Posted on 10 June 2020

 

Source: The Star Online

Lion Industries Corp Bhd (LICB) and Amsteel Mills Sdn Bhd are selling their stake in Antara Steel Mills Sdn Bhd’s hot-briquetted iron (HBI) plant and business in Labuan to Singapore’s Esteel Enterprise Pte Ltd for US$128mil (RM546.56mil).

LICB in a filing with the exchange yesterday said the company and its 99%-owned Amsteel had signed a conditional sale and purchase agreement to dispose of the HBI plant and business in Labuan. The stake comprises 218 million shares and 30 million redeemable preference shares in Antara.

It added that the proposed disposal would hinge on Antara’s restructuring exercise prior to the completion of the proposed disposal which would enable Esteel to use, maintain and/or operate the existing manufacturing facilities and business in Labuan.

However, the assets and liabilities that are not related to the specified assets were mainly the long steel plant located in Pasir Gudang, Johor that produces billets which are rolled into steel bars and light sections such as angle bars, flat bars and U-channels.

Esteel’s principal activity is investment holding and its subsidiaries namely BRC Asia Ltd is involved in prefabricated steel reinforcement steel products for use in concrete, trading of rebars and manufacturing and sale of wire mesh fences.

LICB said the sale price was based on the price-to-book ratio of about 5.0 times based on the proforma balance sheet of Antara as at March 31,2020 of about RM109.29mil and the price-to-earnings ratio of about 5.08 times based on the proforma profit after tax of Antara for financial year ended June 30,2019 of about RM107.65mil.

It added Antara’s proforma net current assets as at March 31,2020 and assuming after implementation of the restructuring exercise was about RM201.48mil (US$47.19mil) which shall accrue to the LICB Group upon realisation.

Hence, the total proceeds under the proposed disposal was RM748.04mil.

“LICB plans to utilise the total proceeds pursuant to the proposed disposal for its existing business, new investment opportunities and/or working capital.

“The new investment opportunities would include, inter-alia, the proposed expansion into flat steel business, ” it added.

LICB said the original cost of investment for the sale shares by Amsteel Steel Mills of RM138.23mil was made in 2002.

The HBI plant was acquired by Antara from Amsteel Steel Mills in 2005 at the original cost of investment of about RM300mil.

“Estimated gain arising from the proposed disposal on proforma basis, based on the latest audited consolidated statement of financial position of LICB as at June 30,2019, upon completion of the proposed disposal, the LICB group is expected to realise a gain of RM433.16mil.

“The proposed disposal would enable the LICB group to unlock the value of the HBI Plant and realise a substantial gain of RM433.16mil that will enhance and consolidate its financial position, ” it said. 

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