FMG 0.52% $13.65 fortescue metals group ltd

fortescue backer hunan valin steel

  1. 3,271 Posts.
    Interesting read below:

    Fortescue backer Hunan Valin Steel plans $1.7bn raising in Hong Kong

    Michael Sainsbury,

    China correspondent From: The Australian December 30, 2009


    Chinese shareholder Hunan Valin Steel plans to triple its capacity through mergers and acquisitions, as it eyes a Hong Kong stockmarket listing to raise up to $1.68 billion.

    While a top 10 steelmaker, Hunan Valin produces just 10.8 million tonnes annually compared with 30 million tonnes from the country's biggest mill owner, Baosteel. But it is planning a push into the top tier.

    Earlier this year Hunan Valin chairman Li Xiaowei said the company wanted to expand its annual production capacity to 30 million tonnes over the next few years. The Hunan-based Xiaoxiang Morning Herald said Mr Li told a local government meeting this week that the steelmaker's parent company, Hunan Valin Iron & Steel Group, might seek to raise as much as 10 billion yuan ($1.68bn) through the float and use the proceeds to expand capacity.

    Mr Li also said the company wanted to double its profit next year, forecasting its steel production would hit 19 million tonnes in 2010.

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    "Valin's action comes in a situation where consolidation is encouraged by the government and everyone strives to be bigger; the market looks good and people are optimistic," said Ma Li, an analyst at the Beijing Lange Steel Information & Research Centre. "Valin is a private company which makes decisions quickly."

    The China Daily cited industry insiders as saying Valin's listing plan is designed to support capacity expansion and overseas acquisitions.

    As the next step in its acquisition program, Valin may want to buy Hunan Lengshuijiang Iron & Steel, a low-end construction steel producer.

    Hunan Valin Steel Co's shares jumped nearly 8 per cent on the mainland Shenzen market on Monday following the news.

    Valin was the first Chinese steelmaker to take a large stake in an Australian iron ore miner, paying $US1.27 billion for a 17.4 per cent stake in Fortescue Metals Group at the start of 2009.

    The move made it the iron ore miner's second-largest shareholder, after Andrew Forrest helped secure iron ore supplies for the group.

    The purchase set a trend and was followed by Wuhan Steel's $US247m investment in Australian iron ore firm Centrex. Most recently, Shanghai-based Baosteel's took a 15 per cent stake in Aquila Resources for $4 billion in debt and equity.

    Baosteel had previously spent 18 months in talks with FMG before the discussion collapsed in 2008.

    Hunan Valin Steel, the group's Shenzhen-listed unit, is partly owned by the world's largest steelmaker ArcelorMittal.

    China is trying to consolidate its fractured steel industry into six mega-groups.
 
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