December 02, 2008

Hunan Valin to buy 55% stake in Jiangsu Xigang

Bloomberg reported that Chinese steel maker, partly owned by ArcelorMittal, Hunan Valin Steel Tube & Wire Co plans to buy 55% of rival Jiangsu Xigang Group Co in cash but did not disclose a price for the transaction.

Hunan Valin Steel in a statement to the Shanghai stock said that the parent, Hunan Valin Iron & Steel Group, pledged to sell Xigang a specialty steel unit of China Resources Group, to the publicly traded Valin Steel within three years.

According to the statement Valin Group will coordinate with Xigang on raw material purchases and the marketing of steel products to reduce competition.

Wuxi, Jiangsu province based Xigang was acquired by China Resources in 2005. The steel maker, with annual crude steel production capacity of 500,000 tonnes, makes bearing steel, spring steel, steel rods and seamless steel tubes. It had a profit of CNY 67.5 million (USD 9 million) on sales of CNY 2.53 billion in 2006.

China's government is encouraging mergers among the nation's steelmakers to create bigger companies and boost their bargaining power with suppliers of raw materials including iron ore.