Beijing:Steel magnate Lakshmi Mittal’s demand for a 50% stake in China’s Baotou Iron and Steel Group has led to a collapse of talks for a joint venture, as Beijing will not allow foreign steel giants to take a controlling stake in a joint venture.
Confirming the failure of striking a deal with Arcelor Mittal, the world’s largest steel maker, Baotou Iron and Steel Chairman Lin Donglu said his company is now scouting for local partners, such as Shanghai-based Baosteel Group, China’s biggest steelmaker.
China, the world’s largest steelmaker and consumer, has adopted a cautious approach to foreign giants like Arcelor Mittal’s ambitious plans in the huge market, industry sources said.
Senior Chinese lawmakers have urged the government to accelerate its improvement of regulations on mergers and acquisitions of domestic companies by foreign capital, which, if not cautiously handled, might jeopardise the nation’s industry security.
Meanwhile, Arcelor Mittal plans to raise its stake in Hunan Valin Steel Tube & Wire Co when the Chinese steelmaker issues new shares.
Arcelor Mittal, which holds 29.5% in Hunan Valin, will take 49.3% of the 520 million new shares on offer, boosting its holding to 33.3%. Hunan Valin will use the 2.3 billion yuan raised from the share sale for growth, the company said yesterday.
China’s manager for Arcelor Mittal, Sridhar Krishnamoorthy said the share placement would raise funds to help Hunan Valin increase its stake in its subsidiaries.