Lion Industries offers RM638m to take over Megasteel assets, debts.
Kuala Lumpur, Malaysia, July 3, 2018 – Lion Industries Corp Bhd has proposed to acquire the flat steel assets including a manufacturing plant in Banting, Selangor from Megasteel Sdn Bhd for RM537.73 million, as part of its plans to expand into the flat steel business.
Lion Industries is currently involved in the manufacturing of long steel products comprising bars and wire rods, which are used in the construction, fabrication and manufacturing industries. It said the proposed acquisitions will widen its steel product base to include the manufacturing of flat steel products.
In a filing with Bursa Malaysia, Lion Industries said the proposals are also part of a debt settlement scheme to be undertaken by Megasteel, with the lenders and creditors. Both Lion Industries and Megasteel have a common substantial shareholder in Tan Sri William Cheng.
Lion Industries said it and Megasteel has today entered into a memorandum of understanding for the asset acquisition, which comprises an existing manufacturing plant that has a production capacity of 3.2 million tonnes per year of hot rolled coils and 700,000 tonnes per year of cold rolled coils. The proceeds will be used to pay Megasteel's secured lenders.
It noted that as the operations of the Megasteel's flat steel mill has temporarily ceased operations since March 2016, an estimated restart-up cost of up to RM35 million may be incurred to resume operation which includes cost for the replacement of parts, testing of machinery and hiring of manpower.
"Such commitments will be funded by the LICB Group's internal funds and/or bank borrowings, details of which have yet to be ascertained at this juncture," the group added.
The group will also acquire the unencumbered assets of Megasteel which include two pieces of land, for RM24.5 million cash. The proceeds will be utilised to pay Megasteel's unsecured creditors.
Lion Industries is also proposing to take over the debts owed by Megasteel by paying RM8.5 million to the secured lenders of Megasteel, which works out to two sen from every RM1 debt. It has also proposed to settle Tenaga Nasional Bhd's entire claim against Megasteel for RM35.8 million.
The total funding required to implement the proposals amounts to RM638.04 million, which will include proceeds from the disposal of certain assets, internal funds and/or bank borrowings of the group.
Lion Industries said the proposals are expected to contribute positively to the future earnings and earnings per share of the group in the future financial year.
TA Securities has been appointed as the principal adviser for the proposals.
The submission of the application to the relevant authorities for the proposals will be made within two months.
"Barring any unforeseen circumstances and subject to the fulfillment of all conditions, the proposals are expected to be completed by the fourth (4th) quarter of 2018," said Lion Industries.
Lion Industries shares closed down 0.5 sen or 0.62% at 80 sen today, with 1.43 million shares done, bringing a market capitalisation of RM544.65 million.