General Steel Holdings, Inc. ("General Steel" or the "Company") (NYSE: GSI), one of China's leading non-state-owned producers of steel products and aggregators of domestic steel companies, today announced that it has entered into a Joint Venture Framework Agreement (the "Framework Agreement") with Shanxi Meijin Energy Group Co., Ltd. ("Meijin Energy"), a corporation formed under the laws of the People's Republic of China.
According to the Framework Agreement, General Steel will contribute approximately $64.7 million in cash or stock and shall thereafter hold a 55% interest in Shanxi Meijin Iron and Steel Co., Ltd. ("Meijin Steel") which is currently 100% owned by Meijin Energy.
Meijin Steel was founded in 2003 near the city of Taiyuan, in Shanxi province and has approximately 1.2 million metric tons of crude steel production capacity and approximately 1 million metric tons of annual pig iron production capacity. On an annual basis, Meijin Steel has a processing capacity of 600,000 metric tons of high speed wire and 900,000 metric tons of rebar and round steel.
General Steel's Chairman and Chief Executive Officer Mr. Henry Yu commented, "The backbone of our story is forming partnerships with companies that have outstanding growth potential and this deal is no different. The joint venture will realize the benefits of increased crude steel and pig iron production and processing capacity, enhanced sales and marketing channels through our well-established Longmen subsidiary as well as the opportunity to secure raw materials at competitive prices. Our goal is to leverage our deep understanding and expertise in this local market to achieve economies of scale and improve profitability."
"We are excited about the respective strengths that each party will bring to this joint venture," said Meijin Energy's Chairman Mr. Yao Jun Liang. "General Steel brings access to the western capital markets and the success of its Longmen facility, which is one of the largest integrated steel producers in the region. This subsidiary's established sales and marketing channels combined with our supply of key raw materials, gives me great confidence that we can increase market share as we benefit from rural China's robust infrastructure build out."