BAOSHAN Iron and Steel Corp, China's second largest steel maker, will take a three per cent stake in reinforcing bar trader Van Shung Chong Holdings, which is seeking a listing on the stock exchange.
Van Shung Chong will place 7.4 million new shares at $1.08 each with Baoshan Iron and Steel. The total cost for the three per cent stake will be about $8 million.
The shareholding link-up will set a stage for further co-operation between the two companies, which are now engaged in a joint venture in Shanghai for trading of reinforcing bars and steel products.
In a simultaneous move with the placement, Van Shung Chong next week will offer 61.67 million new shares at $1.08 each for public subscription.
The new issue, representing 25 per cent of its enlarged share capital, is priced at a price-earnings multiple of 6.8 on a weighted average and 8.3 on a fully diluted basis.
The new issue and placement will raise a total of $74.6 million, before expenses, to fund the company's expansion in Hong Kong and China.
Van Shung Chong has an adjusted net tangible asset value of 56 cents per share, and commands a prospective dividend yield of seven per cent.