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The eBearing News
December 20, 2004
China's Luoyang Bearing
Acquired by Yongcheng Coal
copyright © 2004 eBearing Inc.
Troubled Luoyang Bearing Group Corp. (China) has agreed to be acquired by the state-owned Yongcheng Coal
& Electricity Group Co. Ltd. (China), ending speculation about Luoyang's future. The agreement was
signed December 18, 2004.
Founded in 1954, Luoyang Bearing had been the symbol of China's bearing
industry. A key part of the first Five Year Plan and one of the country's most important
manufacturers, Luoyang Bearing was once China's largest ball bearing manufacturer.
The company manufactures LYC brand bearings.
However, in recent years, Luoyang has been plagued by systemic operating and
management problems. The company's troubles were only made worse by this year's dramatic
rises in raw material costs. Ongoing efforts by the Chinese government to rein in the economy by cracking down
on too-easy credit and poorly run businesses made it impossible for
Luoyang to continue operating on its own.
From a peak of 27,000 employees, Luoyang is now down to 10,000 employees and production
at a fraction of its former peak of 70 million sets.
Although state-owned, Yongcheng Coal & Power Group is considered Henan Province's best-run and
most profitable business. With several anthracite coal mining and railway operations, it is
considered a model for other businesses.
Yongcheng is setting up a new entity, Luoyang LYC Bearing Co. Ltd., to house the
bearing manufacturing operations. The new company is essentially the old
Luoyang Bearing Corp., operating from its existing facilities. No announcement was made
as to how the new business would be managed.
Luoyang LYC has a founding registered capital of RMB 400 million. Of that, Yongcheng is
investing RMB 250 million cash to get the business back on its feet, and receives 62.5% ownership.
Luoyang Bearing Group is contributing only its business assets, valued at
RMB 150 million, for 37.5% ownership.
A number of small operating businesses within Luoyang do not fit the new operation and
will be sold off or closed.
The RMB 150 million valuation put on Luoyang Bearing's assets is only a fraction of the
RMB 3.3 billion valuation it had once claimed.
One Chinese bearing executive told eBearing, "Do not mistake this for a real business
transaction that it is not. This is
the Chinese government, instructing a profitable state-run business to take over an unrelated but
troubled state-run business. By this way, Luoyang Bearing continues to operate."
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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