Shares in Aluminum Corp of China (Chalco) were suspended in Hong Kong and Shanghai yesterday amid speculation the listed firm will buy assets from its state-owned parent - including Shanghai-listed Baotou Aluminium - in a deal possibly worth about 1.15 billion yuan.
Chinalco, Chalco's parent, in January took an 80 per cent stake in Baotou's parent, Baotou Aluminum Group, which held 55 per cent of the listed unit, in a government-arranged asset transfer.
Chalco, the world's second-largest alumina producer, is expected to buy Baotou and take it private after completing in April the same process with two listed subsidiaries - Lanzhou Aluminium and Shandong Aluminium Industry, said Jiang Yukun, an analyst at Everbright Securities.
'It's still hard to tell how much the deal would be worth, but the company will undoubtedly pay a premium over Baotou's current share price,' Mr Jiang said.
Chalco would probably issue new A shares to swap stock with Baotou's shareholders, rather than settle the deal by cash, he said. Shares in Baotou were also suspended from trading yesterday, with the company saying it had received a notice from Chinalco that the company would be making an 'important announcement' soon.
Based on Baotou's total issued shares of 431 million shares and the stock's Monday closing price of 26.74 yuan each, the company is worth 1.52 billion yuan. Chalco had said in March it would buy downstream aluminium assets from its parent, including aluminium smelter Baotou.
Zhang Qing, Chalco's investor relations manager, yesterday said that the suspension related to Baotou. He gave no further details.
Chalco might announce its intention to acquire Baotou as early as today, but not the acquisition details, company sources said.
'Acquiring Baotou could reduce connected transactions between the two listed firms and further boost Chalco's smelting capacity,' said Steven Chen Yue, an analyst at Guotai Junan Securities.
Baotou reported net profit of 403 million yuan on turnover of 4.82 billion yuan last year, while Chalco earned 11.75 billion yuan on 61.9 billion yuan of sales.
Separately, Chalco said yesterday it would sell three billion yuan of short-term bonds with one-year maturity in the mainland's interbank market on Friday, to supplement operational capital.