A Chinese company will have dual corporate hubs for the first time, expert says
China's Baosteel Group will have dual headquarters following its merger with smaller rival Wuhan Iron and Steel (Group) Corp, according to Shanghai-based newspaper The Paper.
The newly merged steel giant will have headquarters in both Shanghai and Wuhan in Hubei province, it said, citing anonymous sources.
A leading industry analyst said it was the very first time a Chinese company would have two corporate hubs.
"Having two headquarters for the newly merged steel giant will substantially boost its efficiency in management and operation," said Wang Guoqing, director of the Lange Steel Information Center.
The two State-owned steel-makers will form the largest steel company in China by capacity.
Despite the fact that Baosteel is taking over Wuhan Iron and Steel Group, the smaller rival will retain some influence following the takeover, Wang added.
An official with the Baosteel's PR department declined to confirm the report on Tuesday. But he said on condition of anonymity that Baosteel will make official announcement on this issue soon.
According to Wang, the dual headquarter operation is also based on an evaluation of the impact of large scale corporate headquarter on local government.
"Local governments prefer corporate headquarters, as they contribute more tax revenue than branch offices," said Wang.
"Wuhan Iron and Steel Group has contributed substantially to the local government, and moving its headquarters from Wuhan would have a major impact on Hubei province financially."
Wuhan used to be the home to several other State-owned enterprises' headquarters. However, China Changjiang National Shipping Corporation and Gezhou Dam have since relocated to other cities.
First announced in June, the plan to combine the two State-owned steel firms is part of the Chinese government's push to consolidate the vast, fragmented industry to get rid of excess capacity.
The State-owned Assets Supervision and Administration Commission approved the joint restructuring of the two steel-makers to form the largest steel company in China by capacity in the same month.
Based on 2015 capacity, the two companies will produce around 60 million metric tons a year, leapfrogging Hebei Iron and Steel to the top spot among China's steel-makers, according to Reuters.
