(Yicai Global) Oct. 18 -- A unit of China's Baowu Steel Group, the largest global steelmaker, intends to buy a controlling stake in RSM Group, a leading Chinese supplier of magnesium alloys, to help the former consolidate its position in the country's market of lightweight steel products for cars.

RSM plans to issue 62 million new shares to Baosteel Metal in a private placement so the latter's shareholding will rise to 21.5 percent from 14 percent, becoming an actual controller of the firm that processes magnesium alloys, the Nanjing-based supplier said in a statement yesterday.

Consequently, the shareholding ratio of the original actual controller, Mei Xiaoming, will decline to 16.5 percent from the original 18 percent.

The investment should be about CNY1.4 billion (USD194 million) based on RSM's [SHE: 002182] closing price of CNY22.46 (USD3.10) on Oct. 14. Trading of the shares is predicted to start again tomorrow after a two-day suspension.

RSM is engaged in a complete industrial chain of mining, smelting, casting, processing, and recycling of magnesium alloys. The booming new energy vehicle industry has brought new opportunities to the company.

Baosteel Metal first invested in RSM in October 2018. It increased its shareholding to 14 percent in August 2020. At that time, RSM said that Baosteel Metal’s investment can introduce more resources to RSM while promoting the development of Baosteel Metal’s lightweight materials and products.

The pair is currently building a plant that is expected to become the world’s largest magnesium alloy production base in eastern China's Anhui province. The CNY14.8 billion (USD2.06 billion) project began construction late last year to eventually have a capacity of 300,000 tons of high-performance magnesium alloys per year.

Editor: Emmi Laine, Xiao Yi