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Citigroup, UBS AG to manage China Steel sale

Share sell-off: * Citigroup Inc and UBS AG beat out eight other investment banks to win the rights to manage the overseas share sale. * The government disposed of 336.8 million shares in a three-day auction last week. * The auction raised NT$8.19 billion. * Only 59.9 percent of the shares up for sale last week were sold. * The remaining 233.2 million shares will be repackaged to overseas investors. * The minimum bidding price for the auction ranged from NT$24 to NT$24.2, but there is no word yet on what the floor price will be for the overseas sale. * A total of 1.2 billion shares are expected to be offered to overseas investors through the issuing of global depositary receipts.

Citigroup Inc and UBS AG will manage the sale of state-run China Steel Corp's (中鋼) stake in overseas markets by October after beating eight other investment banks for the deal, an official at the Cabinet's Development Fund (開發基金) said yesterday.

"We're optimistic about the overseas sale after a successful stake auction in the domestic market last week," said Chen Chang-fen (陳嫦芬), a consultant to the fund which organized last week's sale.

The government disposed of 336.8 million China Steel shares in a three-day auction last week, raising NT$8.19 billion.

Although the auction only unloaded 59.9 percent of the shares the government wanted to sell, it was considered successful due to the fact that the selling prices were only a 1.6 percent discount on the company's closing price of NT$24.60 on the TAIEX.

The unsold 233.2 million shares will be repackaged to overseas investors, Chen said.

The company is expected to unload 1.2 billion shares in total to overseas investors through the issuing of global depositary receipts or GDRs, she said.

The Development Fund set set a minimum biding price ranging from NT$24 to NT$24.2 for the domestic auction.

Chen refused to elaborate on the floor price for the upcoming overseas sales, saying the price will depend on the market price at that time.

If the government sells all 1.2 billion shares in the overseas sale, it will then hold just 23.72 percent of the stock in the nation's largest steelmaker, down from 36.28 percent.

Market watchers generally have high expectations for the overseas sale, deeming China Steel a blue chip for the revival of global steel market.

"The blossoming of the steel industry will last to next year at least owing to strong steel demand from China," said Stanley Yeh (葉德霖), an analyst at Yuanta Core Pacific Securities Co (元大京華證券), last week.

A recent report released by the Industrial Development Bureau noted that the huge demand for steel in China's infrastructure projects has been helping Tai-wanese steelmakers prosper since 1999.

China consumed 211 million tonnes of steel last year, or 25 percent of global steel production, thanks to the rapid growth of its real-estate sector, the report said.

The report further predicted that the demand for steel in China will persist for two to three years because of its growing auto industry. The report estimated that the production of automobiles in China will reach 3.4 million this year.

The report also noted that Taiwan's steel industry is increasingly dependent on the Chinese market.

Of the 20.4 million tonnes of steel exported by Taiwan last year, 56.4 percent was shipped to China, up from 38 percent in 1999.

Taiwanese steel manufacturers also invested up to NT$7.96 billion in China, the report said.
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