Shandong Iron and Steel Group Rizhao Co., Ltd. (hereinafter referred to as "Shandong Iron and Steel Rizhao"), a subsidiary of Shandong Iron and Steel Holdings, is introducing strategic investors. On December 9th, Shandong Iron and Steel announced that in order to attract strategic investors and further enhance the core competitiveness of Shandong Iron and Steel Rizhao, Shandong Iron and Steel Group Co., Ltd. (Shandong Iron and Steel Holding Shareholder, hereinafter referred to as "Shandong Iron and Steel Group") plans to transfer its 48.6139% equity in Shandong Iron and Steel Rizhao to Baosteel Co., Ltd. According to the evaluation report, the pre assessed value of all equity of shareholders of Shangang Rizhao is 23.567 billion yuan, and the expected transfer price of 48.6139% equity of Shangang Rizhao is 10.703 billion yuan. Shandong Iron and Steel intends to agree to the equity transfer and waive the right of first refusal.

At present, the shareholders of Shandong Iron and Steel Rizhao are Shandong Iron and Steel, Shandong Iron and Steel Group, and Rizhao Zezhong Metallurgical Technology Center (Limited Partnership), with shareholding ratios of 50.5981%, 48.6139%, and 0.7881%, respectively. After the completion of this transaction, Baosteel Group will become the second largest shareholder of Shangang Rizhao.

Established in 2009, Shandong Iron and Steel Rizhao is the operating entity of Shandong Iron and Steel Rizhao Production Base, with a steel production capacity of 7.9 million tons. Shangang Rizhao has good profitability. In 2022, Shangang Rizhao achieved a cumulative operating income of 42.239 billion yuan and a net profit of 1.723 billion yuan. In the first three quarters of this year, Shangang Rizhao achieved a cumulative operating income of 26.346 billion yuan and a net profit of 528 million yuan.

A person familiar with Shandong Iron and Steel introduced, "Shandong Iron and Steel Rizhao has excellent asset quality, and is relatively high in the industry in terms of equipment level, production efficiency, and profitability. The abandonment of the right of first refusal by Shandong Iron and Steel this time should be the result of overall consideration."

In response, Shandong Iron and Steel stated that Baosteel Group is a leading modern steel enterprise in the world. After introducing Baosteel Group, Shangang Rizhao will leverage its management philosophy and process technology to accelerate the construction and development of Shangang Rizhao, further enhance its core competitiveness, and comply with the company's strategic investment plan and long-term interests. "The waiver of the right of first refusal by the company this time is a decision made based on the company's overall development positioning and strategic business planning, and will not have an adverse impact on the company's production and operation activities. After the waiver of the right of first refusal, the company's rights and interests in Shangang Rizhao will not change, and the scope of the company's consolidated financial statements will not change."

On the same day, Baosteel Group also announced that in order to tap into the potential for synergy in the northern region, enhance the influence of the northern market, share investment returns, and obtain stable investment returns, the company plans to acquire 48.6139% equity of Shangang Rizhao for 10.703 billion yuan in cash.

Baosteel Group is a leading player in the domestic steel industry, currently possessing major manufacturing bases such as Baoshan in Shanghai, Qingshan in Wuhan, Dongshan in Zhanjiang, and Meishan in Nanjing, all located along and south of the Yangtze River. Baosteel Group stated that this transaction is not only an important practice for China Baowu to serve the national strategy, fulfill the basic function guarantee role of central enterprises, and support Shandong to deepen the transformation of new and old kinetic energy, but also a concrete manifestation of China Baowu and Baosteel Group's strengthening and optimizing the main steel industry, and achieving a strong alliance of high-quality steel bases.

In August of this year, the Ministry of Industry and Information Technology, the National Development and Reform Commission, and seven other departments jointly released the "Work Plan for Stable Growth in the Steel Industry", which clearly proposes to encourage leading enterprises in the industry to implement mergers and acquisitions, build world-class super large steel enterprise groups, and promote the optimization and layout of national steel production capacity.

Wang Guoqing, Director of Lange Steel Research Center, told Securities Daily reporters, "Baosteel's payment of over 10 billion yuan to acquire 48.6139% of the shares in Shangang Rizhao will further enhance Baosteel's core competitiveness and increase the concentration of China's steel industry."