group in a more faithful way.