Russia's Evraz Group said yesterday it wants to buy a Singapore-listed Chinese steel maker for as much as US$1.5 billion to expand in the world's largest market.
Evraz has agreed to buy a 10-percent stake of Delong Holdings Ltd at S$3.9459 (US$2.80) per share, with conditional options to raise the stake to 51 percent. Delong shares were suspended from trading yesterday morning and gained 16 percent to S$3.50 after the announcement.
A 51-percent ownership will require Evraz to make a general offer to buy the remaining shares at the same price, under Singapore takeover codes.
The maximum consideration payable by Evraz will be about US$1.494 billion, assuming full acceptance of the mandatory offer and the exercise of all outstanding warrants, Evraz said. Partly owned by Russian billionaire and Chelsea soccer club owner Roman Abramovich, Evraz has been expanding to Africa and the United States in recent years.
"The investment by Evraz in the Chinese steel sector, our first in the Asia Pacific region, is a critical strategic move to expand our global footprint," said Evraz's Chairman and CEO Alexander Frolov.
Delong, headquartered in Beijing, has its production base in nearby Hebei Province, which is close to raw material sources and an extensive client base within the Bohai Economic Circle.
Evraz said it doesn't intend to change Delong's management following completion of the transactions.
The deal is subject to anti-trust clearance by China's Ministry of Commerce and the State Administration of Industry and Commerce.
China's industry policy bars foreign majority ownership in its state-owned steel producers, but the rules are unclear for privately-owned and overseas-listed mills.
Evraz is buying the initial 10-percent stake from Best Decade and Best Decade shareholders, and has a call option lasting for six months to buy a further 32.08 percent from Best Decade. It added Best Decade shareholders had agreed to sell another 8.97 percent in Delong later.
Delong Chairman Ding Liguo, who owns a majority stake in Best Decade, said the potential combination with Evraz will provide "critical elements" to grow the business, including secure access to raw materials and substantial financial resources, and creating new opportunities to share technology, research and development.
(Shanghai Daily February 20, 2008)