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August 8, 2009

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Laiwu Steel plans asset purchase

Laiwu Steel Corp plans to acquire assets worth 7.26 billion yuan (US$1.1 billion) from its parent by issuing new shares.

The Shandong Province-based steel maker will place 642.48 million shares at 11.3 yuan each with its state parent, Laiwu Iron and Steel Group, it said in a statement to the Shanghai Stock Exchange yesterday.

China is encouraging state steel groups to inject assets into listed units to boost transparency and corporate governance.

The company's crude steel production capacity will jump 78 percent to 9.13 million tons a year after the asset acquisition, Laiwu Steel said.

Laiwu Steel shares jumped by the maximum allowable 10 percent to 15.54 yuan yesterday as they resumed trading after being suspended since July 10 pending the announcement.

Sinolink Securities analyst Zhou Tao said Laiwu Steel's net assets would be significantly increased after the acquisition. He maintains a "buy" rating on the stock.

Laiwu Group's holding in the listed company will rise to 85.06 percent from the current 74.65 percent after the deal. Laiwu Group is a wholly owned unit of Shandong Iron and Steel Group, which was formed in March through a merger with another steel mill in Shandong.


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