China Hongqiao Buys Beihai Xinhe from CITIC for US$320 MM

China Hongqiao Buys Beihai Xinhe from CITIC for US$320 MM

The People’s Republic of China’s China Hongqiao Group Ltd., the world’s top aluminium producer by volume, announced that it entered into an agreement last week to purchase the entire equity interests of Binzhou Municipal Beihai Xinhe New Material Co., Ltd. for US$320 million.

Beihai Xinhe’s equity interests were held by China International Trust and Investment Corporation (CITIC Group), a state-owned investment company. The firm has an alumina production capacity of 2 million metric tons per annum, and has a power production capacity of 240 megawatts.

According to the announcement, an independent appraiser found the low appraisal value of Beihai Xinhe to be US$335,611,330.86 on the last day of 2015. The firm, which is a Chinese limited-liability company, was established August 24, 2011 and is engaged in the production and sale of alumina and aluminium products like aluminium plate, aluminium foil, aluminium belt, and other similar products. Beihai Xinhe turned an after-tax profit of CN¥417 million in 2014, but was in the red last year, recording an after-tax loss of CN¥77 million.

China Hongqiao justified the buy-out as helping to further enhance the Group’s self-sufficiency in raw materials and electrical power. The transaction would also improve competitiveness and mitigate the need for new construction.

Founded by Zhang Shiping and based on China’s east coast in Shandong province, Hongqiao has grown by leaps and bounds since it was first listed five years ago. The company’s nameplate capacity listed in its initial public offering paperwork was 1.1 million metric tons. Hongqiao became the world’s biggest producer of aluminium in early 2015, surpassing Russia’s United Co. RUSAL. The firm’s capacity at the present time is 5.2 million metric tons, although it has announced plans to expand capacity to six million metric tons per annum, or sixteen percent, by the end of 2016, depending on market conditions.