Shares of Wuhan Iron & Steel, the mainland's No3 steelmaker by market value, surged as much as 7.2 per cent after its parent agreed to buy a majority stake in a smaller rival for more than three billion yuan.
Parent company Wuhan Iron and Steel (Group), the mainland's fifth-largest steelmaker with annual capacity for 20 million tonnes, agreed to pay about 3.6 billion yuan for a 48.41 per cent stake in the flagship subsidiary of smaller rival Kunming Iron and Steel Group on Wednesday, becoming the largest shareholder of the Yunnan-based steelmaker.
After the merger, Kunming Steel would become the second-largest shareholder with a 47.11 per cent stake in the listed Wuhan mill.
The tie-up between the two steel groups would create the country's third-largest steelmaker in terms of 2006 output figures, behind Shanghai-based Baosteel Group and Tangshan Iron and Steel Group.
Wuhan Steel Group produced 13.76 million tonnes of crude steel last year.
Kunming Steel, which has an annual capacity of six million tonnes, produced 4.8 million tonnes of crude steel.
