European steel giant Arcelor on Friday signed an agreement with Chinese producer Laiwu Steel Group that will allow Arcelor to hold a 38.41 percent stake in Laiwu Steel Corporation.

Arcelor will acquire 354,236,546 legal shares from Laiwu Steel Group at a price of 5.88 yuan (73.5 cents) per share for a total consideration of 2.086 billion yuan (260.75 million U.S. dollars), according to the agreement.

The total cash amount is subject to adjustment based on the net asset value at a date close to the end of the transaction.

"The transaction will deliver synergies and offer future opportunities for us to further enhance the long-term competitiveness and shareholder value of Laiwu Steel Corporation," said Zhao Yanbin, vice-president of Laiwu Steel Group, at the signing ceremony in Jinan, capital of East China's Shandong Province.

The agreement still requires central government approval, Zhao said.

It also involves the transfer of technology and management expertise as well as the sharing of commercial resources, according to Zhao.

Arcelor Senior Executive Vice President Roland Junck said "this move comes as a result of Arcelor's global long-term growth strategy."

"This partnership with Laiwu gives us an opportunity to contribute to the tremendous development potential of China, the world's largest and fastest growing steel market," Junck said.

For the nine months until Sept. 30, 2005, Laiwu Steel Corporation's main business revenue reached 14.078 billion yuan (1.76 billion dollars).

Active in the production of long and flat carbon steel products, Laiwu Steel Group employs a total of 41,000 workers. In 2005, the Group produced over 10 million tons of steel.

Arcelor is the number one steel company in the world with a turnover of 32.6 billion euros (38.8 billion dollars) in 2005, said a press release on Friday.

Arcelor started negotiations with Chinese steel firms in early 2004, but all of them failed due to its insistence on controlling shares.

Source: Xinhua