Panzhihua New Steel & Vanadium Co, also known as PZH Steel, said sales may more than double this year boosted by its plan to sell shares to its parent.
PZH Steel plans to sell 749 million shares to its parent at 9.59 yuan (US$1.37) each in exchange for assets valued at 7.19 billion yuan, according to a filing to the Shenzhen Stock Exchange last Saturday.
It also intends to merge with two other listed companies of the parent, Chongqing Titanium Industry and Sichuan Changcheng Special Steel, via share swap. The two sister firms, also listed in Shenzhen, then will be delisted.
PZH Steel, based in Panzhihua in Sichuan Province, expects sales of 47.4 billion yuan this year, from 21.2 billion yuan in 2007.
PZH Steel in November last year announced the merger and acquisition plans to add iron ore mines and titanium and vanadium deposits. Its state-owned parent, Panzhihua Iron & Steel (Group) Co, is the largest mill in west China and also the nation's largest supplier of railroad-use steel.
A domestic industry policy favors consolidation in China's steel industry to ensure that its large but fragmented sector will be more internationally competitive.
PZH Steel and Chongqing Titanium have said their operations were unaffected by the 8-magnitude earthquake in Sichuan last Monday because the mills are far away from the epicenter. Sichuan Changcheng has said the quake had caused some deaths and injuries and damages at its plant in the province's Jiangyou City and operations have been halted.
The quake's impact on the assets under its M&A deals is still being assessed, and there are uncertainties over asset valuation and earnings outlook, PZH Steel said.
In yesterday's trading, PZH Steel surged 9.92 percent to 11.30 yuan. Chongqing Titanium jumped 10 percent to 16.82 yuan and Sichuan Changcheng surged 5 percent to end at 7.32 yuan.
(Shanghai Daily May 20, 2008)
