Business Activities News
- Baosteel to take over smaller rival Ba Yi
Date: 18-Jan-2007 Sources: (Shenzhen Daily)
BAOSTEEL Group Corp., China's biggest steelmaker, agreed to pay 3 billion yuan (US$385 million) to buy smaller rival Xinjiang Ba Yi Iron & Steel Group in its first acquisition of a mill since being formed in 1998.
Baosteel is acquiring a 69.6 percent stake in Ba Yi, the biggest mill in China's westernmost region, from the local government, Ba Yi's listed unit said in a statement yesterday. Baosteel may increase its stake in Ba Yi in the next 12 months, the statement said.
The government is backing mergers among steelmakers to create bigger companies that are better able to compete with overseas rivals and have more power in talks with raw-material suppliers. Baosteel's former chairwoman Xie Qihua said last month the company should step up domestic takeovers, aiming to make Baosteel one of the world's top three producers by 2010.
The acquisition might create a model for other steelmakers, Lin Hai, who helps oversee US$1.8 billion of assets at Guotai Asset Management Co. in Shanghai, said.
The deal will create New Baosteel Group, which will be China's first steelmaker to have annual capacity of more than 30 million tons, China Central Television said yesterday. Ba Yi is about one-sixth the size of Baosteel in terms of output.
Xinjiang's regional government agreed to inject 330 million yuan worth of land into Ba Yi in exchange for shares, giving it a 15 percent stake after the sale, Ba Yi said in its statement.
Asia's steelmakers are seeking to boost market value and put defensive measures in place after Mittal Steel Co.'s US$38.3 billion takeover last year of nearest rival Arcelor SA. The deal created a company that pours 110 million tons of steel, or 10 percent of world supply, and prompted talk of more takeovers.
Baosteel had 4.5 billion yuan (US$576 million) of cash at the end of the third quarter, enough to buy any one of China's 12 smallest publicly traded steel companies including Lingyuan Iron & Steel Co.
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