The National Development and Reform Commission (NDRC) has approved a transaction that gives the world's largest steel producer, Mittal Steel, a stake in a domestic steel company.
The NDRC approved the acquisition proposal on Thursday, immediately after the State-owned Assets Supervision and Administration Commission (SASAC) gave the deal the green light.
The deal involves Mittal buying 36.673 percent of stocks in Hunan-based Valin Iron and Steel Co. Ltd. (Valin Steel) for 2.7915 billion yuan (US$338 million).
State-owned Valin Group, Valin Steel's parent company, will hand 30 percent of its Mittal deal earnings to central finance and use the balance to adjust and upgrade its product mix, said Valin sources.
The deal is the largest foreign buy-in to a China A-share enterprise.
Under the deal, Mittal will provide technological development, management and marketing support, and will supply Valin Steel with 3 million tons of iron ore in the first year, with an option to increase this amount subject to Valin Steel's demands.
Valin Steel produced 7.13 million tons of steel last year, and generated revenues worth 26.2 billion yuan (US$3.18 billion).
Mittal's stakeholding in Valin Steel is less than initially intended.
In January, Mittal and Valin Group, agreed to a 37.17 percent stake each in Valin Steel.
But a new government policy prevents foreign steel companies from acquiring controlling stakes in domestic companies.
These restrictions will be included in a new national steel industry policy, which is expected to be released next week.
(Xinhua News Agency July 15, 2005)
