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SHANGHAI: Shanghai Baosteel Group Corp, the country's largest steelmaker, yesterday purchased smaller rival Bayi in Northwest China, its first domestic acquisition.

Under the deal, Baosteel will pay 3 billion yuan for 69.61 percent of Bayi Iron and Steel Group, the biggest steelmaker in Northwest China's Xinjiang Uygur Autonomous Region, with the remaining stake going to Xinjiang's local government.

Baosteel's display at an industry exhibition in Shanghai. [newsphoto]

The long-anticipated deal is expected to beef up Baosteel's presence in Northwest China as Bayi commands about 70 percent of the market share in Xinjiang, the company said in a statement.

The takeover will make Baosteel the controlling shareholder of Shanghai-listed Bayi Iron and Steel Co, which is 53.12 percent-owned by Bayi Iron and Steel Group.

The deal is also part of Baosteel's strategy to strengthen its dominant position in the industry by making local mergers and acquisitions (M&As).

"We should actively participate in the domestic steel industry restructure with a sense of urgency," its former chairwoman Xie Qihua told an internal corporate meeting last month.

Xie, who stepped down on Monday, wanted to make Baosteel one of the top three global steelmakers by 2010. It is currently No 6 in the world.

The Chinese government is trying to consolidate its fragmented steel industry, which currently has 260 steelmakers, using M&As to create big mills so they can compete globally and have bargaining power with iron ore suppliers.

Baosteel's acquisition is also a sign that industry consolidation is accelerating.

Jinan Iron and Steel Group and Laiwu Steel Group, the country's sixth- and seventh-largest steelmakers based in East China's Shandong Province, are in the process of a merger.

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