KUALA LUMPUR (Oct 29): Singapore-based steel firm Green Esteel Pte Ltd will emerge as Southern Steel Bhd's (KL:SSTEEL) new controlling shareholder after completion of its proposed issuance of 752.06 million new shares, which represents 50.1% of Southern Steel's enlarged issued capital, to Esteel for 42 sen apiece or a total of RM315.86 million.
The issue price represents a discount of 14.89% to the five-day weighted average market price of Southern Steel shares of 49.35 sen as at Sept 10.
According to Southern Steel's filing with Bursa Malaysia, it has on Tuesday entered into a conditional subscription agreement with Esteel in relation to the proposed issuance of shares. Earlier on Sept 11, the two companies had signed a non-binding term sheet for the proposal.
As it is the intention of Esteel to maintain the listing status of Southern Steel, an exemption will be sought for Esteel and its controlling shareholder, You Zhenhua, from the obligation to undertake a mandatory takeover offer to acquire the rest of Southern Steel shares they do not own upon completion of the proposed exercise. That's because upon completion of the proposed issuance of shares, the shareholding of Esteel in Southern Steel will increase to 55.78% of its enlarged share capital.
Upon completion of the proposals, Southern Steel will become a subsidiary of Esteel and an associate company of Hong Leong Manufacturing Group Sdn Bhd. Esteel's wholly-owned subsidiaries in Malaysia include Antara Steel Mills Sdn Bhd, Eden Flame Sdn Bhd and Esteel Enterprise Sabah Sdn Bhd. It also holds 61.16% equity interest in Singapore-listed BRC Asia Ltd.
Southern Steel is also proposing to undertake a private placement of up to 152.74 million new shares to third-party investor(s) at an issue price of 42 sen per placement share, representing up to 10.18% of the enlarged issued capital, after completion of the proposed issuance of shares. This will raise proceeds of up to RM64.15 million.
Southern Steel said the total gross proceeds of up to RM380.02 million from the two proposals will be used for the upgrading of the group's plants and for working capital.
Hong Leong Investment Bank Bhd has been appointed as the principal adviser for the proposals and the placement agent for the proposed private placement.
Barring any unforeseen circumstances, the proposals are expected to be completed by the first quarter of 2025.
At 2.37pm on Tuesday, Southern Steel shares were unchanged at 48 sen, giving it a market capitalisation of RM286.2 million. The stock has fallen 27.3% so far this year.