The Steel giant Lakshmi Mittal was eyeing on China’s Baotou Iron and Steel Group for the joint venture business. According to the report, during the talks Mittal had asked for a 50 per cent stake in the Baotou Iron and Steel Group. later, the demand has caused the collapse of talks for a joint venture. China has not allowed Mittal Steel to hold a controlling stake of fifty percent in the joint venture.

Lin Donglu, chairman of Baotou Iron and Steel has later confirmed the failure of the joint venture deal with Laxshmi Mittal. He said later that the Chinese company has ended its discussion with Mittal Steel and now looking for any domestic partner for that deal such as Shanghai-based Baosteel Group, China’s biggest steelmaker.

The China daily has quoted Lin Donglu saying as;

We are not talking about any actual cooperation anymore.

China’s steel industry regulations do not give permission the steel makers from outside the country to take controlling stake in any of the joint venture where any Chinese company is involved.

Lin has said later:

Because Arcelor Mittal wants to take a stake of 50 per cent or so in the venture, we failed to negotiate a deal.

On the other hand, Arcelor Mittal has also planned to increase its stake in Hunan Valin Steel Tube & Wire Co. It holds a 29.5 per cent stake in Hunan Valin. Now, it has planned to take 49.3 per cent of the 520 million new shares on offer. Mittal has thought to boost its holding to 33.3 per cent when the Chinese steelmaker is issuing new shares.

Sridhar Krishnamoorthy, Arcelor Mittal’s manager in China, said that the share placement would raise funds and that would, in return, help Hunan Valin to raise its stake in its subsidiaries companies.

China is the largest steel maker and consumer as well in the world. In the deal with arcelor Mittal, China adopted a very cautious approach to understand Arcelor Mittal’s ambitious plans in the huge Chinese market.

Ma Jinquan, deputy to the National People’s Congress, said:

China needs improved regulations and laws to guide and manage foreign mergers and acquisitions to ward off monopoly by overseas companies and ensure national industry’s security.

The Times of India has reported that Chinese lawmakers have asked the government to improve the laws and regulations regarding the mergers and acquisitions of domestic companies by foreign capitals. They have revealed to the government that if the country failed to handle the matter cautiously, it might endanger the security of Chinese industries.

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