Hiap Teck Venture Bhd will sell a 20% stake in Eastern Steel Sdn Bhd (ESSB) to Shanxi Jianlong Industry Co Ltd (Jianlong) for RM139.3 million, in a bid to turnaround ESSB which temporarily halted production in October 2015 to minimise losses due to challenging market conditions.
In an exchange filing yesterday, the steel maker noted it had entered into an equity and debt transfer agreement to sell 89.52 million shares or 20% in ESSB to China-based Jianlong for RM139.3 million cash.
The proposed disposal is in line with Hiap Teck’s plan to rope in a new strategic partner to resume operations at ESSB, adding the disposal proceeds will fund resumption of production as well as future business expansion into billets production.
The agreement includes the disposal of shareholders’ advances made by Hiap Teck to ESSB, of RM625.6 million as at Feb 28, 2018.
The disposal is not subject to shareholders’ approval and is expected to be completed by the first-quarter of 2019. Last month, Hiap Teck entered into an equity and debt transfer agreement with Orient Steel Investment Pte Ltd to dispose of 179.04 million shares or 40% of ESSB, as Orient Steel decided to exit its investments in ESSB due to a change in corporate strategy.
Steel manker ESSB was a joint-venture (JV) company between Hiap Teck, Orient Steel and Chinaco Investment Pte Ltd. Following Orient Steel’s exit, the company will now be a JV between Jianlong with a 60% stake, Hiap Teck with 35% and Chinaco with 5%.