January 29, 2019 / 6:04 AM / 3 months ago

China's HBIS to buy Southeast Asian holdings from Tata Steel

BEIJING (Reuters) - China’s HBIS Group will buy Tata Steel’s production assets in Southeast Asia, its latest move to expand its overseas steelmaking capacity after an investment in the Philippines in December.

HBIS Group, the second-largest steel producer in China, will purchase Singapore-based NatSteel Holdings (NSH), fully owned by Tata Steel, and the 67.9 percent stake that Tata holds in Tata Steel (Thailand) Public Company (TSTH) for $327 million and a 30 percent share of the equity of the new combined companies, HBIS and Tata Steel said on Monday.

NatSteel and TSTH have combined steel production capacity of around 3.7 million tonnes per year and assets in Singapore, Thailand, Vietnam and Malaysia.

The deal came just one month after HBIS signed a memorandum of understanding on a $4.4 billion steel project in the Philippines with production capacity of 8 million tonnes per year.

The Tata purchase will help HBIS narrow the gap with China Baowu Group, the country’s top steel firm. HBIS currently has 50 million tonnes of annual steelmaking capacity and the purchase would lift it above Japan’s Nippon Steel & Sumitomo Metal Corp to become the world’s third-largest steelmaker, according to data from the World Steel Association’s website.

“This project will seize the chance of fast economic development and firm steel demand in Southeast Asia,” HBIS said in its statement.

HBIS started to acquire assets overseas in 2016 when Beijing launched its supply-side reform to clamp down excessive capacity in the steel industry, forcing companies to look outside the country for production growth.

The company bought Smederevo Steel for 46 million euros ($52.58 million) in April 2016 and transformed it into HBIS Group Serbia Iron and Steel.

By the end of 2018, HBIS has invested in more than 70 companies across 30 countries, with total assets exceeding $50 billion, the company said in its statement.

The deal with Tata Steel is expected to be completed in three to four months, subject to regulatory approvals, the companies said.

Reporting by Muyu Xu and Dominique Patton; editing by Christian Schmollinger

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