What’s new: Jiangsu Shagang Group signed a formal agreement to buy 60% of Nanjing Nangang Iron & Steel United Co. Ltd. for 13.58 billion yuan ($1.97 billion) from Fosun International Ltd., the companies said Tuesday.
The price is almost 3 billion yuan lower than agreed in October. Whether the deal will go through is still up in the air as Nangang’s other parent company, Nanjing Steel Group, may favor another buyer. Other bidders — including state-owned Citic Pacific Special Steel Group Co. Ltd. and Jiangxi Fangda Steel Group Co. Ltd. — may mount rival offers.
Also Tuesday, Fosun issued a notice of pre-emptive right giving Nanjing Steel Group the right to buy the Nangang shares before the opportunity is offered to others. Nanjing Steel Group has 30 days to respond whether it intends to exercise the pre-emptive right.
It is uncertain whether Nanjing Steel Group will do so, Nanjing Iron & Steel Co. Ltd. (600282.SH) said in a regulatory filing. Nanjing Iron & Steel is the publicly traded unit of Nangang.
Citic Pacific Special Steel is seeking support from management of Nanjing Steel Group, Caixin learned from sources. But Citic may not be able to complete due diligence with 30 days, an industry participant told Caixin.
The background: Shagang agreed in October to buy 60% of Nangang for 16.5 billion yuan and paid Fosun 8 billion yuan of earnest money a few days after it signed an investment framework agreement with Fosun.
The 13.58 billion yuan price in the formal agreement fell below the original price tag of 16.5 billion yuan. Fosun said Nangang paid a 1.8 billion yuan dividend to Fosun at year-end of 2022, which offset part of the transaction amount.
To facilitate the deal, Fosun also bought a 30% stake in Zhejiang Wansheng Co. from Nangang for 2.65 billion yuan.
Fosun came under mounting pressure from its huge debt overhang as the declining property market and weak retail consumption strained liquidity amid several rounds of Covid-19 outbreaks. The conglomerate has dumped its stakes in some subsidiaries to raise money to pay debt.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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