Arcelor, Laiwu Steel ink preliminary agreement

Arcelor, Laiwu Steel ink preliminary agreement

SteelOrbis Shanghai According to a source from Laiwu Steel, Arcelor and Laiwu Steel have reached a preliminary agreement for the share transfer and they are now waiting for the approval from the Shandong Province. The agreement will require Arcelor to pay RMB 1.8 billion ($224 million) to be a shareholder of Laiwu Steel. The percentage of shares to be transferred has not been disclosed yet but some agencies report it around 38 percent. Nevertheless, it is sure that the percentage of the shares is not high enough to transfer the controlling right. China's New Iron and Steel Industry Policy dated July 20, 2005 stipulates that foreign investments in Chinese iron and steel companies with a production capacity over 5 million metric tons would not get the controlling right. Arcelor's desire was to get the controlling right at the beginning of the negotiation. Meanwhile, government officials stated that it would be difficult to get government's approval if Arcelor had just planned to become one of Laiwu's shareholders, without introducing technologies as well. Therefore, Arcelor will also bring new technologies to Laiwu Steel. Laiwu Steel is the largest H beam producer in China. Arcelor stated that Laiwu Steel would become one of Arcelor's overseas H beam production bases if the agreement gets approval. At present, threatened by Mittal's move, Arcelor was eager to reach an agreement with Laiwu Steel as soon as possible and it brought an advantage to Laiwu Steel in the negotiations.