An arm of one of China's largest municipal governments is in talks to buy Stemcor, the historic British steel trading company.
Sky News has learnt that a new company connected to Guangzhou Aerotropolis, which is located in the province of Guangdong, is in detailed negotiations with Stemcor's lenders about a deal to take control of the company.
The transaction would displace GR Life Style, a Hong Kong-listed property company with no obvious link to the steel trading industry, as Stemcor's buyer.
Founded in 1951 by Hans Oppenheimer, a German immigrant to the UK who built it into an international powerhouse, it has grown into one of the world's biggest players in its sector.
Mr Oppenheimer was the father of Dame Margaret Hodge, the veteran Labour MP.
City sources said that the takeover by Guangzhou Aerotropolis had been triggered by a pledge over Stemcor's shares which had prompted it to decide to step in and take control of the company itself.
Stemcor has been owned since July 2022 by ShouYe Holdings, another Hong Kong-based entity.
ShouYe bought the company from Cedar Holdings Group, a mainland Chinese company which was reported to be struggling to repay its debts.
If the Guangzhou Aerotropolis deal completes, it would therefore make it the third Chinese company in less than two years to own Stemcor.
It would, however, be the first of those to be under direct government ownership.
Stemcor's syndicate of lenders, which is understood to include HSBC and the Dutch bank ING, has been applying pressure to the company to seek new owners amid concerns about its ultimate ownership.
Dozens of banks are understood to have exposure to Stemcor owing to its substantial trading book.
Over recent months, a number of UK-based investors have also tabled rival offers to acquire Stemcor, which is understood to remain profitable and have started 2024 with a solid forward order-book.
"Discussions with the leading bidder are now in the final stages with commitment to Stemcor retaining its autonomy and independence as an international trading house," said one source close to the situation.
Stemcor ran into financial difficulty after the 2008 financial crisis, and was forced into a radical debt restructuring.
It was ultimately split into two companies, with the other - Moorgate Industries - principally comprising assets in India.
Dame Margaret, a long-standing critic of the tax avoidance tactics employed by multinational companies, was reported in 2015 to have been a beneficiary of the winding-up of a Liechtenstein foundation which held shares in Stemcor.
She said at the time that she had "paid all relevant taxes in full".
Neither she nor any members of her family hold any residual interest in Stemcor.
Stemcor declined to comment on the talks about Guangzhou Aerotropolis's prospective purchase of the company.