Baosteel Seals CNPC Stake Swap With $590 Million Worth of Shares

  • CNPC will get a 4.9% holding in Baoshan Iron & Steel Co.
  • Move mirrors shift in June of PetroChina stake to Baosteel

Shanghai Baosteel Group Corp., China’s second-largest steel producer, plans to transfer 800 million shares in one of its listed units to China National Petroleum Corp., mirroring a similar move by the energy company earlier this year.

The country’s biggest oil and gas producer would hold 4.86 percent of Baoshan Iron & Steel Co., trimming Baosteel’s share to 74.88 percent, the steelmaker said in a statement Monday to the Shanghai stock exchange. The Shanghai-traded A shares to be transferred are worth about 3.92 billion yuan ($590 million) using the company’s last traded price. The transaction requires approval from the State-Owned Assets Supervision and Administration Commission.

In June, CNPC shifted 624 million shares, or 0.34 percent, in its PetroChina Co. unit to the steel company’s parent, a stake worth about 4.5 billion yuan at the time. The companies in both instances said the transfers were free and intended to “enhance strategic cooperation,” without elaborating. The swap may be part of China’s efforts to promote cross-ownership as part of broader state-owned enterprise reforms, according to Tian Miao, an analyst at North Square Blue Oak Ltd.

“These cross-shareholdings are investments between suppliers and operators under a so-called mixed-ownership mechanism,” Tian said by phone. "Baosteel is already an investor in CNPC’s pipeline assets, which means it supplies steel to the project’s expansion.”

In 2012, Baoshan Iron & Steel invested 8 billion yuan for a 13 percent stake in a third CNPC pipeline that links the country’s western regions to its eastern provinces. PetroChina is seeking to consolidate the companies that operate its three separate west-to-east gas pipelines into a single entity to improve efficiency and boost the value of the businesses, it said in December.

— With assistance by Sarah Chen, and Jing Yang

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