ANHUI Leimingkehua Co., a Shanghai-listed explosives maker, is acquiring a coal mining affiliate in a US$3.1 billion deal, a move it said was part of the government’s push to make State-owned enterprises (SOEs) more efficient.

Anhui Leimingkehua, whose main shareholder is local government-run Huaibei Mining Group, said that along with a subsidiary it plans to buy Huaikuang Co., a coal miner also controlled by Huaibei Mining in Anhui Province, for 20.3 billion yuan (US$3.08 billion) in cash and newly issued shares.

“The deal is part of the government’s push to reform the State-owned sector and boost the securitization of State-owned assets,” Leimingkehua said in a statement Tuesday.

The acquisition will help the shareholder, Huaibei Mining, to list its core mining-related assets.

The government is trying to streamline and modernize the nation’s State-owned sector and create conglomerates capable of competing globally.

The reforms have involved the restructuring of SOEs through reorganizations and mergers, reductions in excess capacity and the relocation of workers.

Anhui Leimingkehua, which mainly makes explosives used in coal and non-coal mining, is also involved in the mining business.

The company aims to raise up to 700 million yuan in a private placement of shares to help fund the Huaikuang Co. acquisition, it said. It had a negative free cash flow of 122.9 million yuan as of end-December 2016.

Huaikuang Co., which is also the largest producer of coke coal in eastern China, reported an unaudited revenue of 31.96 billion yuan for the January-July period this year, according to Leimingkehua’s statement.

The miner had coal reserves of about 3.7 billion tons at the end of 2016.

Anhui Leimingkehua shares have been halted from trading since August this year, and it was not immediately clear when they will resume trading.

(SD-Agencies)