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The state assets regulator’s new policy has cleared obstacles for Shandong-based Laiwu Steel to renew its stake sale deal with Arcelor Mittal, said a Laiwu source.
Last weekend, the State-owned Assets Supervision and Administration Commission (SASAC) joined hands with China Securities Regulatory Commission (CSRC) and issued a regulation regarding state owners’ transfer of equity interests in listed companies.
In the new regulation, SASAC set a rule on how to price the stake in the listed companies when it is to be sold by state owners. The new regulation requires the state owners to sell the stake in listed companies either via the in-time trading system on the stock exchange or via a block sale. If it is via the trading system, the price should be no less than the weighted average trading price of the day. If it is via a block sale, the stake sale price should be no less than 90% of the average price of the past 30 trading days before the stake sale deal is announced, according to the new regulation.
Before the new policy, state owners usually would sell stake in listed companies at the net asset value, which was pretty much low.
“We are studying the new regulation these days and have not started to talk with Arcelor on the deal revision,” said the Laiwu source, adding that they need to completely understand the key rules of the new policy before they can start to renew the stake sale deal with Luxemburg-based Arcelor Mittal.
Previous reports on this news service suggested that Laiwu Steel had never terminated the stake sale deal with Arcelor Mittal. The company had actively communicated with the National Development and Reform Commission (NDRC) and prepared all kinds of documents required by NDRC for the deal approval.
Now the Laiwu source said that Laiwu Steel and Arcelor have been waiting for the SASAC’s new policy so they could revise the stake sale price in accordance with the new rule.
Many M&A deals regarding state-owned assets injection, state-owned parent company group listing and state owner selling stake in listed companies to foreign bidders cannot move forward due to the policy issuance, said the Laiwu source.
Now that the new policy has come out, there were no policy obstacles to talk about selling a stake in the listed Laiwu Steel to Arcelor Mittal, said the Laiwu source. “We just need to follow the new policy and revise the deal.”
Arcelor signed an agreement in February 2006 with Laiwu Group to take a 38.41% stake in the Shanghai-listed subsidiary Laiwu Steel for CNY 2.086bn (USD 260m). At that time, Laiwu steel was trading at CNY 5.7 (USD 0.75) a share. And now Laiwu Steel is trading at CNY 15.81 (USD 2.08) a share.
Also, previous reports on this news service said Arcelor could be required to lower the bidding stake and raise the offer price.
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