ArcelorMittal, keen on making its presence felt in China, is paying $647 million for a 28.1-percent stake in China Oriental Group Co. Ltd., making it the only Western steelmaker to own significant stakes in two of the country's steel mills.
The purchase of the stake in China Oriental comes about two years after the world's largest steelmaker bought a stake in Hunan Valin Steel Tube & Wire Ltd., the listed arm of Hunan Valin Group. It marks the biggest investment in a major Chinese mill since the government effectively banned foreign investors from taking majority control of Chinese steelmakers in 2005.
ArcelorMittal purchased the shares from Smart Triumph Corp., owned by Chen Ningning, one of China's richest women, and is now the group's second-largest shareholder.
Hong Kong-listed China Oriental has two steel plants in Guangdong and Hebei provinces producing billet, H-beams and hot-rolled, cold-rolled and galvanized strip. Last year it sold 3.75 million tonnes of steel products, generating earnings before interest, taxes, depreciation and amortization of $225 million.
ArcelorMittal owns a 29.2-percent stake in Hunan Valin Steel Tube and last February agreed to buy a 38-percent stake in Laiwu Iron & Steel Co., although it has not yet received final government approval for that deal.
Analysts said the purchase of a stake in China Oriental was only a small step for ArcelorMittal, although it would strengthen the steelmaker's presence in China.
"ArcelorMittal has strengthened its existence in the Chinese steel market with one more investment, although China Oriental is not a major steel mill in China," an analyst in Shanghai said. "It should also be good news for China Oriental, as their second-largest shareholder is the leader in the global steel industry with advanced production technology, which will be of great value for its future development."