Green Esteel Takes Control of Southern Steel with Strategic Share Acquisition
In a major development in the Malaysian steel industry, Green Esteel Pte Ltd, a Singapore-based steel firm, has emerged as the new controlling shareholder of Southern Steel Bhd, with a commanding 50.1% stake in the company. This shift in ownership follows the successful completion of a share issuance deal on January 12, where 752.06 million new shares were issued to Green Esteel at 42 sen per share, totaling approximately RM315.86 million.
Southern Steel Becomes a Subsidiary
As a result of this deal, Southern Steel has officially become a subsidiary of Green Esteel, joining other Malaysian steel companies under Green Esteel’s umbrella, including Antara Steel Mills Sdn Bhd, Eden Flame Sdn Bhd, and Esteel Enterprise Sabah Sdn Bhd. In addition to this acquisition, Green Esteel also holds a 61.16% equity stake in BRC Asia Ltd, a company listed in Singapore, further expanding its presence in the regional steel market.
The Acquisition Deal: Key Terms
Green Esteel’s acquisition was made possible by the issuance of 752.06 million new shares, effectively diluting the existing shareholders. Prior to this transaction, Hong Leong Investment Holdings Pte Ltd, along with its associated group of companies and its co-founder Tan Sri Quek Leng Chan, were Southern Steel’s largest shareholders, holding a 71.21% stake in the company. Following the share issuance, Green Esteel now commands a majority stake and has taken control.
Green Esteel’s RM315.86 million investment was part of a larger capital-raising effort by Southern Steel. The company also executed a private placement of up to 152.74 million new shares to third-party investors, raising an additional RM64.15 million. This private placement represents 10.18% of Southern Steel's enlarged issued capital. The gross proceeds from both the share issuance and private placement, which total up to RM380.02 million, will be utilized for the upgrading of Southern Steel’s plants and to enhance its working capital.
Bursa Malaysia Exemption
Green Esteel sought and received an exemption from Bursa Malaysia regarding the obligation to make a mandatory takeover offer (MTO), a regulatory requirement typically triggered when an entity acquires more than 33% of a listed company. Green Esteel stated that it intends to maintain Southern Steel’s listing status on the Malaysian stock exchange, and therefore, will not proceed with a takeover offer despite acquiring a controlling stake.
Southern Steel’s Stock Performance
Following the announcement of the deal, Southern Steel’s stock closed unchanged at 53 sen on January 12, giving the company a market capitalization of RM795.6 million. The company’s stock has faced challenges over the past year, with a 15% decline in value, signaling potential difficulties despite the recent change in ownership.
Strategic Implications of the Acquisition
The strategic implications of Green Esteel’s acquisition are significant, not only for Southern Steel but for the broader steel industry in Malaysia. By increasing its stake in Southern Steel, Green Esteel strengthens its foothold in Malaysia’s steel manufacturing market and enhances its portfolio of steel products and operations across the region. This acquisition aligns with Green Esteel’s broader vision to expand its operations, enhance its production capabilities, and strengthen its market position in Southeast Asia.
For Southern Steel, this transaction provides new financial resources that will support its modernization efforts and potentially improve operational efficiency. The upgrading of plants and working capital infusion from the capital raising exercises could help Southern Steel navigate the challenges of the competitive steel industry, especially amid fluctuating market conditions.
