Shares in Hebei-based steelmaker China Oriental Group surged 17.98 per cent yesterday after Chen Ningning, its second-largest shareholder and the mainland's second-richest woman, said she might make a general offer for the shares in the company she did not already own. The stake would be valued at HK$5.63 billion, based on yesterday's closing price of HK$2.69. Smart Triumph, controlled by Ms Chen and her mother, Lu Hui, and which owns 28 per cent of China Oriental, was in talks with the steelmaker's controlling shareholder, Wellbeing Holdings, about 'a possible change of control', which might involve Smart making an offer to all the other shareholders, an exchange statement said. Wellbeing owns a 42 per cent stake in China Oriental. The statement said it was in response to the 'undue movements' in the shares, which jumped 6.5 per cent on Wednesday. On the back of the possible takeover, the stock closed at a three-year high yesterday. The possible offer for China Oriental's shares might involve 'a mixture of cash and non-cash' and 'may or may not be at a premium to the steelmaker's current share price', the statement said. Under exchange rules, when a shareholder passes the 35 per cent stake threshold, it must make an offer to all the other shareholders at the price it paid in its most recent share purchase. Negotiations between Smart and Wellbeing, controlled by China Oriental chairman Han Jingyuan, were ongoing and no terms had been agreed yet, the statement said. China Oriental, which mainly produces semi-finished steel products, suffered an earnings decline in 2004 and 2005. Analysts expected it to recover in the next two years on higher steel prices and stable iron ore prices. Last month, JP Morgan gave an 'overweight' rating on the company and forecast its earnings would rise 25 per cent last year to 1.06 billion yuan and amount to 1.33 billion yuan this year. Mr Han and Ms Chen acquired their holdings in the company when their stakes in Jinxi Iron & Steel were exchanged for shares in China Oriental before it went public in 2004. They gained control over Jinxi as part of a management buyout from the state in December 2002. Ms Chen, along with her mother, ranked second on an annual list of the wealthiest mainland females last year and was the 19th-richest person, with an estimated US$813 million, according to researcher Rupert Hoogewerf.
