BEIJING, Jun. 3 -- China's seventh-largest steel maker Shougang Group [SGANG.UL] will take a majority stake in debt-ridden Tonghua Iron and Steel, where workers murdered a takeover manager from a private steel group last year, the China Daily said on Thursday.
The deal is in line with China's ongoing policy of consolidation within the over-supplied steel sector, it said, citing an unnamed official from Tonghua.
Beijing has successfully forced a number of mergers of state-owned steel firms, but they have rarely resulted in capacity closures at mills, many of which are relics of the state-controlled economy and the main employers and taxpayers in their cities.
In the case of Tonghua, which has severe cash-flow problems, restructuring could be particularly difficult.
Workers from state-owned Tonghua, near the border with North Korea, in July beat up takeover manager Chen Guojun and then threw him down a stairwell, trying to dissuade him from carrying out the takeover of Tonghua by Jianlong Group, a private steel operator.
Thousands of brick-throwing workers then clashed with police trying to fetch the body and retake control of the mill.
Local government officials cancelled the deal for Jianlong to acquire a majority in Tonghua, which they had initially supported in order to restructure the ailing steel firm. [ID:nPEK104877]
Jianlong had previously held a minority share of Tonghua but briefly pulled out when steel markets crashed in 2008. Chen had frequently clashed with Tonghua mill officials, local media reported at the time.
Tonghua's main attraction as a take-over target could be its proximity to North Korea, where Chinese firms are already mining iron ore to bring back to China. Beijing is promoting revitalisation in rustbelt Northeast China, which planners believe could get a boost if the North Korean economy ever opened.
The China Daily said that Anshan Iron and Steel (0347.HK: Quote), or Angang, China's fourth-largest steelmaker and a powerhouse in the Northeast, had also been interested in taking over Tonghua.
Angang was recently cleared to take over Panzhihua Steel, in the far southwest. It has yet to fully integrate Benxi Steel, with which it officially merged in a highly-publicized, top-down marriage announced on Aug 8, 2005.