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Chalco aims to buy out Baotou to consolidate

(Shanghai Daily)
Updated: 2007-07-04 13:00

Aluminum Corp of China will buy out sister firm Baotou Aluminum Co in a share-swap deal worth 15.3 billion yuan (US$2 billion), as the domestic industry leader tries to consolidate to rival global giants.

Chalco, as Aluminum Corp is known, said yesterday it planned to issue 1.48 A shares to Baotou shareholders in exchange for one Baotou share. Baotou will then be delisted.

In Shanghai, Baotou shares surged to their 10-percent daily limit yesterday to 29.41 yuan on the news and Chalco rose 3.73 percent to 23.94 yuan. Shares of both firms had been suspended from trading since June 12 pending yesterday's announcement.

Based on Chalco's closing price, the offer valued Baotou, which has 431 million shares outstanding, at 15.3 billion yuan. Baotou and Chalco are both controlled by Chinalco.

The plan needs shareholders' and regulators' approval. Baotou shareholders can choose to get 21.67 yuan for each of their shares as an alternative offer.

Hong Kong-listed Chalco started trading in Shanghai in late April as part of government efforts to improve quality of the mainland stock market.

Related readings:  Chalco may restructure Baotou firm  Chalco to issue bonds  Bid to curb overheating in aluminum industry Special Coverage: Markets Watch

" When it returned to the mainland market, Chalco has committed to acquire more aluminum assets from its parent," Orient Securities analyst Yang Baofeng said. "The Baotou deal is part of the commitment and we expect more to come."

Based in northern Inner Mongolia Autonomous Region, Baotou has annual aluminum production capacity of around 300,000 tons, or about a tenth of Chalco's.

Chalco plans to increase aluminum capacity to five million tons by 2010 from 3.5 million tons this year.

Chalco had absorbed Lanzhou Aluminum Co and Shandong Aluminum Industry Co in a similar way, and has acquired others, too. It is seeking to grow bigger at a time of consolidation in the global aluminum sector, highlighted by US-based Alcoa Inc's hostile bid for Canada's Alcan Inc.