By Chen Yang and Zhang Nan

Privately-owned Liaoning Fangda Group Industrial beat State-owned steel manufacturer China Valin Group Friday in bidding for a 57.97 percent share of State-owned Nanchang Iron and Steel (NIS).

Nanchang Changli Iron and Steel, a listed company owned by NIS, said in an announcement yesterday that Fangda will become Changli's main shareholder and will be involved in the restructuring of NIS.

Fangda's victory was not surprising to analysts. NIS put the 57.97 percent of its shares on sale August 17 on the Jiangxi Property Exchange at a price of 910 million yuan ($133 million). Both Fangda and Valin bid at the same time.

Fangda was predicted to win the bidding because NIS required that its future partner was profitable every quarter from 2007 to June 2009.

Valin, which was hit hard by the global economic downturn, had not seen consecutive profits since late 2008, while Fangda's net profits reached 346.1 million yuan ($50.7 million) last year.

Fangda, however, currently only has one asset involved in iron and steel. The private firm acquired State-owned Wulanhaote Iron and Steel, which mainly produces cords and round steel, through a restructuring deal similar to the one it will ink with NIS.

"The purchase will help Fangda improve its supply chain, which is a core component of its development strategy," Wang Zhe, an analyst at China Securities Company, said.

We chose Fangda because it has enough capital to invest in the expansion and growth of Changli, China Business News quoted senior management at NIS as saying.

Critics of Fangda's bid said that a company without rich experience in iron and steel should not have been able to win. They sited government policy which encourages intra-industry restructuring to boost further integration.

We did not want another major steel producer to get involved in NIS. We believe Fangda will be more committed to developing and improving the company rather than just incorporating it into pre-existing systems, said NIS's senior management.