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)