Baosteel cleared to complete Bayi deal

(Shanghai Daily)
Updated: 2007-06-19 14:09

China's securities watchdog has approved Baosteel Group Corp's plan to buy control of smaller Xinjiang Bayi Iron & Steel Group, according to Bayi's listed unit.

The China Securities Regulatory Commission authorized the deal last Friday, Xinjiang Bayi Iron & Steel Co said in a filing to the Shanghai Stock Exchange yesterday.

This marks the completion of the Baosteel-Bayi deal. Bayi shares gained 2.77 percent to close at 9.26 yuan (US$1.20) yesterday after reaching an intraday high of 9.59 yuan.

Shanghai-based Baosteel, China's largest mill, agreed to acquire a 69.6 percent stake in Bayi Group in January for three billion yuan, in its first acquisition of a mill since it was formed in 1998. The listed Bayi is now 53.1 percent owned by Baosteel.

Analysts say the deal won't lead to much competition between Bayi and Baoshan Iron & Steel Co, Baosteel's flagship listed unit.

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Based in remote Xinjiang, Bayi sells more than 90 percent of its production, mainly used for construction purpose, in the northwestern market. While Baoshan Steel's key markets are in the eastern, central and southern regions, with products of higher grade and greater value, according to Zheng Dong, at Guosen Securities Co.

On the overseas front, Bayi exports to Central Asian markets, which border Xinjiang, while Baoshan sells in East Asia, Southeast Asia and the West.

"So there probably won't be further restructure between Bayi and Baoshan Steel to avoid same-business competition," Zheng said.

Bayi will benefit from Baosteel's expertise in staff training, logistics, technology and research, and in return, it provides access for Baosteel to tap the northwestern market and rich mining resources there.

(For more biz stories, please visit Industry Updates)