Lion Industries to expand flat steel business via takeovers

Posted on 04 July 2018

Source: The Star Online

Lion Industries Corp Bhd has proposed to expand into the flat steel business through the proposed acquisition of flat steel assets with a production capacity of 3.2 million tonnes per annum of hot rolled coils and 0.7 million tonnes per annum of cold rolled coils.

In a filing with Bursa Malaysia, Lion Industries said it and Megasteel Sdn Bhd had entered into a memorandum of understanding for the agreements below.

Firstly, there is the proposed acquisition by Oriental Shield Sdn Bhd, a wholly owned subsidiary of Lion Industries, of all encumbered fixed and floating assets, along with the acquisition of a 100% equity interest in Secomex Manufacturing (M) Sdn Bhd for RM547.73mil. Secomex is a wholly owned subsidiary of Megasteel.

Secondly, there is the proposed assignment to Gelora Berkat Sdn Bhd, also a wholly owned subsidiary of Lion Industries, of the benefits accruing to the Megasteel secured lenders for the under-secured portion debts for RM8.5mil. This is equivalent to about two sen for every RM1 debt.

Thirdly, there is the proposed acquisition by Gelora of all the unencumbered assets of Megasteel for approximately RM24.5mil.

On the same date, Oriental also entered into a tri-partite agreement with Tenaga Nasional Bhd (TNB) and Megasteel for the proposed supply of electricity to Lion Industries and its subsidiaries, and this includes the proposed settlement of TNB’s entire claims against Megasteel for RM35.8mil.

These proposals are undertaken in conjunction with the debt settlement scheme by Megasteel.

Meanwhile, the total funding required to implement the proposals amount to RM638.04mil.

“The Lion Industries group is expected to pay RM132.16mil within 14 days from the date of lodgement of the court order for the Megasteel debt settlement scheme and the remaining payment shall be paid on a deferred basis,” said Lion Industries.

The source of funding for the proposals shall include proceeds from the disposal of certain assets, internally-generated funds or bank borrowings.

Lion Industries is involved in the manufacturing of long steel products comprising bars and wire rods which are used in the construction, fabrication and manufacturing industries. It is the intention of the company to widen its steel product base to include the manufacturing of flat steel products, hence embarking on the proposals.

It is also the intention of Lion Industries to invest in a blast furnace project to be integrated with the flat steel mill following the completion of the proposed acquisitions.

The proposed acquisition of unencumbered assets and the proposed TNB settlement form part of the Megasteel debt settlement scheme. The unencumbered assets may be used for the blast furnace project in the future. Meanwhile, the proposed TNB settlement is essential to ensure supply of electricity for the operation of the flat steel mill.

Following the completion of the proposals, Lion Industries would be able to embark on the flat steel business, thus strengthening its presence in the steel industry in Malaysia. 

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