December 19, 2019 / 11:35 AM / a month ago

China's Chalco takes 10% stake in Yunnan Aluminium for $183 million

An employee of Aluminum Corp of China walks inside the company's headquarters in Beijing March 26, 2010. REUTERS/Christina Hu

BEIJING (Reuters) - Aluminum Corp of China Ltd, known as Chalco, said on Thursday it would pay 1.29 billion yuan ($183 million) for a 10% stake in regional aluminum producer Yunnan Aluminium via a share offering.

The move is a step towards integrating the two firms.

Chalco parent Chinalco, China’s biggest state-owned aluminum firm, took over Yunnan Aluminium last year to consolidate capacity in China’s bloated aluminum sector. The takeover helped the group close the gap on private rival China Hongqiao Group.

Chalco and Yunnan Aluminium currently compete in the primary aluminum and alumina sectors, Chalco said in a statement to the Hong Kong stock exchange, adding that the share subscription “is conducive to resolving” this.

Chalco said in January that Chinalco would start integrating the businesses of the two firms in 2019 and aimed to address the competition problem within five years.

In the non-public share offering, Chalco will subscribe for around 314 million shares in Yunnan Aluminium at a price of 4.10 yuan per share, a discount of 20% to the closing price on Thursday, and make a lump-sum cash payment by Dec. 19.

Following the subscription, Chalco will hold a stake of about 10.04% in Yunnan Aluminium, which will not become a Chalco subsidiary, according to the statement.

Yunnan Aluminium, which uses Southwest China’s hydropower resources for the energy-intensive smelting process, has 2.1 million tonnes of annual primary aluminum capacity, according to company filings. It only produced about 866,000 tonnes in the first half of 2019.

Chalco, the world’s second-biggest listed aluminum producer after Hongqiao, churned out 1.89 million tonnes of aluminum in the first half.

Reporting by Tom Daly; Editing by Edmund Blair

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