ArcelorMittal takes control of China Oriental

ArcelorMittal takes control of China Oriental

Hong Kong: ArcelorMittal, the world’s largest steel maker, has raised its stake in China Oriental Group Co Ltd to over 73%, becoming the first foreign firm to take control of a Chinese steel maker.

ArcelorMittal, which for years has tried to buy a larger footprint in the world’s top consumer and producer of steel, may have paid as much as $1.7 billion for the deal based on a previous, smaller investment in the firm.

“This will provide Mittal with a foothold to enter the Chinese market, and they can use this company as a platform for further mergers and acquisitions," said Feng Zhang, JP Morgan’s steel analyst.

Beijing has pushed a consolidation of its fragmented, overcrowded steel arena for years, encouraging mergers between national champions but also investments by global players, but strict controls over foreign ownership have deterred the pace of acquisitions.

ArcelorMittal, which has struck acquisition deals with several Chinese mills —including a pact to buy 38% of Shandong-based Laiwu Steel Co — paid $647 million for a 28.03% stake in Oriental earlier this month.

Stock exchange data showed that the Luxembourg-based steel giant, born of a landmark merger spearheaded by billionaire Lakshmi Mittal, lifted its slice of Oriental to 73% although no financial terms were unveiled.

An Oriental spokeswoman declined comment but said the company would issue a statement on Thursday or Friday.

China forbids foreign control of major steel makers, a major sticking point in ArcelorMittal’s past efforts to invest in China. But Oriental, which was privatised in 2001, is registered in Bermuda and, although it runs a Chinese steel operation, is technically a private, overseas company.

ArcelorMittal now controls a minority slice of Valin Steel Tube & Wire Co, though it had to trim its stake to comply with curbs on foreign ownership.