The company - the first of 31 firms traded in both Hong Kong and the mainland to embark on share restructuring - said its parent, Angang Iron & Steel, would offer 2.2 mainland-listed shares and 1.5 warrants for every 10 of Angang New Steel's mainland-listed shares outstanding.

The exercise price of the warrants, which entitle investors to buy new shares at specific times, is four yuan (HK$3.84) per share. Angang New Steel's Shenzhen-traded A shares were last quoted at 4.34 yuan before their suspension Monday. Holders of Angang New Steel's Hong Kong-traded H shares are not eligible for the offer.

The offer is intended to compensate smaller shareholders for any losses incurred once Angang Iron's 1.3 billion nontradable shares - 44.52 percent of Angang New Steel's capital - can be exchanged just like any other shares. They now can be sold only through private negotiations and at low prices.

China's state-controlled listed companies have just begun the process of making their nontradable shares held by government entities fully tradable. But investors fear the flood of shares to be unleashed could undermine the value of their holdings - hence the compensation offer.

However, market watchers said Angang's offer was probably not definitive. "The compensation package is worse than those of its A-share peers. It will definitely revise the plan and grant more bonus shares," said KGI Securities analyst Zhang Wei. "These companies tend to offer a worse-than- expected plan at first as a way to begin negotiations with shareholders."

In a further bid to reassure investors, Angang Iron has pledged not to transfer any shares in Angang New Steel for 36 months. It added that its holdings in the listed company would not fall below 60 percent before the end of 2010.

Under the central government's market reform plan, all A-share companies must complete the restructuring of their shareholdings before undertaking any fund-raising activities or reorganizing their assets.

The requirement has made Angang New Steel's plan to purchase assets, including coking, iron and steel operations, from its parent much more expensive. Since it broached the plan, the assets' value has risen to 19.69 billion yuan from 18 billion yuan, an increase of 9.4 percent.

Angang New Steel said Friday it has abandoned the eight-for-10 rights issue with which it originally intended to raise 8.2 billion yuan to help pay for the acquisitions.

Instead, the company will partly fund the new assets by issuing 2.97 billion domestic shares to Angang Iron at 4.29 yuan each, increasing the parent's stake to 69.5 percent, or 67.6 percent, if all A shareholders exercise their warrants. It will cover the rest with cash and bank loans. "Although it will increase the financing costs, canceling the rights issue should speed up the acquisitions, which will boost the company's profit," said Patrick Chow, an analyst at Tai Fook Research. He expects the purchase to be completed by the first quarter of 2006.

Angang New Steel has said the acquisitions will increase its earnings by 40 percent to 1.03 yuan per share in 2006. The annual capacity of the new production facilities is 15 million tonnes of iron, 11.6 million tonnes of steel and 11.6 million tonnes of steel products.

"There will be more dually listed [Hong Kong and mainland] companies queuing up for share reform since many of them need to raise funds for expansion," said Peter So, head of China research at Macquarie Securities.

Angang New Steel's H shares, which resumed trading Friday, closed 3.2 percent higher at HK$4.02. Its A shares remained suspended in Shenzhen.