Dec. 7 (Bloomberg) -- ArcelorMittal, the world's largest steelmaker, will offer to pay at least HK$12.9 billion ($1.7 billion) for shares in China Oriental Group Co. it doesn't own, obeying a regulatory ruling it must bid after a stake purchase.

ArcelorMittal must make a general offer after it was deemed to have worked with China Oriental's Chairman Han Jingyuan, who controls 45 percent of the company, to buy another shareholder's 28 percent stake, the Hong Kong's Securities and Futures Commission said yesterday.

The takeover may allow Chief Executive Officer Lakshmi Mittal to bypass laws that restrict overseas control of steelmakers in an economy that has grown more than 11 percent in the first three quarters of the year. ArcelorMittal plans to keep China Oriental's listing in Hong Kong, it said.

``Maintaining the listing status of China Oriental can give ArcelorMittal a fund-raising vehicle in Hong Kong to finance more possible expansion into China,'' Helen Lau, an analyst at Daiwa Securities Group Inc., said in Shanghai. ``ArcelorMittal will immediately own production facilities in China.''

China has accounted for 65 percent of global growth in steel production in the past 10 years, and is now four times the size of the U.S. steel industry, BHP Billiton Ltd., the world's largest mining company, said Nov. 12.

ArcelorMittal, based in Luxembourg, was also in talks to buy Han's China Oriental stake, according to the regulator's statement. Han couldn't be reached for comments at his office.

Must Match

ArcelorMittal's general offer must match the HK$6.12 a share paid for the 28 percent stake it had bought from China Oriental's former board member Chen Ningning last month, the regulator said. That would be at a 13 percent premium to the last traded stock price of HK$5.40. China Oriental has been suspended from trading in Hong Kong since Nov. 7.

The bid would value the whole company for at least HK$17.9 billion, according to Bloomberg data.

``We have made no secret of our wish to participate more actively in the China's fast growing steel market,'' Mittal said today in a statement distributed by Business Wire. Lynn Robbroeckx, a Beijing-based spokeswoman at ArcelorMittal, declined to comment further.

China Oriental makes billets and strips, producing more than 3 million tons of crude steel a year. It posted a 769 million yuan ($104 million) profit from sales of 6.65 billion yuan for the six months ended June 2007.

The Chinese steelmaker, which has its main production plants in China's northern Hebei province and southern Guangdong province, controls closely-held Hebei Jinxi Iron & Steel Co., the nation's 29th-biggest steelmaker, according to the company Web site.

No Threat

``Buying a 3 million-ton plant won't pose any threats to bigger Chinese rivals,'' said Li Xinchuang, vice president of China Metallurgical Industry Planning and Research Institute, who helped draft the nation's steel industry policy in 2005 that blocks foreign control of assets. ``The deal is likely to be accepted by the government.''

Mittal is still waiting for approval of his 2006 accord to buy a 38 percent stake in state-owned Laiwu Steel Corp., after the Chinese government last year tightened scrutiny of acquisitions by overseas companies.

According to ArcelorMittal's statement, it will transfer technology to develop China Oriental's steel manufacturing operations, and help source raw materials iron ore and coal.

UBS AG was the financial adviser to Han, and ING Bank NV advised ArcelorMittal.

To contact the reporter on this story: Theresa Tang in Hong Kong at ttang3@bloomberg.net

Last Updated: December 6, 2007 23:01 EST