Shougang to sign M&A agreement with Tonggang

Wednesday, 14 July 2010 17:07:13 (GMT+2)

On July 13, a senior official of Beijing-based Chinese steelmaker Shougang Group disclosed that Shougang will sign a merger and acquisition agreement (M&A) with Jilin-based steel producer Tonghua Iron and Steel Group (Tonggang) on July 16.

During the first half of this year, the M&A plans between Shougang and Tonggang lost momentum due to the great differences between the sides regarding the modernization scheme for Tonggang.

It is reported that the new M&A plan is the result of a compromise by both parties. According to the new scheme, Shougang will control Tonggang in accordance with the previous plan and will provide financial and technical support to help Tonggang conduct modernization and technical upgrades. Meanwhile, Shougang will obtain two or three places on the board of directors of Tonggang after the restructuring of the latter.

Meanwhile, it is reported that Tonggang may expand its capacity after the merger. Currently, Tonggang remains the biggest steel company in Jilin Province, with an annual capacity of about 6 million mt of crude steel.

In 2009, Shougang produced 17.30 million mt of crude steel. The company is planning to raise its annual capacity to 30 million mt by the year 2012.

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