Malaysia’s Two Steel Majors Ann Joo Steel and Southern Steel inks MoU for Joint Venture
As per the latest reports, Malaysia’s two steel giants, Ann Joo Resources Bhd (Ann Joo) and Southern Steel Bhd are proposing to form a joint- venture (JV) company to capitalise on opportunities in the long product steel manufacturing business.
In a filing exchange yesterday, the companies signed a memorandum of understanding (MoU) for the JV, under which Ann Joo will sell its entire interest in Ann Joo Integrated Steel Sdn Bhd, Ann Joo Steel Bhd and Saga Makmur Industri Sdn Bhd to the JV company for RM907.5 million. Whereas Southern Steel will also release its entire interest, including assets and liabilities, in Southern Steel Rod Sdn Bhd, Southern Steel Mesh Sdn Bhd, Southern PC Steel Sdn Bhd and Danstil Sdn Bhd to the JV company for RM742.5 million.
The proposed JV, which will comprise the long product steel manufacturing businesses of both steel industry players, will promote business efficacy and obtain synergistic benefits. Post-completion of the corporate exercise, the JV company will become a 55%-subsidiary of Ann Joo and a 45% associate of Southern Steel. Both parties are expected to undertake due diligence investigations within 90 days from the date of the MoU signing.
Ann Joo steel has a combined annual capacity of 820,000 tonnes whereas Southern Steel has a capacity of 180,000 tonnes. In recent times, Ann Joo and Southern Steel have been affected by the steel industry’s challenging operating environment. Southern Steel posted net losses of RM34.85mil in the fourth quarter ended June 30,2019 compared with a net profit of RM35.20million a year ago. As for Ann Joo, in the second quarter ended June 30,2019, it posted net losses of RM37.75mil compared with a net profit of RM20.70mil a year ago. In the first half, it registered net losses of RM44.35mil compared with a net profit of RM82.14mil in the previous corresponding period.
source: SteelMint
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