Baoshan Steel To Issue New Shares, Buy Assets
From Parent Company
Baoshan Iron and Steel, the publicly traded arm of Baosteel,
will issue new shares to buy assets from its parent in
the largest deal of the kind in China. Baosteel is now
the sixth largest steel company in the world, and the
move to consolidate assets under its publicly traded arm
is seen as a rationalization of one of the country's leading
state-owned enterprises.
Baoshan will issue US$3.4 billion of shares to finance
the purchase of the assets, which are located throughout
China. Xie Qihua, chairwoman of the company, said that
the goal of the company is to become one of the three
largest steelmakers in the world by 2010, putting it ahead
of the larger South Korean and Japanese steel manufacturers.
The company will issue five billion new yuan-denominated
shares, with part being sold to the public, and part to
its parent to finance the deal. After the deal is completed,
almost all of the company will be publicly traded.
Because the company was founded in 1978, it is largely
free of the non-performing debt problems which plague
most of China's other state-owned enterprises. As Chinese
demand for steel and raw materials have increased, the
company has been aggressive about expanding
overseas. The Australian and South American
economies have become particularly dependent on Chinese
imports of raw materials. This has caused commodity prices
for raw materials to surge on international markets.
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