ArcelorMittal to launch open offer for remaining stake in COGL

BEIJING: NRI Lakshmi Mittal-run ArcelorMittal on Friday said it will pay at least $2 billion for a controlling stake in Chinese steelmaker China Oriental (COGL), in which it already holds a 28 per cent stake.

World's biggest steelmaker ArcelorMittal said it will make an open offer to purchase shares not already owned by it at a price not less than HKD 6.12 per share, an offer that values the company at about $2.2 billion. On November 6, Mittal had acquired a 28.02 per cent stake held by Diana Chen Ningning, a former director and known as China's 'steel princess', for about $635 million.

Incidentally, Ningning was herself interested in acquiring control of Hong Kong-listed China Oriental at one point of time, but the move was opposed by the company chairman and CEO Han Jingyuan.

Besides buying out Ningning's stake, Mittal has also won over the support of Jingyuan and a circular filed by the company to the Hong Kong stock exchange yesterday showed that the current 'controlling shareholders' led by Jingyuan are now 'parties acting in concert with Mittal Steel.'

These shareholders currently own 45.11 per cent stake in the company, which along with a 28.02 per cent stake now in Mittal Steel's name takes the total holding of Mittal and his associates to 73.13 per cent.

The other shareholders own 26.87 per cent stake, as per the latest shareholding pattern filed with the exchange.

"ArcelorMittal has entered into a shareholders' agreement with the controlling shareholders of China Oriental regarding their shareholdings in and the management of the company," the Luxembourg-based steel giant said in a statement.

Mittal said it has also signed a business cooperation agreement with China Oriental and these pacts would help it strengthen its position in China's fast growing steel market.

"We have made no secret of our wish to participate more actively in China's fast growing steel market and the agreements we have signed are a major step forward in delivering that strategy," Mittal said in the statement.

He intends to keep COGL listed on the Hong Kong Stock Exchange after the acquisition.

Mittal is already present in most of the major steel-producing countries and has been trying to get a breakthrough in China, but his ambitions have been hampered by the government's prohibitive policy against foreigners owning control of steel firms, terming it as a strategic sector.

However, he succeeded in his latest attempt because COGL is one of the few Chinese steel firms that are privately owned as well as listed outside mainland China.

His attempts to acquire a 38 per cent stake in Laiwu Steel, China's ninth-largest steelmaker, is pending for more than a year for want of some regulatory approvals. Mittal is looking at COGL as the entry point to China, the world's biggest producer as well as consumer of steel.

According to Mittal, part of ArcelorMittal's growth over the years has been through strategic acquisitions and creating value through active management of the companies.

The COGL deal is another pointer to his predatory skills that guide him to opportunities in least-expected terrains.

Interestingly, Ningning and Jingyuan were at loggerheads for control of COGL before Mittal came into the picture. Ningning, ranked as 82nd richest Chinese by Forbes magazine with a net worth of $880 million, had previously launched a hostile takeover bid to acquire control of COGL.

However, she could not succeed amid a stiff opposition from Jingyuan, who is ranked 146 in the Forbes list of China's Richest 400 with a wealth of $545 million.

Ningning was accused of forgery by COGL management and a Jingyuan-chaired board recommended her removal as a director at the company earlier this year. Shareholders approved her removal on October 29 with over 64 per cent of votes.