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Shares in Panzhihua Steel units surge on takeover expectations

Carol Chan

The shares of Panzhihua Iron & Steel Group's three Shenzhen-listed units jumped their 10 per cent daily limit yesterday on speculation Anshan Iron & Steel Group is planning a takeover after revealing that it has bought at least 1.33 billion yuan (HK$1.51 billion) worth of shares in the companies.

Liaoning-based Anshan Steel, the parent of listed Angang Steel, bought the shares between May and August, giving it a 5.09 per cent stake in each of Panzhihua New Steel & Vanadium, Sichuan Changcheng Special Steel and Chongqing Titanium.

Panzhihua Iron & Steel is undergoing group restructuring, including plans to inject its production and mining assets into its flagship Panzhihua New Steel then merge it with the other two listed units through a 7.29 billion share placement and swap deal.

Anshan Steel has said it would provide financial support, which may amount to more than 20 billion yuan, for the restructuring. Yesterday's disclosure of its stakes in the three units further showed its commitment and deflated rumours that it may walk away.

'It makes sense for Anshan Steel to buy the shares as they are now trading below what it had promised to buy,' said Guotai Junan Securities analyst Sabrina Xie Lulu.

According to filings to the Shenzhen Stock Exchange, Anshan Steel bought 167.13 million Panzhihua New Steel shares at between 6.41 yuan and 9.59 yuan each, costing it at least 1.07 billion yuan. It also paid at least 257 million yuan for the stakes in Sichuan Changcheng and Chongqing Titanium.

Anshan Steel has offered minority shareholders of the three listed firms 9.59 yuan in cash for each Panzhihua New Steel share, 14.14 yuan per share for Chongqing Titanium and 6.50 yuan each for Sichuan Changcheng shares, if they do not want to take the proposed share swap deal.

Panzhihua New Steel shares closed at 7.58 yuan yesterday. Sichuan Changcheng ended at 5.06 yuan and Chongqing Titanium finished at 10.98 yuan.

Anshan Steel may continue to increase its stake in the three units over the next 12 months, according to the filings.

Ms Xie said Panzhihua Iron & Steel was an acquisition target for many steelmakers because of its ample iron ore, vanadium and titanium resources, key ingredients for making steel.

Panzhihua Iron & Steel would also help Anshan Steel expand into the southwestern market which had strong demand for steel for reconstruction after the earthquake in Sichuan province in May, she added.

However, as Shanghai-based Baosteel Group and Hubei-based Wuhan & Iron Steel had also expressed interest in Panzhihua Iron & Steel, it was still unclear which major steel group would eventually take control, Ms Xie added.

Stake raising

Anshan Steel's share buys give it a 5.09 per cent stake in each unit

Anshan Iron & Steel Group has bought up shares in the three Panzhihua Iron & Steel Group units worth at least, in yuan: 1.33b yuan

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