Wuhan Iron & Steel Co.(WISCO) plans to raise as much as 12 billion yuan ($1.8 billion) in a rights offer to buy factories and a stake in a construction-steel maker from its parent, after a plunge in net income of first-half 2009.

WISCO, China's third-biggest steelmaker, saw its net income for its first-half drop to 506 million yuan, 90% down from 4.9 billion yuan a year earlier. The company said it's mainly due to the lasting effect the of financial crisis which curbed demand for the alloy used in power transformers and automobiles.

The steel mill is to make acquisitions from parent Wuhan Iron & Steel Group, including a 77.6% of Echeng Iron & Steel Group, a pellet plant and a powder smelting unit. The Wuhan Iron & Steel Group holds 64.38% shares of WISCO.

Echeng Steel, as a construction steel producer, is benefiting from China's stimulus plan in infrastructure projects, Bloomberg reported, citing Luo Wei, an analyst with China International Capital Corp as saying. Buying Echeng will boost Wuhan Steel's earnings for at least this year and next.

The steel mill will offer 3 new shares for every 10 held by shareholders, according to a filing to Shanghai's stock exchange late Wednesday. The Wuhan, Hubei province-based company didn't give a price for the shares.

Wuhan Steel shares have risen 79% this year, outpacing a 63% gain on the benchmark Shanghai Stock Exchange Composite Index.

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