China Steel Corp (
China Steel, Taiwan's largest steelmaker that's 23 percent owned by the government, is talking to a few companies, its vice president and chief financial officer, Chang Chin-hsing (張景星), said in an interview in Singapore last Friday. He declined to elaborate.
Mittal, which last month sealed its US$38.3 billion takeover to create the world's biggest maker of the alloy, may target steel mills in Asia to tap economic growth rates of more than 10 percent. Nippon Steel Corp, Kobe Steel and Sumitomo Metal Industries, who own shares in each other, said in March they'd study other measures to thwart hostile bids.
China Steel is "worried that it'll be taken over, so they're trying to make it harder to be bought," Xing Yalei, an analyst in Sinopac Securities Corp (
The company's market value of about NT$317.4 billion (US$9.7 billion), dwarfs the No. 2 and No. 3 Taiwanese steelmakers. Tung Ho Steel Enterprise Corp (東和鋼鐵) has a market value of NT$18.3 billion and Feng Hsin Iron & Steel Co (豐興鋼鐵), the nation's third-biggest steelmaker by market value, is worth NT$16.1 billion.
"A strategic alliance such as that amongst the Japanese companies, this is one option we are studying," Chang said. "When one is being acquired, the other comes in to buy shares, to support the former."
China Steel's shares have risen 22 percent so far this year, compared with the 4 percent decline in the TAIEX. The stock rose 1 percent to close at NT$30.50 on the Taiwan Stock Exchange yesterday.
Tung Ho's stock has risen 31 percent and Feng Hsin's shares have advanced 23 percent.
Mittal offered in February to buy China Steel, who rejected the approach, the Japan Metal Daily reported that month, without saying where it got the information. The Rotterdam-based company refuted the report and China Steel said overseas control wasn't a good idea.
Mergers between Asian steelmakers are difficult to achieve, as their respective governments may not approve, Chang said.
"You're not just buying the companies' shares but you'll have to get the governments to approve as well, which is harder," he said. "In China, it's not possible to buy steelmakers."
Growing demand for China Steel's products from shipmakers and carmakers has enabled the company to raise prices for two straight quarters. Gross margins in the third quarter may continue to rise as China Steel benefits from higher product prices, Chang said.
"Prices have bottomed out in the first quarter of this year," he said.
China Steel will have to assess demand in Japan, South Korea and the US to decide if it should raise prices in the fourth quarter, he said.
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