MITTAL IN PACT WITH CHINA'S VALIN

Global steel sultan, Lakshmi Mittal is expanding his presence in 'steel-sucking' China.

Mittal Steel today entered into a pact to purchase 37.17% shares of a listed subsidiary of one of China's leading steel companies, Hunan Valin & Steel Group for $314m.

According to the share purchase agreement with Hunan Valin Steel Tube & Wire Co, Mittal Steel would acquire 526,250,000 legal person shares from the group at a price of RMB 3.96 per share.

The company boasts of an annual steel production capacity of 8.5mt and is listed on the Shenzhen Stock Exchange with a market capitalisation of $967m.

Chinese crude steel production is projected to grow by 30mt in '05, compared to a growth of 50mt last year.

With China emerging as the world's largest consumer for steel products, demand is expected to grow strongly and hence, this transaction is a key milestone for Mittal Steel.

On completion, the transaction would see both partners having an equal shareholding of 37.17% each, while Mittal Steel would participate in the management and nomination of board members.

The closing of the transaction - expected in the second quarter of '05 - is subject to approval of the regulatory authorities in China.

Deutsche Bank is the financial advisor to Mittal Steel, which has approached the China Securities Regulatory Commission for a waiver from making a general offer to all shareholders of the company. The transaction is conditional on the waiver.

"Strategically, this is a key acquisition for Mittal Steel, as it provides us with our first production platform in the world's fastest-growing steel market. Valin is one of China's leading steel makers and we can help the company expand further by providing marketing, procurement and technological knowledge and expertise," said Lakshmi Mittal, chairman and CEO.

Li, chairman, Valin Group said, "This will have a positive impact on the Chinese steel industry in terms of restructuring to resolve issues of lack of scale. It would also enable us to co-operate in technology and share global resources, which are critical to enter the international steel industry."

Hunan Valin Steel Tube & Wire Co produced over 5mt of steel products and recorded sales of $1,949m and net profit of $85m for the nine months ended September 30, '04.

For the first nine months of '04, Mittal Steel had revenues of approximately $16bn and steel shipments of 32mt.

Lakshmi Mittal, with steel interests in Trinidad & Tobago, Mexico, Canada, Germany, France, Kazakhstan, Romania, Algeria, South Africa, Indonesia, Macedonia, Bosnia, the Czech Republic, the US, Poland and China is the world's largest steel maker.

After the restructuring of the LNM Group, which consisted of Ispat International and LNM Holdings in October, Mittal Steel's output is in the region of 63mt of liquid steel, overtaking that of French rival Arcelor, which last year produced 42.8mt.