(Yicai Global) July 25 -- Shares in Aluminum Corporation of China, also known as Chalco, advanced as much as 5.5 percent today after the leading Chinese aluminum producer said it will pay CNY6.7 billion (USD1 billion) for an additional 19 percent equity to gain control of its sister firm Yunnan Aluminum in order to reduce competition in the sector and pool resources as the price of the metal slides.

Chalco’s share price [SHA:601600] closed up 1.7 percent at CNY4.61 (USD0.68). Earlier in the day it had hit CNY4.78. 

Yunnan Aluminum [SHE:000807] climbed 2.7 percent to finish the day at CNY9.84 (USD1.45). Earlier in the day it surged 6.2 percent to CNY10.18. Both stocks have more than halved in value since September last year.

Chalco is boosting its holdings of Yunnan Aluminum to 29.1 percent from 10.1 percent to become the biggest stakeholder, the Beijing-based firm said yesterday. The pricing of the deal is CNY10.11 (USD1.50) per share, a 3 percent premium on today’s latest share price.

The acquisition will allow integrated and better management in the aluminum oxide and electrolytic aluminum sectors, Chalco said. The field has come under pressure in recent months with the price of aluminum trades on the London Metal Exchange sliding 40 percent since March.

After the take-over, the pair will merge their financial statements, giving the new entity a market capitalization of over CNY110 billion (USD16.3 billion). Kunming, southwestern Yunnan province-based Yunnan Aluminum’s advantages in clean energies will also bolster the company’s green aluminum capacity, Chalco added.

Parent firm Aluminum Corporation of China Group, also known as Chinalco, has long been planning such a merger, saying in 2019 that it will resolve internal competition within five years. 

Editor: Kim Taylor