The world's largest steelmaker, Mittal Steel Co. will buy 36.7 per cent stake for $316 million in China's Hunan Valin Steel Tube & Wire Co.
The Rotterdam-based Mittal would become Hunan Valin's second-biggest shareholder with a 36.7 percent stake after the Chinese commerce ministry sanctioned the purchase, Hunan Valin, informed the Shenzhen Stock Exchange.
"The stake purchase provides Mittal with a platform to enter China and market products in the country, instead of exporting, which sometimes can promote trade barriers," said
Wu Chunyong, an analyst with China Merchants Securities Co. Mittal, which operates plants in 14 countries and employs 160,000 people worldwide, has been seeking acquisitions amid rising demand from China and India, Xinhua agency reported.
China plans to shut smaller steel producers and force mergers to create two companies each capable of making more than 30 million tonnes of steel a year by 2010, the government said July this year.
Hunan Valin's yuan-denominated A shares fell 3.55 per cent to 4.08 yuan on the Shenzhen exchange. They have dropped 11.59 per cent since January 12, when the company said it was in talks with Mittal.
'Mittal' was created last year by merging its chairman's publicly-owned Ispat International NV and privately held LNM Holdings NV.
The company bought Cleveland, Ohio-based International Steel Group in April for $4.5 billion, overtaking Arcelor SA as the world's No. 1 steelmaker.
Lakshmi Mittal, whose family owns 88 percent of the company, currently owns assets capable of producing 70 million tonnes a year.