Friday 29 Mar 2024
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KUALA LUMPUR (Oct 31): Hong Kong-based steel miller Angang Group Hong Kong Co Ltd will be taking up a 50% stake in loss-making Hiap Teck Venture Bhd's subsidiary, Eastern Steel Sdn Bhd — for an amount to be agreed on.

The entrance of Angang, via its wholly owned unit Ansteel International Co Ltd, will allow Eastern Steel to resume its production of steel slabs, which was temporarily suspended in October 2015.

"The proposed transaction could expand Eastern Steel's product range to include the production of hot rolled coil and could potentially increase its production capacity to 1.5 million metric tonnes per annum," it added.

On completion of the deal, Eastern Steel intends to invest in the construction of a hot rolled coil rolling mill, of which the agreement shall be entered into at a later date with Ansteel for the construction of the mill at a consideration to be determined later.

Currently, Hiap Teck owns 55% equity interest in Eastern Steel. Orient Steel Investment Pte Ltd, a substantial shareholder of Hiap Teck, holds 40% in Eastern Steel, while Chinaco Investment Pte Ltd owns the remainder 5%.

To effect Angang's entrance, Hiap Teck inked a cooperation (co-op) agreement with Ansteel, Orient Steel, Chinaco and Eastern Steel to carry out a series of transactions.

Firstly, Ansteel shall buy over Orient Steel's stake in Eastern Steel, and the shareholders' loan provided to Eastern Steel, together with any accrued interest. The acquisition price shall be at 40% of Eastern Steel's valuation, subject to changes in bank borrowings and trade debtors.

"On the completion date of the transaction and prior to the completion of additional shares issuance, all of the outstanding shareholders' loans in Eastern Steel and any accrued interest shall be converted into new ordinary shares in accordance with the terms and conditions set out in the co-op agreement (shareholders debt equity swap)," said Hiap Teck.

Upon completion of the shareholders' debt equity swap, Hiap Teck, Ansteel and Chinaco shall hold 55%, 40% and 5% stake in Eastern Steel respectively.

Subsequently, Eastern Steel shall issue additional shares to Ansteel at an issue price to be determined later, which will result in Ansteel holding a 50% stake in Eastern Steel, while Hiap Teck and Chinaco's stakes will be pared to 45.83% and 4.17% stake, respectively.

"The parties shall at their best endeavors negotiate and finalise the details of the proposed transaction such that the definitive agreements shall be entered into by Dec 31, 2016 and the conditions precedent as set out therein to be fulfilled before Feb 28 next year," said Hiap Teck.

Ansteel was first established on Dec 26, 1948 and operates as one of the top five largest steel mills in China. Its annual production capacity is around 40 million metric tons of crude steel with more than 200,000 employees.

Hiap Teck said the proposed transaction is expected to contribute positively to its future earnings.

Shares in Hiap Teck closed at 34.5 sen, up 1.5 sen or 4.55%, for a market capitalisation of RM442.72 million.

 

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