CHANGCHUN - Beijing-based Shougang Group Friday signed an agreement with the provincial government of Jilin in northeast China to spend 2.5 billion yuan ($369 million) to take over operating Tonghua Iron and Steel Group in the province.
According to the agreement, Shougang Group will spend 2.5 billion yuan in cash to buy part of Tonghua Iron and Steel Group's shares held by the State-owned Assets Supervision & Administration Commission of Jilin province and, meanwhile, inject capital into Tonghua. The commission, at the same time, will transfer some of Tonghua's shares to Shougang Group.
The agreement received much attention one year earlier when local governments cancelled a previous takeover following a fatal riot. Jianlong Steel Holding Co, a closely held mill, scrapped its Tonghua takeover last year after workers of Tonghua, worried about layoffs, beat an executive to death.
After the takeover, Shougang Group, will hold 77.59 percent of Tonghua and the State-owned Assets Supervision & Administration Commission of Jilin province will hold 10 percent. In addition, China Huarong Asset Management Corporation will hold 10.33 percent while other shareholders will own 2.08 percent.
Zhu Jimin, president of Shougang Group said, after the takeover, that Shougang Group will fully support Tonghua's development and will strive to make Tonghua one of the leading steel companies in northeast China.
Additionally, Zhu said, "Shougang Group encourages its people to develop with the company. The benefits of employees will be paid much attention to and problems will be solved properly."
Shougang manufactured 17.3 million tons of steel last year, making it the country's seventh-largest mill, according to the company's statement.
Further, Shougang set a goal to produce 30 million tons of steel by 2012, according to the statement.
Tonghua's annual steel production is currently around 6 million tons, so the takeover of Tonghua has brought Shougang Group one step closer to realizing its goal by 2012, said Zhu.
