Luxembourg-based steel giant Arcelor SA has reached an agreement in principle to buy an undisclosed stake in Laiwu Steel Corporation, China's second biggest fully integrated steel plant, officials of Laigang Group, Laiwu Steel's parent company, said on Friday.

According to listed Laiwu Steel's statement to the Shanghai Stock Exchange (SSE) on Friday morning, its shares were halted on Friday and would be on Monday so that Laigang Group can "sign an agreement on a transfer of shares in its listed unit Laiwu Steel," without identifying the buyer.

However, the Laigang Group spokesman, who identified himself only with the surname Liu, identified Arcelor in a telephone interview from Jinan, capital of East China's Shandong Province, where the agreement will be signed.

However, Liu declined to disclose any more information on the deal. "We can only unveil the figures and details after the two parties have made terms on the announcement (on Saturday)," he said.

He also refused to comment that the stake was 38.41 per cent, as reported by Bloomberg News. In its report, Bloomberg revealed the stake was valued at 2 billion yuan (US$249 million), based on the closing price of 5.70 yuan (US 71 cents) for Laiwu Steel's shares on Thursday on the SSE.

Colleagues confirmed that Chen Bo, media manager of Arcelor China, had been negotiating this week for the deal with Laiwu Steel.

The co-operation started from 2004, when Arcelor began to seek acquisition opportunities in China. Guy Dolle, chief executive officer of Arcelor, had said that acquiring Chinese enterprises was a key for the whole group because of "the booming steel demand was increasing by 10 per cent to 12 per cent annually in China."

Arcelor, the Paris-listed world's largest steel H-beam provider, had contacted several domestic steel makers such as Qingdao Steel and Nanjing Steel, before deciding on Laiwu.

Analysts attributed the long-term negotiation to Arcelor's strong perseverance of stake control. They also considered that Arcelor would try to acquire Laiwu Steel's H-beam steel production line to sharpen its competitiveness in the Chinese market.

"If this acquisition comes to pass, Arcelor will probably inject the most advanced European technology and management into the line to produce the high added-valued and multi-spec products," said an analyst of a securities company who declined to be named. "And it can then export its world-class H-beam products to the North American market."

The analysts also regarded the timing of Arcelor's deal as a factor in trying to thwart a hostile takeover bid from steel conglomerate Mittal Steel Co.

(China Daily 02/25/2006 page5)