Updated April 6, 2008

According to the data of Chinese mass media, Evraz Group wants to purchase 20% stocks of the local FerroChina for $167 million. This asset can augment successfully the Chinese Delong Holdings business, as Evraz plans to complete the deal for controlling stock interest purchase of this company by the year- end. However, the Australian BlueScope Steel competes with Evraz for FerroChina, and their interest to the asset has already resulted in its price rise for more than 10%.

According to the data of the leading Hong Kong business newspaper South China Morning Post, Evraz Group and the largest Australia’s steel producer BlueScope Steel got interested in purchasing 20% FerroChina stocks "for the current $167 million market price". In April FerroChina executive director Normann Fong was quoted as saying that the company was looking for a strategic foreign investor to increase sales and to receive access to raw materials. Merrill Lynch conducts a partner search. In FerroChina itself refused to comment. The information of the Singaporean newspaper in Evraz refused to comment as well.

FerroChina headquarters is located in Changsha town in the east of China. The company is engaged in production of steel used in the construction, railway transport and engineering. The production capacity is 1,5 million tons, it should up to 3,5 million tons this year. FerroChina stocks are quoted at the Singapore stock exchange. The core shareholders are Citibank Nominees Singapore Pte investment fund (11,65%), the member of the company directors’ board Chzhan Yedun (10,86%), HSBC Singapore Nominees Pte investment fund (8,79%), DBS Nominees Pte investment fund (6,37%), Raffles Nominees Pte investment fund (5,93%).

Since the beginning of the year FerroChina stocks have been slowly falling to 1,42 Singapore dollar (SGD) ($1,04), but after the information about a possible deal has appeared they have upped by 10%. Now the company capitalization is SGD 1,27 billion ($931 million), i.e. 20% cost $186,2 million already.

Analysts consider Evraz interest towards FerroChina logic. "The idea occurred right after Evraz Group declared it had agreed with Best Decade Holdings to purchase 51,05% of Delong Holdings owned by the latter", marks the head of KIT Finance department for stock market research Maria Kalvarskaya. "FerroChina is also bargained in Singapore, it represents the steel sector. Therefore, the experts named this company exactly as the next prospective object for takeover". According to an analyst, FerroChina has high debt load, whereupon the question about the additional emission of company stocks has come up. And exactly about 20% from the book value. "FerroChina considers the stocks are unstable, and this should not be, as its business has both feet on the floor", explained the company intention to attract an investor the Hong Kong CIMB-GK investment company analyst Lourens Lay.

According to Alexandr Mokhovoy opinion from Yakovlev and Partners law firm, FerroChina choice is partly predetermined by its Singapore registration which is currently almost the only opportunity for investors to enter the closed Chinese market. Sobinbank analyst Nikolay Sosnovsky marks that Delong, which capacities permit to produce around 3 million tons of rolled steel, would perfectly go with FerroChina, which possesses capacities to produce rolled zinc. "Both assets purchase permits Evraz Group to sell not only flat products, but a product of high quality", an expert explains. On the other hand, BrokerCreditService Investment Company analyst Oleg Petropavlovsky considers Evraz Group would hardly get interested in 20% FerroChina stocks.

However, the Hong Kong newspaper quotes a source who forecasts the sale of all FerroChina. By the Chinese laws the foreigners can not purchase the majority stock holdings of the state-owned companies. However, there is no formal limitation concerning private-owned companies.