ArcelorMittal clear to raise Valin Steel stake

PUBLISHED : Wednesday, 19 December, 2007, 12:00am
UPDATED : Wednesday, 19 December, 2007, 12:00am

ArcelorMittal, the world's largest steelmaker, has received approval to increase its stake in Shenzhen-listed Hunan Valin Steel Tube and Wire, to tap the world's biggest market of the alloy.

The China Securities Regulatory Commission approved Valin Steel's plan to place 49.3 per cent of its sale of 520 million new shares to ArcelorMittal, lifting the global steelmaker's stake in the firm to 33.02 per cent from 29.5 per cent.

Hunan Valin Iron & Steel Group, the Shenzhen-listed firm's parent, will buy the remaining shares, increasing its stake from 29.99 per cent to 33.92 per cent to remain its controlling shareholder.

Valin Group and ArcelorMittal have agreed not to sell the shares for three years,

The CSRC also granted a waiver exempting them from making a general offer for all other Valin Steel shares, the statement said.

In March, Valin Steel said it would raise 2.3 billion yuan from the share sale to buy steel plants from Valin Group, and increase output of steel plates to 1.8 million tonnes from 1.4 million tonnes.

Shares in Valin Steel rose 2.32 per cent to 11.44 yuan at the close yesterday.

ArcelorMittal, which supplies 10 per cent of the world's steel, has been targeting growth in China. However, as Beijing bans foreign companies from taking majority stakes in the nation's leading state-owned steel mills, its ambitions have seen little progress.

Its long fight to buy 38.41 per cent of Shanghai-listed Laiwu Steel Corp is set to collapse after the mill said it might not proceed with a share sale agreement due to expire by the end of the month after it failed to get government approval.

Its talks with other steelmakers in the country, including Baotou Iron & Steel Group, Kunming Iron & Steel Group and Xinjiang Ba Yi Steel & Iron Group, have also ended.

Frustrated in its plans for the larger mills, ArcelorMittal has shifted its focus to small privately owned steel mills. Last week, it revealed a plan to boost its stake in Hong Kong-listed steelmaker China Oriental Group from 28 per cent to 73.13 per cent.

Apart from Valin Steel, ArcelorMittal's key investments in the country also include 12 per cent of a Shanghai-based vehicle sheets venture with Nippon Steel Corp and Baoshan Iron & Steel and the purchase of 90 per cent of tyre-wire maker Rongcheng Chengshan Steelcord in Shandong.

All projects are still subject to government approval.