ArcelorMittal, the world’s largest steel company, has announced a $1.7bn general offer for shares in China Oriental, China’s only listed steel company not under state control.

The offer came just hours after Hong Kong’s securities regulator determined that ArcelorMittal, which earlier paid $647m for a 28 per cent stake in China Oriental, had been acting in concert with China Oriental’s controlling shareholder, Han Jingyan, and was therefore obligated to make a general offer.

The Hong Kong Securities and Futures Commission criticised ArcelorMittal, Mr Han and their financial and legal advisers for an “almost total absence of consultation”. ArcelorMittal was advised by ING and Baker & McKenzie, while Mr Han retained UBS and Freshfields Bruckhaus Deringer.

ArcelorMittal appeared to have scored a coup last month when, as shown in Hong Kong stock exchange filings, it acquired rights to a controlling 73 per cent stake in Hong Kong-listed China Oriental, which owns a steel mill in Hebei province.

This would give ArcelorMittal an important foothold in China, where regulations do not allow foreign investors to take majority stakes in domestic mills.

ArcelorMittal’s efforts to buy a 38 per cent stake in another Chinese mill, Laiwu Steel, have been hampered by the Chinese government’s restrictions on foreign ownership.

The SFC found that ArcelorMittal had been acting in concert with Mr Han since as early as July to defeat a hostile takeover attempt.

That bid by Diana Chen, China Oriental’s second largest shareholder and one of China’s wealthiest women, failed in early October. After Ms Chen abandoned her takeover attempt, ArcelorMittal paid $647m for her 28 per cent stake.

ArcelorMittal then signed an agreement with Mr Han that gave it an option to buy his 45 per cent stake after clearing Chinese antitrust regulations.

Hong Kong’s Takeover Code requires that parties acting in concert make a mandatory general offer if they control more than 30 per cent of a company’s voting rights.

The deal ensured that Mr Han would receive no less than HK$6.12 per share – the same price that ArcelorMittal paid for Ms Chen’s stake – and also remain chairman of the company for three years.

ArcelorMittal’s share purchase offer was not originally extended to other shareholders.

“The overall arrangement with Mr Han was in fact a favourable deal for Mr Han,” the SFC’s takeover panel said in its ruling, which decreed that ArcelorMittal and Mr Han must now make an unconditional offer to the rest of China Oriental’s shareholders.

“Whilst there was a ‘no names’ verbal query to the [SFC] from one of the advisers on the morning of the day of the acquisition, this was far from a consultation identifying the specific proposals which by then were obviously in a very advanced state,” the SFC said. “Both ArcelorMittal and Mr Han are advised by experienced practitioners familiar with the [Takeover] Codes. The issues considered today … were of substance and not matters arising from inadvertence or inexperience.”

Shares in China Oriental, which have been suspended since November 6, last traded at HK$5.40.