Arcelor Mittal, the world's largest steelmaker, bolstered its presence in booming China on Wednesday by paying $647 million for a 28 percent stake in steel products maker China Oriental Group.
Arcelor Mittal is buying its stake from the firm's vice chairwoman, Chen Ningning, and her Smart Triumph Corp. Chen last month fell short in her buyout bid for China Oriental. Hostile takeovers are rare in China.
Shares in China Oriental, which have tripled over the past year amid the buyout talk, were suspended on Wednesday.
Arcelor Mittal is the only foreign firm to hold a direct ownership in a Chinese steel maker, through a roughly one-third stake in Hunan Valin Steel Tube and Wire, the country's tenth-largest producer.
But the world's largest steel maker's attempt to buy into the listed arm of China's ninth-largest mill, Laiwu Iron and Steel Group, has been blocked by Beijing for over a year and a half.
The stake in China Oriental would give Arcelor Mittal a foothold in China's northern industrial province of Hebei, which is also rich in iron ore, to complement the Valin stake in the south. The deal makes the European giant China Oriental's second-largest shareholder.
It already participates in an automotive steel joint venture with Baosteel Group and Nippon Steel in Shanghai, and has a steel wire joint venture in Shandong.
Last year, China Oriental sold about 3.75 million tons of steel products and generated sales of $1.3 billion and net profit of 1.03 billion yuan (US$138 million).
Its main operating subsidiaries are Jinxi Iron and Steel in Hebei, and Foshan Jinxi in the southern province of Guangdong.
Chen had been advocating for China Oriental to buy mills and participate in the consolidation of China's fragmented steel industry, and had signaled her intention to sell her stake in the firm if her takeover effort fell short.
"I believe that consolidation in this industry is accelerating and it is crucial for China Oriental to achieve scale to remain competitive," she said in a statement in early October.