Nanjing Iron and Steel Co yesterday said it will acquire assets worth 8.6 billion yuan (US$1.26 billion) in exchange for giving new shares to a related company, paving the way for a group listing.
Nanjing Steel will issue 2.03 billion shares at 4.23 yuan apiece to Nanjing Nangang United Co in exchange for assets in steel making, iron ore mining and transport, it said in a statement to the Shanghai Stock Exchange yesterday.
The purchases would raise Nanjing Steel's annual crude steel capacity to 6.5 million tons, the company said. The expansion will represent a 20 percent rise in capacity, according to Guosen Securities analyst Zheng Dong.
"The asset injection could increase the company's profitability in the future, although the steel market remains weak amid the global economic crisis," Zheng wrote.
Chinese steel makers, including industry leaders such as Baoshan Iron and Steel Co and Angang Steel Co, are acquiring assets from parent companies as the government encourages consolidation in the sector.
The deal will help reduce connected transactions and increase its capacity to cope with risks, according to Nanjing Steel.
Nanjing Steel, based in Jiangsu Province, is controlled by billionaire Guo Guangchang, chairman of Shanghai-based and Hong Kong-listed Fosun International Ltd, one of China's largest privately owned conglomerates.
Nanjing Steel fell 1.51 percent to 4.58 yuan yesterday after the announcement. The Shanghai Composite Index shed 0.82 percent.
(Shanghai Daily May 27, 2009)
