General Steel inks deal to take controlling stake in Tangshan Baotai Iron and Steel
China based steel producer, General Steel Holdings Inc (NYSE: GSI) announced that it has signed a non-binding Letter of Intent to acquire a 60% controlling interest in Tangshan Baotai Iron and Steel Group. The acquisition will increase General Steel’s aggregate production by 23%, open-up its position in the Hebei province and also provide the company with a key strategic location within 100km form the port of Tangshan.
Tangshan Baotai has an annualized capacity of 1.5 million metric tons of steel billet, which will increase General Steel's aggregate capacity by over 23% to 7.8 million metric tons. According to General steel the acquisition will advance the company towards its goal of becoming one of China's largest steel companies.
General Steel expects to benefit from Baotai's established market position producing and selling steel billet and strip steel in Hebei province. Additionally General Steel said that Baotai’s geographic location will provide access to high-quality imported iron ore at minimal transportation costs.
General Steel's chairman and CEO commented on the proposed acquisition and the company’s on-going growth strategy:
"We have a unique value proposition that makes us well-suited to lead in China's steel industry consolidation effort ... With access to the western capital markets, we are able to inject currency to improve the profitability of acquired assets while simultaneously stimulating economic development ... After extensive dialogue, it is clear that Baotai's interests and vision are aligned with ours and we are excited to take the next steps in forming our mutually beneficial partnership."
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