China steel merger a ‘rip-off’

The long-awaited merger of Baoshan Steel Baosteel and Wuhan Iron and Steel is almost at the finish line. Baosteel announced the details of its acquisition this week, offering 0.56 shares of Baosteel for each unit of Wuhan Steel stock.

The deal makes a lot of sense from a public policy point of view. By merging two steel giants, China’s powerful State-owned Assets Supervision and Administration Commission SASAC will begin tackling the thorny problem of overcapacity in the sector.

But although it might be good news for government officials in Beijing, the merger is leaving shareholders out in the cold.

Acquiring companies usually pay a...