Shandong steel merger derailed
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A proposal to merge two major steel companies in Shandong Province is facing a setback as they failed to call for a shareholder meeting within a stipulated timeframe, citing changed market conditions.
Jinan Iron and Steel Co and Laiwu Steel Corp, both listed on the Shanghai Stock Exchange, said they were unable to hold a planned shareholder meeting to discuss their proposed merger before yesterday's deadline.
A shareholder meeting is required within six months once a major asset restructuring plan is announced under Chinese securities rules.
"Since the restructuring plan was announced, there have been significant changes to the national macro-economic environment, the capital market conditions, the steel industry and in particular the iron ore pricing mechanism," the firms said in separate statements yesterday.
Both said they are still evaluating the impact of these changes on the merger deal. The China Securities Journal said that an alternative plan is under discussion so that a merger could still happen. The newspaper said the drop in share prices made the original plan no longer workable.
Under their plan announced in February, Jinan Steel would buy most of Laiwu Steel in stock in a deal worth about US$1.7 billion, as part of consolidation in the steel industry in Shandong. Jinan Steel and Laiwu Steel are sister firms, controlled by Shandong Iron and Steel Group.
