China Baowu Steel Group Corporation Ltd. agreed to acquire a 51% stake in rival Magang (Group) Holding Company Ltd. at nil consideration, according to a June 2 release.
As a result, Baowu will hold a 45.54% stake in Magang unit Maanshan Iron & Steel Co. Ltd. The deal is subject to necessary procedures and the grant of Baowu's application for a waiver over its obligation to make a mandatory offer for all Maanshan shares it does not own.
Baowu reportedly began takeover talks with Magang in September 2018 as part of a plan to increase production capacity to 100 million tonnes by 2021 from about 70 Mt. In the same month, the two companies joined a 2 billion Chinese yuan joint venture called Huabao Metallurgical Assets Management Co. to support consolidation in the country's steel sector.
Baowu was the world's second-largest steel producer in 2018 with 67.43 Mt of output, while Maanshan ranked 16th with 19.64 Mt of output, according to latest data from the World Steel Association.
Baowu is reportedly planning to transfer its blast furnaces to Cambodia from Xinjiang in China late this year to maintain output levels.
As of May 31, US$1 was equivalent to 6.90 yuan.