SHANGHAI, Feb 25 (AFP): European steel giant Arcelor signed an agreement Friday to buy a 38.41-percent stake in China's Laiwu Steel for 2.09 billion yuan (258 million dollars), the Luxembourg-based company said.
"This move comes as a result of Arcelor's global long term growth strategy," Arcelor Senior Executive Vice-President Roland Junck said at a ceremony in the east Chinese province of Shandong, where the Chinese company is headquartered.
"The investment in Laiwu Steel Corporation will become a key operational platform to better serve our Chinese customers," he said, according to a statement issued by Arcelor.
The deal comes as Arcelor fights off a hostile 18.6-billion-euro (22.7-billion-dollar) bid by Mittal Steel, the world's leading steel producer at 57.6 million tonnes a year.
The French-Spanish-Luxembourg consortium is aiming to fend off the Mittal challenge by expanding its global operations through deals such as the one with Laiwu. The agreement still requires central government approval.
However, the signing was particularly timely for Arcelor after it was forced to abandon Thursday its pursuit of a 20.5-percent stake in Turkish steel group Erdemir.
Laiwu Steel Corporation will benefit from the European company's technology and commercial networks, Arcelor said in the statement.
"This transaction will deliver synergies and offer future opportunities that we expect to further enhance (our) long-term competitiveness," Laiwu Steel Group Vice President Zhao Yanbin said, according to the statement.
With the addition of a recently commissioned heavy section mill, Laiwu Steel Corporation is China's largest producer of sections and beams.
Arcelor already has a 12-percent interest in a venture in Shanghai with Baoshan Iron and Steel (Baosteel), China's largest steel company, and Nippon Steel of Japan.
It also has a stake in an automobile steel project with Baosteel, which Arcelor chief Guy Dolle has said is worth 800 million dollars.
Arcelor, which is the world's second biggest producer of steel with an annual output of 47 million tonnes, initially sought a controlling share in Laiwu, a group which turns out 10 million tonnes a year.