Established players in the Malaysian steel market Ann Joo Resources Bhd (AJRB) and Southern Steel Bhd (SSB) have signed a signed a memorandum of understanding (MoU) for the formation of a 55:45 joint venture company (JV Co) that will capitalize on opportunities in the long product steel manufacturing business. Under the proposal, AJRB will be selling its entire equity interest in Ann Joo Integrated Steel Sdn Bhd, Ann Joo Steel Bhd and Saga Makmur Industri Sdn Bhd to the JV Co for MYR 907.5 million (USD 217 million).
Meanwhile, SSB will also be releasing it entire equity interests, including assets and liabilities of its units Southern Steel Rod Sdn Bhd, Southern Steel Mesh Sdn Bhd, Southern PC Steel Sdn Bhd and Danstil Sdn Bhd, the business of Manufacturing, sales and trading of steel billets and steel bars, and certain parcels of its land to the JV Co for MYR 742.5 million (USD 178 million).
The JV seeks to realize various benefits, including synergy from operational efficiency gains and economies of scale with a strong balance sheet to support long-term expansion opportunities.
Ann Joo and Southern Steel will enter into definitive agreements to effect the proposal within 90 days from the date of the MoU.
(Sources: The Sun Daily; The Edge Markets; The Malaysian Reserve)
