China Merchants Group and China International Marine Containers (CIMC) are currently in talks to merge their offshore businesses. Splash can confirm.
A source close to the deal told Splash that the two groups have had the intention to merge the offshore business since last year, and that management of the two groups have started preliminary negotiations.
China Merchants Group is the largest shareholder of CIMC, controlling a 25.54% equity stake in the group.
Li Jianhong, used to serve as chairman of both China Merchants Group and CIMC, but quit CIMC in December to focus on China Merchants.
CIMC operates three offshore bases in Yantai, Longkou, Haiyang in Shandong, and it also acquired Sinopacific Offshore & Engineering in August 2015. China Merchants runs two offshore facilities, in Shenzhen and Haimen.
CIMC announced a plan in 2015 to establish an offshore holding company to integrate all its offshore assets including the offshore yards and the offshore design units.
The two groups both have yards included in the central government’s offshore yards white list.
The global offshore equipment sector is now facing a gloomy outlook amid the recession and overcapacity in the offshore oil and gas industry. According to a report from the China Association of the National Shipbuilding Industry (CANSI), Chinese offshore yards’ total new order value sharply declined by 75.5% to $3.82bn in the first eleven months of 2015, the lowest level in the past decade. CANSI also estimates a large number of offshore orders the domestic yards received in 2013 and 2014 are facing delivery risks in 2016.