Companies

Baosteel merger talks with Baotou Steel collapse

(Agencies)
Updated: 2010-06-01 14:25

BEIJING: Merger talks between leading Chinese steel mill Baosteel and the Baotou Iron and Steel Group of Inner Mongolia have collapsed after four years of negotiations, the 21st Century Business Herald said on Tuesday.

The takeover bid by the Shanghai-based Baosteel, China's second-biggest steel producer, failed after the intervention of the local government in Baotou last month, the newspaper said, citing an insider with knowledge of the situation.

Neither company was immediately available to comment.

The report said Baosteel's rival, Anshan Iron and Steel, also known as Angang, was expected to move in with its own bid for the Inner Mongolian company, which raised its total annual steel capacity to more than 10 million tons in 2009.

Angang, based in Liaoning province in northeast China, was last week given the go-ahead by regulators to acquire Panzhihua Steel and could eventually become the country's biggest steel mill as a result of the acquisitions.

Related readings:  Baosteel scales back expansion target  Baosteel uses temporary pricing to import ore  Baosteel Q1 net profits surge to 3.93b yuan  Industry meltdown possible if miners stick to price hike

The company has already merged with Benxi Iron and Steel, also based in Liaoning, to create the Anben Group, which was China's fourth-biggest steel producer in 2009 with a total of 29.3 million tons of output.

China's long-standing plans to consolidate its fragmented steel sector have been routinely blocked, with local governments reluctant to relinquish important sources of revenue to companies like Baosteel, which pay tax directly to the central government.

China originally aimed to bring 50 percent of total national production capacity under the control of its top five mills by the end of 2010, but the figure stood at just 29 percent by the end of last year.