SINGAPORE (Dec 1): Japan-listed steel trader Hanwa Co will become a major shareholder in CosmoSteel Holdings by subscribing for a block of placement shares and buying the founder’s entire stake.
CosmoSteel, which supplies pipes, flanges and related components used in the building of rigs, ships and other vessels, will place out 26.4 million new shares, representing 10% of its existing share capital, to Hanwa at 58 cents each, according to a regulatory filing.
The placement price is 48.7% above the stock’s volume-weighted average price of 39.01 cents last Friday.
The exercise will raise $15.3 million, which CosmoSteel will use to fund construction of a new building and build machinery and equipment.
The money will also be used to repay short-term loans and meet general working-capital needs.
In the meantime, CosmoSteel founder and CEO Ong Chin Sum will sell his 21.3% stake at 58 cents a share to Hanwa, which will end up with 28.4% of the company’s enlarged share base and get two board seats.
One of the leading trading companies in Japan, Hanwa supplies steel, metals and alloys, as well as a range of other products that include food, petroleum, chemicals and lumber.
The company was introduced to CosmoSteel by Daiwa Capital Markets, which is advising the latter on the share placement.
Ong’s two sons, Tong Yang and Tong Hai, will remain directors in CosmoSteel after the two transactions are completed.
The company has also entered into a strategic alliance agreement with Hanwa in an effort to boost sales.
“CosmoSteel and Hanwa each have complementary strengths as we have different focus in terms of specific markets and products,” Ong said in a statement.
“We plan to tap on Hanwa’s customer network, global outreach and expertise as a ‘distribution specialist’ to further grow our business.”
The strategic alliance agreement is subject to CosmoSteel shareholders' approval.
Cosmosteel, whose customers include Keppel Corp, Shell and Exxon-Mobil, reported earnings of about $881,000 for the quarter ended June 30.
That was down 31% from a year earlier, owing to an increase in allowance for slow-moving inventories and a write-off for obsolete stock.