Shandong Iron and Steel Group, the world's eighth largest steel maker, is suffering a setback in its proposed takeover bid for Rizhao Iron and Steel Group over differences in the terms of the deal.
Du Shuanghua, the founder of Rizhao Steel, one of China's most profitable non-State steel mills, is employing delaying tactics against the purchase of a 67 percent stake in the company, according to people familiar with the situation.
In addition, Du was likely to consider moving to another province to restart his steel empire, according to insiders at the company.
The acquisition, which was expected to be pushed through as early as this week, was still under discussion and would probably be finalized next week or by the beginning of September, a senior executive at Rizhao Steel told China Daily.
Another source said the protracted talks are related to the financial terms of the deal. Shandong Steel's acquisition is not thought to be all in cash. Instead, the company is expected to inject assets such as modern equipment in return for a controlling stake.
Du tried to protect his interests in the consolidation by handing up to 30 percent of Rizhao's core assets to Kai Yuan Holdings, a Hong Kong-listed company in January.
Although Rizhao Steel is attempting to fight the acquisition, it has to weigh the repercussions of not cooperating with local authorities.
Officials from the local environment watchdog visited Rizhao Steel recently and asked the company to stop production using two boilers, on the grounds the facilities were not in accord with environmental standards, the source from Rizhao Steel said.
A senior official of neighboring Hebei province talked to Du recently, suggesting he should move back to Hebei, where he was born and started his business making steel tubes, the source said.
The consolidation is part of a plan by the Shandong provincial government to build a quality steel production base in Rizhao city with annual capacity of 20 million tons.
