(Yicai) May 23 -- Shares of Hontron Aluminum Industry Holding slid after it unveiled plans to issue new shares at a sharp discount to facilitate an acquisition of aluminum processing assets in a move aimed at making the Chinese firm a global leader in electrolytic aluminum production and boosting its profitability.

Hontron [SHE: 002379] closed 9.8 percent lower at CNY10.80 (USD1.38) per share today, paring its market capitalization to CNY13.5 billion. The broader Shenzhen market retreated 0.9 percent.

Hontron’s actual controllers plan to inject upstream aluminum processing assets worth CNY63.5 billion (USD8.8 billion) into the Binzhou-based firm by issuing just under 11.9 billion new shares at CNY5.34 (74 US cents) each to nine owners of the target company, Shandong Hongtuo Industrial, according to a draft acquisition report it released late yesterday.

While the deal is one of the largest acquisitions by a Chinese mainland-listed company in recent years, the pricing of the new shares represents a 55 percent discount on Hontron’s closing price of CNY11.92 yesterday.

Through the deal Hontron will overcome its long-standing profitability challenges by integrating its actual controllers’ aluminum processing assets and emerging among the world’s top aluminum producers with over CNY100 billion (USD13.9 billion) of assets, more than CNY150 billion in annual revenue, and a markedly higher net profit, the company said.

Hontron’s actual controllers will remain unchanged, while the controlling shareholder will change to Shandong Weiqiao Aluminum Electric, a business in which China Hongqiao Group, an indirect shareholder of the target company, holds an indirect 98.6 percent stake.

China Hongqiao’s shares [HKG: 1378] inched down 0.3 percent to finish at HKD14.58 (USD1.86) apiece in Hong Kong today.

Hongtuo Industrial is one of China's leading producers of electrolytic aluminum, alumina, and deep-processed aluminum products, according to Hontron. It has an annual electrolytic aluminum production capacity of over 6.45 million tons, accounting for nearly 15 percent of the country's total and ranking No. 1 among private Chinese firms, Hontron noted, adding that its alumina output capacity is 19 million tons a year.

Hontron develops and supplies downstream products in the aluminum supply chain, including aluminum plates and strips, household aluminum foil, container foil, pharmaceutical foil, and decorative foil.

Editor: Martin Kadiev