Chinese steelmaker Baowu Steel Group has agreed to take 51pc controlling stake in stainless steel producer TISCO or Taiyuan Iron & Steel for CNY14.5bn ($2.09bn).
TISCO’s Shenzen arm filed the announcement saying that Baowu Steel will not be paying anything as it is state-backed restructuring. Market sources have confirmed the news with Davis Index. The merger needs the approval from Assets Supervision and Administration Commission of the State Council.
Chinese government has been trying to consolidate its steel industry to reduce emissions and achieve orderly market competition. Post-acquisition, Baowu will expand its presence in northern China. Baowu comprises Baosteel Group in eastern and southern part of China, Wuhan Steel Group in central, Maanshan Iron and Steel group in eastern part of China and Chongquig Iron and Steel in southwest.
Post the acquisition of TISCO, Baowu will be producing 100mn mt of steel annually while enhancing its overall market competitiveness in stainless steel sector. Also, this will give Baowu a competitive advantage over its Japanese and South Korean counterparts.
Tisco’s stainless steel is mostly used by high-end users and is China’s second largest steel maker after Tsingshan Holding with an annual steel capacity of 12.9mn mt, of which 4.5mn mt is of stainless steel.
($1=CNY6.9)