Posted on 13 Sep 2024
Singapore-headquartered steel firm Green Esteel (Esteel) may emerge as the controlling shareholder of Malaysian steel firm Southern Steel, Kallanish notes.
Southern Steel says in a bourse filing that it has entered into a nonbinding term sheet with Esteel. The term sheet is about the proposed issuance of new shares. The new shares would represent not less than 50.1% of the enlarged issued share capital of the company after completion of the proposed issuance of shares to be subscribed by Esteel.
The shares are to be subscribed by Esteel at MYR 0.42 ($0.097) per share. The price is a 16% discount from Southern Steel's closing price of MYR 0.50 on Wednesday.
The proceeds from the proposed issuance of shares will be used to upgrade the manufacturing and operational capabilities of Southern Steel as well as for the company’s working capital.
The proposed issuance of shares will provide an avenue for the group to raise funds more expeditiously and in a cost effective manner as opposed to bank borrowings and any issuance of debt instruments which will incur interest cost.
In addition, the proposed issuance of shares is expected to create synergies between Esteel and Southern Steel as both entities are involved in the steel industry.
"In view of the proposed use of the proceeds to be raised to upgrade the manufacturing and operational capabilities of the company, coupled with the experience and expertise of Esteel and its subsidiaries in the steel related industry, the operational capability and efficiency of the company are expected to improve," Southern Steel says. It is envisaged that the combined capabilities of the company and Esteel will be beneficial to the company’s businesses moving forward.
Source:Kallanish
