Management And Company Valution Study In Cosco Merge & Acquisition

COSCO and China Shipping(CSCL)as two of largest shipping companies listed in the Shanghai stock market.Also as two big players in the global container shipping industry,their merge and acquisition(M&A)is a major event to the industry as well as to the market.How will this M&A impact the final valuation of the companies? How will this event impact the whole shipping industry? As we know,the shipping industry now is undergoing a severe over-supply situation globally.Merge and acquisition is not a new thing in this industry,and the process has accelerated since 2012 when Maersk,MSC and CMA started to form P3 Alliance.Also the merge and acquisition between COSCO and CSCL is part of further reforming the state-owned enterprises in recent couple of years,started with China Railway Rolling Stock Corporation(CRRC).We try to identify common factors behind all such events in order to gain a better understanding as to how these factors will finally impact company’s valuation.The main results from our study include: COSCO’s merge is good reaction to the market downturn and this event will bring at least 3 benefits: reduce the competition between domestic shipping companies;improve the COSCO’s profitability by focus on container shipping and container terminals operation worldwide;set up good business model for future state-owned enterprises reforming.As members of two major shipping alliances,COSCO’s merge with CSCL will increase the concentration of shipping industry,especially on the east-west trade where shipping alliances play actively.Synergy of COSCO’s merge event has great potential to further explore,COSCO’s market value in Shanghai stock market after the merge event is higher compared with valuation from COSCO’s future free cash flow forecast or COSCO’s peer companies public value worldwide.COSCO’s value in Hong Kong stock market is lower considering the great uncertainty of both COSCO’s operation and container shipping industry in the near future.