China's Shougang Group will sign an agreement with Tonghua Iron & Steel Group (Tonggang) in Jilin province on July 16 for a takeover, marking a breakthrough in the long and winding road of their restructuring, the 21st Century Business Herald reported, citing an official from Shougang.
The takeover plan was suspended in the first half of this year, as the two sides had big disagreements over the deal.
The breakthrough was achieved as both sides compromised Shougang will take a controlling stake in Tonggang as planned, assist in the restructuring and upgrading of Tonggang financially and technically, and send two or three directors to the new Tonggang - said a source close to the matter.
The source also said the Jilin government made even bigger compromises on the takeover because it was urgent for Tonggang to find a partner for restructuring.
An insider with Shougang revealed that although the agreement will soon be signed, it remains difficult to conduct the takeover.
Currently, Tonggang is the biggest steel enterprise in Jilin, with an annual capacity of 6 million tons. The takeover, when completed, might boost its capacity, which is also in accordance with Shougang's expansion plan, the paper said.
Shougang produced a total of 17.3 million tons of crude steel in 2009. It plans to increase its capacity to 30 million tons by 2012. Mergers and acquisitions are part of its expansion plans.
