HEBEI Iron and Steel Co has said it plans to raise as much as 16 billion yuan (US$2.34 billion) through a private placement to buy its parent company's assets as part of the parent's plan to inject assets into the listed mill.

The mill will sell up to 3.8 billion A shares while the parent Hebei Iron and Steel Group has pledged to subscribe for at least half of the issue shares with its own cash or through its subsidiaries, the company said in a statement filed to the Shenzhen Stock Exchange.

The proceeds will be used to finance the takeover of Hanbao Iron and Steel Co, an affiliate of the Hebei Group.

Hanbao is able to produce 4.6 million tons of high-end hot-rolled steel annually.

"The move signals the parent is pressing ahead with its consolidation plan by injecting its major assets into the listed company," said Zhou Xizeng, an analyst at Citic Securities Co. "As the only listed unit of the group, the company is expected to acquire more assets from its parent."

The Hebei Group was formed from a merger of state-owned Tangshan Iron and Steel Co, Handan Iron and Steel Co and Chengde Xinxin Vanadium and Titanium Co as the Chinese government encouraged the creation of world-class steel giants. It is among the top three steel groups along with Baosteel and Ansteel.

The Hebei Group has also promised to inject its affiliates, Xuanhua Steel Co and Wuyang Steel Co, into the listed mill within one year and Tangshan Stainless Steel Co within three years.

"If the group is to inject its mining business into the listed firm in the future, the listed unit will gain new growth momentum," Zhou said.