KUALA LUMPUR (Oct 7): Ann Joo Resources Bhd (AJRB) and Southern Steel Bhd (SSB) are joining forces via a 55:45 joint venture company (JV Co) to synergise opportunities in the long product steel manufacturing business.

In bourse filings today, both parties said they have signed a memorandum of understanding for the formation of a strategic alliance in relation to the business.

Under the proposal, SSB will be selling the entire equity interests including assets and liabilities of its units Southern Steel Rod Sdn Bhd, Southern Steel Mesh Sdn Bhd, Southern PC Steel Sdn Bhd and Danstil Sdn Bhd to the JV Co for RM742.5 million.

Meanwhile, AJRB will be disposing of its entire interest in Ann Joo Integrated Steel Sdn Bhd, Ann Joo Steel Bhd and Saga Makmur Industri Sdn Bhd to the JV Co for RM907.5 million.

The new JV Co will be a 45%-associated company of SSB and a 55%-subsidiary of AJRB via the issuance of new ordinary shares, the parties said.

"The proposal aims to establish a joint venture comprising the long product steel manufacturing businesses of SSB and AJRB, both of which are established players in the Malaysian steel market, to promote business efficacy and obtain synergistic benefits for such businesses.

"The proposal brings together the strengths of both SSB and AJRB with a vision to create a highly competitive long product steel manufacturer in South East Asia which will be better positioned to fully support the evolving needs of their customers," the filings said.

The parties are expected to effect the proposal within 90 days from the date of the MoU or such extended period which is no later than six months from the date of the MoU, subject to a further extension of three months in the event the conditions precedent as stated in the MoU are not fulfilled or waived.

Trading in the shares of both companies had been halted earlier pending the announcement.

SSB and AJRB said trading in their respective securities would resume at 2.30pm today.