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August 20, 2009

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Evraz ends plan to take over Delong

RUSSIAN steel maker Evraz Group SA has dropped plans to acquire control of a smaller private Chinese mill as it failed to obtain approval from Chinese anti-trust authorities before a deadline expired.

Evraz in February 2008 agreed to buy a 10 percent stake in Delong Holdings Ltd. The deal was valued at US$1.5 billion at the time and included an option to increase the stake to 51 percent.

The option was not exercised and expired on Tuesday, Singapore-listed Delong said in a stock exchange filing.

Foreign companies, eying the world's largest steel market, are attempting to buy the likes of Delong in an effort to bypass Chinese rules on foreign ownership limits. China's industry policy bars majority foreign ownership in state-owned steel producers, though the rules are not clear for privately owned and overseas-listed mills.

A Beijing-based Delong representative said the Ministry of Commerce, the main anti-trust authority, didn't give a reason for rejecting approval. The ministry has yet to comment on the issue.

"I don't think the ministry should have rejected the deal because I cannot see any grounds," said one analyst at Mysteel. "Maybe the government is just postponing approval because it didn't want the deal to occur now."

Delong, which operates from Xingtai, an industrial city in Hebei Province, has annual production capacity of 3 million tons. China's crude steel capacity stood at 660 million tons as of the end of last year.

Evraz said in a statement it remains interested in developing its business in China and continues to consider various opportunities in the country. It did not provide further details. The second-largest Russian steel firm is part owned by billionaire Roman Abramovich.


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