What’s new: A firm owned by state-owned heavyweight Citic Ltd. is set to acquire a controlling stake in a major Chinese steelmaker, edging out rival bidder Jiangsu Shagang Group Co. Ltd. that had signed a deal earlier last month to acquire the asset from owner Fosun International Ltd.
Following a last-minute bid, Citic unit Hubei Xinyegang Steel Co. Ltd. will pay 13.58 billion yuan ($2 billion) to acquire the 60% stake in Nanjing Nangang Iron & Steel United Co. Ltd. The money will be paid in phases, with the first installment set to be made on Tuesday, according to a Sunday announcement from Citic. A total of about 13 billion yuan will be paid by Citic within a week, sources familiar with the deal told Caixin.
The background: Jiangsu Shagang, China’s largest privately owned steelmaker, initially signed an investment framework to buy the Nangang stake from Fosun last October for around 15 billion yuan, sources previously told Caixin.
But the deal dragged on for months amid haggling before the sharp discount announced in the latest deal earlier last month.
Uncertainty hovered over the deal from the start because Nanjing Iron & Steel Group Co. Ltd., holder of the remaining 40% of Nangang, had a right of first refusal that allowed it to buy out Fosun’s stake before the opportunity was offered to others.
Xinye will partner with Nanjing Iron & Steel to exercise the latter’s right to buy Fosun’s share of Nangang. Specifically, the Citic unit will inject cash to take an around 55% stake in Nanjing Iron & Steel, which would do the actual purchasing, according to Citic’s Sunday announcement.
Related: In Depth: Will Fosun’s $2.2 Billion Steel Unit Sale Save the Conglomerate?
Contact editor Leila Hashemi (leilahashemi@caixin.com)
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