Beijing Shougang Co. (000959), a Chinese steelmaker, surged by its daily limit in Shenzhen trading after receiving regulatory approval to buy 16.3 billion yuan ($2.6 billion) of steel assets from its parent.
The steelmaker, based in Beijing, climbed 10 percent to 3.07 yuan, the highest since August 28, as of 10:27 a.m. in Shenzhen. The stock was halted from trading on Jan. 10, pending a review of the asset swap. The China Securities Regulatory Commission approved the plan yesterday, the company said in a filing to the Shenzhen Stock Exchange.
As part of the transaction, the company will sell 6.3 billion yuan of its steel assets, most of which aren’t operating, to parent Shougang Corp. It will also issue 2.32 billion shares to the parent for 4.29 yuan apiece.
“Shougang is aiming to boost profit by buying assets as its existing plants in Beijing has been shut permanently,” said Zhao Liming, Beijing-based analyst with Hongyuan Securities Co.
Beijing Shougang closed most of its steelmaking plants in the capital city by the end of 2010 as part of a government plan to cut pollution and reduce energy consumption in large cities. The company will gain a steel plant in Qianan City, Hebei Province, which is 250 kilometers (155 miles) east of Beijing.
The Qianan City facility is the parent’s most profitable steel plant, said Zhao. It has a capacity to make 8 million metric tons of steel a year and supplies products to automakers, shipbuilders and high-end construction projects, Beijing Shougang said in May.
Beijing Shougang cut the price it plans to pay for the parent’s assets from 18.4 billion yuan because of ‘weakening conditions in the steel industry,’ it said in an exchange filing Dec. 27.
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