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Chalco to bid for 4.2b yuan parent assets

PUBLISHED : Wednesday, 27 February, 2008, 12:00am
UPDATED : Wednesday, 27 February, 2008, 12:00am

Aluminum Corp of China (Chalco), the mainland's biggest producer of the metal, will bid for 4.18 billion yuan worth of assets from its state-owned parent company to diversify into downstream aluminium processing.

Chinalco, Chalco's parent, had put up for sale stakes in six of its subsidiaries on Monday on the Beijing Equity Exchange, a fledgling platform for the sale of state assets.

Valued at 4.18 billion yuan, the stakes include majority holdings of five aluminium processing plants and an aluminium smelting plant.

'We are interested in bidding for the stakes as the companies fit into our business strategy,' said Chalco investor relations manager Zhang Qing. But Ms Zhang said the firm should obtain the board of directors' approval before entering a bid.

Analysts said the assets were likely to fall into Chalco's hands, given the strict bidding qualifications.

Bidders must be a state-backed alumina and aluminium maker with at least 50 billion yuan in net assets.

They should buy the entire package - all the six plants - and deposit 500 million yuan when they put in bids. Bids from consortia will not be accepted and listed firms are preferred.

'Not many metals firms could meet all the requirements. It is somehow tailor-made for Chalco,' an analyst said.

Chinalco, which this year led a US$14 billion acquisition of 12 per cent of global mining giant Rio Tinto, is selling its two wholly owned units, Liancheng Aluminium for 1.87 billion yuan and SWA Cold Rolling Strip for 119.6 million yuan, according to information on the exchange's website.

It is also selling stakes in four units - 75 per cent of Ruimin Strip, 60 per cent of SWA Strip, 84.02 per cent of Henan Aluminum Fabrication and 56.86 per cent of Huaxi Aluminium.

Xiao Yaqing, Chalco's chairman, said last year that the company would acquire downstream aluminium processing plants from its parent in the next two to three years to gain another growth engine.

Asset injection from the parent would help Chalco complete its aluminium business chain and become an integrated aluminium maker, with businesses ranging from bauxite mining to alumina refining, thus giving it 'stronger protection from risks', said Sabrina Xie Lulu, an analyst at Guotai Junan Securities.

Chalco's H shares fell 0.26 per cent yesterday, closing at HK$15.14, while its A shares rose 0.81 per cent to 31.18 yuan in Shanghai.

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