Zhongwang, based in northeast China's Liaoning province, is one of the world's largest manufacturers of aluminium extrusions - products made from primary metal that are widely used in the transport, construction and electronics industries.

Under the non-binding agreement, Shanghai-listed CRED will purchase Zhongwang's 96.55% stake in extrusions arm Liaoning Zhongwang for an as yet undecided fee, according to a Zhongwang statement to the Hong Kong stock exchange.

This will allow Liaoning Zhongwang to be traded in Shanghai without the need for an initial public offering (IPO), in a so-called backdoor listing.

"The board believes that the potential spin-off would enable the market to appraise and assess the value of the company more effectively and provide a separate fund-raising platform," Zhongwang said in its statement.

Extrusions are one of Zhongwang's three core businesses - along with further fabrication and flat-rolling - and accounted for more than two-thirds of its 18.65 billion yuan ($2.66 billion) revenue in the first nine months of 2019.

The move marks the second significant restructuring for Zhongwang in a matter of weeks after the company last month agreed to sell its loss-making aluminium smelter to Yidian Luoyang for 4.6 billion yuan.

CRED had said earlier on Tuesday that trading in its shares would halt from March 18 pending the asset acquisition but did not provide a reason for the move.

Liaoning Zhongwang will remain an indirect subsidiary of China Zhongwang Holdings if the spin off is completed.

(Reporting by Tom Daly, editing by Louise Heavens)