By HU XINRAN and YIN WEINA

Song Zhiping, chairman of China Building Materials Group, received a lucky call from the Harvard Business School at the beginning of the year asking to include the success of joint reorganization and management integration of his Southern Cement Company as one of the school’s management cases.

As one of the most classic cases of joint reorganization in the Chinese cement industry, the Southern Cement pioneered the project that initially drew doubts from other similar companies. The project later proved to be successful.

According to an announcement by the Shanghai United Assets and Equity Exchange, China Building Materials plans to sell 51 percent of its stake in the Southern Cement for 110 million yuan ($17.2 million).

The Southern Cement were integrated into China Building Materials several years ago. Zhejiang’s cement industry had been encountering troubles with excess capacity, highly distributed enterprises and disorderly competition.

Even in this unfavorable situation, Song Zhiping still found an opportunity to expand.

At the end of 2006, China Building Materials entered the Zhejiang market and started their large-scale integration. In August 2007, the Southern Cement was established. Since then, China Building Materials has remained the leader of the province’s cement industry.

While 110 million yuan is not a large amount to control these cement companies, taking a closer look at trading conditions, the situation appears to be rather complex.

According to an announcement by the Shanghai United Assets and Equity Exchange, the transferee of this trade should also take a 100 percent stake in the Chengdu CBM Real Estate Company and Shenzhen CBM Construction Investment.

The price of each is 170 million and 190 million yuan respectively, and both are real estate companies. But these companies offer almost no income and are even running at a deficit.

China Building Materials is actually selling shares by the pack for the chance to transfer shares. The insider in this project said that if one analyzes the bundled sales project, it is predictably concluded that the total price is 470 million yuan. But with 450 million yuan of hidden debt, the actual price is more than 900 million.