Business Activities News
- Shanghai News
Date: 11-Dec-2006 Sources: (Shenzhen Daily)
ALUMINUM Corp. of China Ltd. (Chalco), the nation's biggest maker of the metal, offered 8.17 billion yuan (US$1 billion) in stock to buy out two Shanghai-listed units as part of a plan to trade its shares in Shanghai.
Hong Kong-listed Chalco, will issue yuan currency shares for the first time in exchange for the stock it doesn't own in Lanzhou Aluminum Co. and Shandong Aluminium Industry Co., the companies said in filings Friday. The units' shares will cease to trade and Chalco's stock will replace them in Shanghai.
Trading shares in Shanghai may help Chalco raise cash to acquire rivals and build new plants as aluminum demand rises in the world's biggest consumer of the metal used in cars, aircraft and beverage cans.
'Chalco will get an important new financing channel by listing domestically,'' said Sean Zheng, who helps manage US$100 million at Dingtian Asset Management Co. in Beijing. 'The share swap is an easy way to do it, although the payment is a bit higher than I expected.''
China wants companies such as PetroChina Co. and China Life Insurance Co. that don't trade shares in Shanghai and Shenzhen to list their shares in the domestic markets that are now dominated by smaller, State-owned manufacturers, Shanghai Stock Exchange executive vice president Zhou Qinye said in January.
Chalco, priced the stock offer for Lanzhou Aluminum Co. and Shandong Aluminium Industry Co. 25 percent above their last traded share prices. A concurrent cash offer valued at 6.91 billion yuan doesn't contain a premium.
After the takeover, Chalco's yuan-denominated A shares will trade on the Shanghai Stock Exchange, according to Friday's statements. The shares of all three companies are suspended, they last traded Nov. 27.
Chalco is offering 3.15 shares for every Shandong Aluminum share, which was last traded at 16.65 yuan, for a total of 4.17 billion yuan. The cash offer is the same as the last traded price. The scrip bid for Lanzhou Aluminum of 1.8 Chalco shares is worth 4 billion yuan.
Chalco said it's paying the premium to compensate shareholders for making nontradable State holdings tradable.
'We are happy to see it returning to the domestic market,'' said Liu Yang, who helps oversee more than US$3 billion of assets, including more than US$100 million of A shares, at mutual fund Atlantis Investment in Hong Kong. She has Chalco shares. 'We don't care how much it offers in compensation.''
Chalco plans to buy rival smelters to gain more control of the domestic aluminum and alumina industry following a government decision to slow investment in industries including aluminum, steel and automaking to cool inflation. Chalco has added 1.09 million tons of capacity by buying aluminum plants this year, the company said Oct. 23.
Aluminum Corp. of China, Chalco's parent, plans to increase capacity 56 percent to 5 million metric tons by 2010. Its alumina-making capacity will rise to 12 million tons in 2008, from 9.05 million tons by the end of this year, Li Dongguang, the company's trading manager, said last month.
Alumina is a semi-finished white powder smelters turn into aluminum in an energy-intensive electrolytic process.
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