According to Chinese securities laws, any company that buys 30 percent or more of a listed company must make a general offer to buy all outstanding shares in the enterprise. But the law doesn't say the offer has to be reasonable, a loophole Iron & Steel United is taking advantage of in offering to buy shares at well below the current market price.

United was formed in March by four partners, including Nanjing Iron & Steel Group, which held 70.95 percent of the non-tradable shares in Nanjing Iron & Steel Co Ltd, a steelmaker listed on the Shanghai Stock Exchange.

Iron & Steel Group transferred the shares to United as part of initial investment in the new venture.

By law, the transfer means United must make an offer to buy all outstanding shares in the listed company.

United made the offer yesterday, bidding 5.86 yuan (71 US cents) per tradable share and 3.81 yuan for each non-tradable share.

The shares closed on Wednesday at 8.74 yuan. Trading was suspended for one day yesterday due to the pending offer.

The offer is good for 30 days.

Analysts, however, say the offer is strictly ceremonial, and the company is only meeting its legal obligations, not attempting to gain total control of the listed company.

"Nanjing Iron & Steel United doesn't want to see a successful offer," said Wu Jie, a dealer with Kinghing Securities Co Ltd. "No investor will sell their shares. The general offer is set to end in a flop," he said.

(Shanghai Daily June 13, 2003)