PZH Steel to get 7.19b yuan asset injection

Panzhihua Iron and Steel Group, which ranks 18th largest in the country, is following in the footsteps of its rivals by injecting its production and mining assets into its listed flagship to create a three-into-one entity.

Shenzhen-listed Panzhihua New Steel & Vanadium (PZH Steel) is getting 7.19 billion yuan (HK$8.04 billion) worth of assets from its parent.

To fund the purchase, it will sell 749.17 million new shares to its state-owned parent at 9.59 yuan each, the world's third-biggest producer of vanadium steel used in railroads, said in a statement filed with the Shenzhen Stock Exchange yesterday.

It also will issue 951.77 million new shares to swap with shares of its two Shenzhen-listed sister companies, Chongqing Titanium and Sichuan Changcheng Special Steel, held by minority shareholders.

For every Chongqing Titanium share, it will offer 1.78 shares, and for every Sichuan Changcheng share, it will give 0.82 share. The two companies will be merged into PZH Steel and will then be delisted.

Minority shareholders of the three listed firms also could choose to receive cash from the parent group's strategic partner, Anshan Iron & Steel Group, at 9.59 yuan each for PZH Steel, 14.14 yuan each for Chongqing Titanium and 6.50 yuan each for Sichuan Changcheng, the statement said.

The deal, which was approved by the State-owned Assets Supervision and Administration Commission last month, would more than double PZH Steel's total assets and create a listed company with 37.5 billion yuan in annual sales and 1.65 billion yuan in net profit based on last year's figures.

However, the enlarged listed company is expected to report a decline in net profit this year to 1.42 billion yuan on a turnover of 4.74 billion yuan, according to its own forecast.

The forecast has not yet taken into account damage caused by last week's earthquake in its home province, which it is still evaluating.

Shares in the three listed firms jumped yesterday after the detailed restructure plan was unveiled. The share price of PZH Steel and Chongqing Titanium both rose to their 10 per cent daily limit, closing at 11.30 yuan and 16.82 yuan, respectively. Sichuan Changcheng gained 5 per cent to 7.32 yuan.

The restructuring plan still is subject to approval from shareholders and the China Securities Regulatory Commission.

Panzhihua Steel Group, one of the largest steelmakers in the western region, produced 6.64 million tonnes of crude steel and 612 million tonnes of steel products last year.

Analysts said the restructuring and asset injection could streamline the group's operations and enhance the competitiveness of its listed flagship PZH Steel.

The world's biggest steel producer and consumer, the mainland is urging consolidation in the industry to curb overcapacity and improve competitiveness.

Steel giants including Baosteel Group, Anshan Iron & Steel and Wuhan Iron & Steel Group have completed asset injections into their respective listed arms to pave the way for expansion.

Gathering steam

Consolidation in steel industry will pave way for expansion

The enlarged listed PZH Steel is expected to report a decline in net profit this year to, in yuan 1.42b