PETALING JAYA: Ann Joo Resources Bhd and Southern Steel Bhd have entered into a memorandum of understanding (MoU) for the formation of 55:45 joint venture company (JV co) in relation to their long product steel manufacturing businesses.
This entails the proposed sale by Ann Joo of the entire equity interests 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.
It also entails the proposed sale by Southern Steel of the entire equity interests in Southern Steel Rod Sdn Bhd, Southern Steel Mesh Sdn Bhd, Southern PC Steel Sdn Bhd and Danstil Sdn Bhd, the business of manufacturing, sales and trading of steel billets and steel bars, and certain parcels of its land to the JV co for RM742.5 million.
“The proposals are intended to result in the JV co becoming a 55%-subsidiary of Ann Joo and a 45%-associated company of Southern Steel via the issuance of new shares in the JV co to Ann Joo and Southern Steel,“ Ann Joo and Southern Steel said in their stock exchange filings.
Ann Joo and Southern Steel are exploring various options to achieve the optimal structure for the proposal, including, but not limited to, the transfer of the sale assets to a new JV co to be incorporated; Southern Steel or a wholly-owned subsidiary of Ann Joo as the JV co; or Ann Joo or a wholly-owned subsidiary of Southern Steel as the JV co.
“The proposal aims to establish a joint venture comprising the long product steel manufacturing businesses of Ann Joo and Southern Steel, both of which are established players in the steel industry, to promote business efficacy and obtain synergistic benefits for such businesses. The proposal brings together the strengths of both Ann Joo and Southern Steel with a vision to create a highly competitive long product steel manufacturer in Southeast Asia.”
The proposal also seeks to realise various benefits, including synergy from operational efficiency gains and economies of scale with a strong balance sheet to support long-term expansion opportunities.
Ann Joo and Southern Steel will enter into definitive agreements to effect the proposal within 90 days from the date of the MoU.
Trading in Ann Joo and Southern Steel shares were suspended in the morning session pending the material announcement. At 3.10pm, Ann Joo and Southern Steel were trading 7 sen and 3 sen lower at RM1.16 and 95 sen, respectively.
