Shen Wenrong, a wealthy businessman in Suzhou, died of illness, where is the largest private steel company, 100 billion shagang group?

Southern Metropolis Daily

2024-07-01 09:49Southern Metropolis Daily official account

On June 30, 2024, Shagang Group issued an obituary, and Shen Wenrong, chairman of the board of directors of Jiangsu Shagang Group, passed away at 2:10 on June 30, 2024, at the age of 78.

Shen Wenrong, who was born in the acre, spent nearly 50 years to build the largest private iron and steel group in the mainland - Shagang Group. As of the end of the first quarter of 2024, Shagang Group's net assets reached 111.714 billion yuan, and the operating income in 2023 was 157.072 billion yuan and the net profit was 2.126 billion yuan.

Shen Wenrong is also worth 38.5 billion yuan, ranking 118th in the "2023 Hurun Report".

Born in acres, "buy, buy, buy" to build a private steel kingdom

Like many self-made tycoons, Shen Wenrong, the actual controller of Shagang Group, has a legendary entrepreneurial experience.

Shen Wenrong was born in Shazhou County, Suzhou City in 1946. Affected by geographical conditions and historical factors, the local residents mainly take cotton planting as their business, and in 1986, Shazhou County was changed to a county-level city, which became Zhangjiagang City today, and was identified as a national high-quality cotton base. In such an environment, Shen Wenrong, who had excellent academic performance but had to return home to work as a farmer due to poverty, entered a local ginning factory as a fitter in 1969 after obtaining a certificate through part-time work and study. Due to his outstanding performance, he was later promoted to deputy factory director.

In the 70s of the last century, southern Jiangsu set off a boom in steel mills, and Shen Wenrong's ginning factory also prepared to build a rolling workshop, which became independent as a factory in 1975, the predecessor of Shagang Group, and in 1984, Shen Wenrong became the director of the steel plant.

Although it is called a steel mill, it may be more appropriate to call it a "workshop" in terms of scale and technology. The reason why this small workshop can grow into today's private steel kingdom is inseparable from Shen Wenrong's dual ideas.

The first is to invest a lot of money and gamble on upgrading technology.

For example, in 1988, under the risk of failure to invest in the factory and the closure of the factory, Shen Wenrong introduced a 75-ton ultra-high power electric furnace steelmaking, continuous casting, and continuous rolling short-process production line from the United Kingdom, which greatly improved the output and product quality of the factory. In 2001, Shen Wenrong spent 1.6 billion yuan (2.2 billion yuan) to buy the Horsch Iron and Steel Company, a subsidiary of ThyssenKrupp, a veteran European steel company, and then packaged its production line equipment to China as a whole, so that Shagang got rid of its dependence on imported billets in one fell swoop, and basically completed the construction of the upstream and downstream industrial chain of steel.

In the past ten years, Shagang Group has also introduced equipment from Germany, the United States, Switzerland, South Korea, etc., and continuously upgraded the equipment, completing the rebirth from a "small workshop" to a "modern iron and steel enterprise".

Also in 2001, Shagang Group, which was originally owned by the collective, completed the restructuring, with the collective, employees and management holding 25%, 30% and 45% of the shares respectively. Since then, after seven equity transfers from 2004 to 2021, Shen Wenrong currently directly holds 29.32% of the shares of Shagang Group, and indirectly holds 17.67% and 7.14% of the shares through Zhangjiagang Free Trade Zone Runyuan Stainless Steel Trading Co., Ltd. and Ningbo Meishan Free Trade Zone Jincheng Shazhou Equity Investment Co., Ltd. respectively, with a total shareholding ratio of 54.13%, becoming the actual controller of the company. The exact transfer price for the transactions was not disclosed.

The second is to take advantage of the policy to achieve leapfrog development through mergers and acquisitions.

In order to improve the overall technical level of the iron and steel industry, optimize the industrial structure, eliminate and transform backward production capacity, and control the energy consumption and pollution of the industry, in 2005, the National Development and Reform Commission promulgated the "Iron and Steel Industry Development Policy" to encourage mergers and acquisitions of advantageous enterprises.

Shen Wenrong immediately formulated the strategy of "near first and then far, easy first and then difficult, first internal and then external", and began the road of large-scale mergers and acquisitions.

In June 2006, Jiangsu Huaigang Group, the largest iron and steel enterprise in northern Jiangsu, was incorporated into the command, and then operated Huaigang Group backdoor "high-tech Zhang Tong" to become today's Shagang Co., Ltd. (002075. SZ）； In September of the following year, it acquired Henan Anyang Yongxing Iron and Steel; In January 2008, it bought 51% of the shares of Changzhou Xinrui Special Steel; In January 2010, it completed the holding of Xixing Iron and Steel; In 2017, by participating in the reorganization of Northeast Special Steel, it became a new (600399. SH......

According to data from the World Steel Association (WSA), in 2023, Shagang Group's crude steel output will reach 40.54 million tons, second only to Baowu Iron and Steel Group, Anshan Iron and Steel Group and HBIS Group, ranking sixth in the world, fourth in China, and first among private enterprises. 

(Source: Shagang Group official website)

The net assets exceed 100 billion yuan, spanning many fields such as steel, finance and investment

Shagang Group has grown into a veritable private steel kingdom in China, and its business territory is not only steel, but has also expanded to finance, investment and many other fields. As of the end of the first quarter of 2024, its net assets reached 111.714 billion yuan

At present, Shagang Group holds Shengang Securities, Zijin Property Insurance, Soochow Life Insurance, Zhangjiagang Bank (002839. SZ) and other financial institutions, including securities, insurance, banking and many other industries.

As mentioned in the first part, through backdoor and participation in reorganization, Shagang Group holds two listed companies, Shagang Co., Ltd. and Fushun Special Steel, and holds Zangge Mining (000408. SZ) 3.68% stake and Huachuang Yangan (600155. SH) 0.12% stake.

Shanghai Gimpo Xinpeng Investment Management Co., Ltd., which is owned by the company, mainly invests in the chip industry, and also involves lasers, environmental protection, games, food and other fields 301161. SZ), Jujie Microfiber (300819. SZ) has been successfully listed, and companies such as Changguang Satellite and Yitang Semiconductor are hitting the IPO.

Shagang Group is also the initiator of the first provincial-level private investment consortium in mainland China, "Su Mintou" (i.e., "Jiangsu Private Investment Holding Co., Ltd."). The latter's business scope covers the whole life cycle of the enterprise, and has invested in Weice Technology (688372. SH), Sineng Electric (300827. SZ), ArcSoft Technology (688088. SH), Navitas Technology (688690. SH) and other listed projects.

In addition, Shagang and Baosteel, Shougang, Anshan Iron and Steel and other leading enterprises in the steel industry have invested in Ouyeel Yunshang Co., Ltd., which is mainly engaged in bulk commodity e-commerce business.

Shagang Group also holds a partial stake in Jiangsu Fosun International Trade Co., Ltd., the controlling shareholder of which is Fosun International (0656.HK). HK）。 Interestingly, just last year, the transaction of acquiring 60% of the shares of Nanjing Iron and Steel was cut off by CITIC Group, and Shagang Group also sued the relevant companies under the seller "Fosun System" in court. After mediation by the Jiangsu Provincial High People's Court, it was finally properly resolved.

Nandu reporters noticed that in addition to Shagang Group, Shen Wenrong personally has a lot of other investments.

For example, he is the second largest shareholder of China Merchants and has also served as a director of China Merchants Group. It is the main investor of "Ningbo Meishan Bonded Port Area Jincheng Shazhou Equity Investment Co., Ltd.", and indirectly invested in Huatu Education, Gepai Nickel and Cobalt, Guofu Hydrogen Energy and other enterprises are all impacting the IPO; Another company, "Zhangjiagang Free Trade Zone Qiande Investment Co., Ltd.", indirectly holds shares in Beijing Singba Technology, Ant Technology Group and other companies.

With 18 billion yuan of monetary funds in hand, several expansions and transformations have ended in vain

As of the end of the first quarter of 2024, Shagang Group held monetary funds of up to 20.771 billion yuan, and after taking into account restricted assets, the balance of cash and cash equivalents was also as high as 18.098 billion yuan. However, the group still had short-term borrowings of 16.417 billion yuan and non-current liabilities of 28.075 billion yuan due from one year to maturity in the same period.

Moreover, Shagang Group's performance has declined year by year in recent years, and its recent "Ultra-Short-term Financing Bond Prospectus" shows that the group's operating income in 2021, 2022, and 2023 will be 188.153 billion yuan, 173.938 billion yuan, and 157.072 billion yuan respectively; The operating profit was 20.039 billion yuan, 5.063 billion yuan and 2.528 billion yuan respectively, both of which had a large decline.

According to the overall analysis of the industry, from the perspective of the supply side, under the guidance of the "double carbon" goal, energy saving and emission reduction, output reduction, and technological upgrading will be the main theme of the steel industry for a long time in the future.

On the demand side, the structural weakness is obvious.

Infrastructure, manufacturing, and real estate are the main downstream demand areas for steel products.

According to the data research report of Cinda Securities, from 2020 to 2023, the steel consumption of real estate in mainland China will drop from 374 million tons to 312 million tons, a decrease of about 16%.

According to the National Bureau of Statistics, in 2022, the total profit of iron and steel enterprises above designated size in the mainland will be 36.55 billion yuan, a year-on-year decrease of 91.30%; In 2023, the industry will achieve a total profit of 56.48 billion yuan, a year-on-year increase of 157.3%, but compared with 145.99 billion yuan in 2021, there is still a significant gap.

In fact, due to industry restrictions, in 2010, Shagang Group was still the first in the list of China's top 500 private enterprises, and now, even in Jiangsu, there are already two companies in front of Shagang Hengli Group and Shenghong Holdings.

Under various circumstances, the importance of promoting scale through mergers and acquisitions, seeking profits from scale, or transformation and expansion has become increasingly prominent.

If you want to build a "century-old shagang", it is very necessary to be prepared for danger in times of peace. Under the leadership of Shen Wenrong, the pace of mergers and acquisitions of Shagang Group has never stopped, but in recent years, it has encountered many "troubles".

First of all, when Anyang Iron and Steel Group launched the mixed reform in 2020, Shen Wenrong personally went to Henan and stated at the symposium, "While accelerating the implementation of the integration and reorganization of some private iron and steel enterprises in Anyang City led by Shagang Yongxing, we will actively participate in the transformation and development of iron and steel enterprises in other parts of Henan Province by means of restructuring, acquisition, and mixed reform." But in the end, things didn't come to an end.

Secondly, since 2016, the listed platform Shagang Co., Ltd. has thrown out a restructuring plan, intending to extend its business to the IDC field at a consideration of 18.8 billion yuan through the acquisition of GS Company, forming a dual main business operation situation. However, after a long period of 5 years, in 2021, the acquisition was finally rejected.

Last year, the larger and more high-quality assets of Nanjing Iron and Steel shares were put on the shelves by the "Fosun system", in the face of such an opportunity, Shagang Group showed great interest and sincerity, but in the end by the CITIC Group "snatched love".

According to the statistics of Cinda Securities in the past three years, there have been 30 major mergers and acquisitions in the mainland steel industry, and shagang has only been counted once, and it is an internal acquisition of the assets of the controlling shareholder.

The second-generation succession has made remarkable achievements, but it was involved in the letter approval violation case

Shen Wenrong, who was born in 1946, unfortunately passed away, and his son Shen Bin also entered Shagang early and took over the company step by step.

Shen Bin was born in 1979, bachelor's degree in accounting, master's degree in economics, in 2006 into shagang group, has been engaged in financial and accounting work, and gradually promoted to the head of finance, in 2010, was elected as shagang group party secretary, in charge of the group's cadre personnel management.

After gradually becoming familiar with the two lines of finance and personnel, in 2016, the legal representative and chairman of Shagang Group was changed from Shen Wenrong to Shen Bin, and officially went to the front of the stage.

Under the helm of Shen Bin, in recent years, shagang has taken "intelligent transformation and digital transformation" as the core measure to promote the redevelopment and upgrading of enterprises, and has achieved good results in further improving the operational efficiency of enterprises and improving product quality, which has become an important support for shagang group to maintain good performance under the overall pressure of the steel industry.

At the same time, Shen Bin is also a member of the Standing Committee of the 13th All-China Youth Federation, vice president of the China Non-governmental Chamber of Commerce, director of the Young Entrepreneurs Committee of the All-China Federation of Industry and Commerce, vice president of the China Iron and Steel Association, and was successfully elected as the 2021-2022 National Outstanding Entrepreneur.

However, on July 5, 2022, the CSRC disclosed an "Administrative Penalty Decision" that surprised many investors.

According to the "Administrative Penalty Decision", on November 20, 2019, Wei Guo, the first deputy chief accountant of Shagang Group and the actual manager of Jinlin Fengtai Trading Co., Ltd. (hereinafter referred to as "Jinlin Fengtai") in Zhangjiagang Free Trade Zone, arranged for his subordinate to take Sun Lianjie to apply for a mobile phone number and open a tripartite depository bank account and securities account.

On November 26 of the same year, the securities account of "Sun Lianjie" spent 277 million yuan to transfer 44 million shares of Shagang shares in the form of block transactions, and from May 26 of the following year to March 2, 2021, a total of 567 million yuan was cashed out of the shares.

The China Securities Regulatory Commission found out that the funds corresponding to the purchase and sale of Shagang shares in the securities account of "Sun Lianjie" all came from or flowed to Jinlin Fengtai, and Wei Guo made specific decisions on transactions and arranged for subordinates to place orders. In addition, the actual controller of Shagang Group actually controls Jinlin Fengtai through Zhangjiagang Free Trade Zone Qiande Investment Co., Ltd., and Shagang Group and Jinlin Fengtai are acting in concert.

However, in the relevant financial reports of shagang shares, the concerted action relationship between the two parties was not disclosed, and the "Sun Lianjie" securities account sold 1.1% of the total shares of shagang shares from May 26 to June 29, 2020 in a timely manner, so the letter was approved in violation of laws and regulations.

In the end, in addition to Shagang Group, Jinlin Fengtai, Sun Lianjie, Wei Guo and other parties involved in the incident were punished, Shen Bin, as the person in charge directly responsible for Shagang Group, was also given warnings, fines and other punishments.

After Shen Bin took over the position of chairman of Shagang Group, Shen Wenrong did not completely retreat into the background, and he has always retained the title of chairman of the board of directors of Shagang Group.

"A lifetime of dedication to steel, I have no regrets." Shen Wenrong once said. 

Nandu reporter Miao Lingyun sent from Shanghai

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