China steelmaker Jiangsu Shagang to enter new business area, buy big data assets

[BEIJING] Jiangsu Shagang Co, the listed arm of China's top private steelmaker Shagang Group, plans to enter the data centre industry through a 18.8 billion yuan (S$3.84 billion) deal to diversify its operational risks and increase profits.

The company aims to buy a Suzhou investment firm, which owns a 51 per cent stake in UK-based data centre operator Global Switch Holdings via a cash and share deal, it said in a filing to the Shenzhen Stock Exchange on late Tuesday.

"After the transaction, the company's main business will shift from special steel to both special steel and data centre," said Shagang, adding the transformation will enhance the company's profitability and risk resistance capacity amid fierce competition in the ferrous sector.

Jiangsu Shagang had announced the plan as early as 2017, when the deal amount was estimated at 23.8 billion yuan. The latest deal excludes purchase of stakes in one of Global Switch's clients and takes into consideration a change in the base data of assets evaluated.

The steelmaker said it will raise up to 200 million yuan via share issue to fund the acquisition.

China, the world's top steel producer, which is expected to churn out over one billion tonnes of the industrial metal, is still facing challenges to eliminate outdated capacity and upgrade steel products.

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The acquisition will help Shagang to expand its "digital, network and intelligent transition", and is in response to Beijing's "new infrastructure" push after being hit by the coronavirus pandemic.

The deal is subject to domestic and foreign regulators' approval, according to the statement.

Shagang did not answer phone calls seeking comment.

Its share price plunged 10 per cent to hit the daily limit after trading resumed on Wednesday, having been suspended since Nov 19.

REUTERS