China Steel Corp (中鋼), the nation’s biggest steelmaker, will seek to raise as much as US$743.53 million by issuing 37.8 million global depositary receipts (GDRs) — each of which represents 20 China Steel common shares — at an average price of US$19.67.
In a stock exchange filing yesterday, the Siaogang District (小港), Greater Kaohsiung-based company said it would use the proceeds from the GDR sale to fund the procurement of raw materials overseas.
China Steel said it would issue the GDR on Aug. 1 and it would be traded on the Luxembourg Stock Exchange.
With the pricing of each GDR equivalent to NT$28.32 per common share (based on an exchange rate of NT$28.793 against the US dollar), the new shares are being sold at a 4.49 percent discount from China Steel’s closing price of NT$29.65 on Tuesday.
China Steel shares closed 1.52 percent higher yesterday at NT$30.1.
Analysts said the company might use part of the proceeds to fund a second blast furnace at Dragon Steel Corp (中龍), a China Steel unit based in Longjing District (龍井), Greater Taichung. The new furnace is under construction and is scheduled to start production in 2013.
The company might also use the proceeds to support its expansion plans for cold-rolled coils, which are used mainly in the automotive industry, as well as to make strategic investments in global mining companies that would help the firm secure a steady supply of raw materials, such as iron ore and coking coal, Citigroup Global Markets said in a note on July 18.
China Steel yesterday downplayed the potential share dilution caused by the GDR issue, saying instead the funds raised would help strengthen its balance sheet.
Citigroup estimated the potential dilution at about 6 percent, while Daiwa Capital Markets predicted a 5.9 percent dilution to its earnings per share over the next two years.
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