ArcelorMittal to hold Eastern Bloc to 73%

ArcelorMittal has signed an agreement with the controlling shareholder of China Eastern Group Holdings Limited (Oriental Group Co. Ltd) to raise its stake in China's Oriental group from 28% to 73% per cent, ArcelorMittal said. The deal will make ArcelorMittal the first foreign company to hold the Chinese steel maker. The deal also requires approval from China's regulatory authorities. Chinese regulators have said they do not want foreign companies to gain a controlling stake in China's big medium-sized steel companies or even to become major shareholders. ArcelorMittal, the world's biggest steelmaker by capacity, is seeking a controlling stake in China's Oriental group, which has been frustrated by previous attempts to gain control of China's big-medium steel makers. Dirk Matthys, president of ArcelorMittal China, said the company sought another deal: a plan to acquire 38% per cent stake in Laiwu Steel (Laiwu Steelcompany Corp.), a medium-sized state-owned steel company, Mattes. The reason is Laiwu iron and Steel decided not to renew the contract expires at the end of a cooperation agreement. In a statement, ArcelorMittal said it planned to issue a HK $6.12 full offer to China Oriental to buy the company's outstanding stake in China Eastern Group, with a total price of not more than HK $6 billion (US $769 million). The purchase price was higher than the 5.40 Hong Kong dollar premium of 13.3% on the last trading day before China Oriental Group's November 7 suspension. The unit resumed trading in Thursday afternoon, closing up 19.3% to HK $6.44. The controlling shareholder includes Han, chairman of China Oriental Group and other affiliated parties, who hold a 45.11% per cent stake in China Eastern Group. ArcelorMittal said it would hold a 73.13% per cent stake in China Eastern Group after fully fulfilling its agreement with the controlling shareholder. Before being asked to make a full offer, ArcelorMittal last month bought 647 million of billions of dollars to acquire 28% per cent of China Eastern Group. In accordance with the rules of the Hong Kong exchange, the acquirer who holds the target company's shares will have to issue a full offer to all shareholders of the target company once it reaches the 30% ceiling. Although ArcelorMittal's stake is below that limit, the HKEx has judged Han, the chairman of the Board of Directors of China Eastern Group, as a concerted action. Analysts disagree on whether ArcelorMittal will succeed in controlling the stakes. The biggest potential obstacle, Merrill Lynch & Co, said, is that China does not in principle allow foreign ownership of Chinese steel companies, whether state-owned or private. However, according to Helen Lau, an analyst at Daiwa Institute (Daiwa Cato of Research), the company may not be subject toThe impact of general government policies. The deal has yet to be approved by the Ministry of Commerce of China (Ministry of Commerce) and the State Administration for Industry and commerce (Administration for Industry and Commerce).