G Steel to enter talks with Mitsui for strategic investment
Written by changthai11 on Tuesday, October 7th, 2008
INDUSTRY
G Steel to enter talks with Mitsui for strategic investment
NAREERAT WIRIYAPONG
Thailand’s second largest hot-rolled steel maker, G Steel Plc, has entered official negotiations with Mitsui & Co, the world’s biggest steel trader, for a share acquisition proposed by the Japanese firm.
The company’s board approved in principle a proposal made by Mitsui Group on Friday to acquire shares, according to a statement released yesterday.
”The board of directors thus asked management to further proceed on associated details such as the share price and holding proportion,” G Steel director Ryuzo Ogino said in a filing to the Stock Exchange of Thailand.
G Steel views Mitsui as a strategic investment partner, especially for marketing, in both Thailand and abroad as the local firm is aiming to lift its production capacity to five million tonnes a year by 2010 from 3.5 million now.
Mitsui is interested in G Steel in order to build its presence in Thailand and the region, said Wuttichai Sresthabutra, G Steel’s business planning manager.
”Mitsui has a lot of exposure not only in this region but also all over the world,” he said, citing Mitsui’s status as a listed company on the New York Stock Exchange. ”What we are initially looking for is better access to targeted Japanese clients in Thailand as Mitsui has close relationships with them.”
On the supply chain side, Mitsui’s close ties with the upstream steelmaker Nippon Steel could help G Steel to better secure raw material supplies.
Nippon Steel is among four foreign steelmakers that have expressed interest to Thailand’s Board of Investment in setting up steel smelting facilities here.
A Thai unit of Mitsui & Co declined to comment about the proposed deal to G Steel. The company is the biggest steel trader in Thailand.
A source from G Steel said the company was likely to issue new shares to facilitate the acquisition from Mitsui. The Japanese company has not detailed the share price or the percentage of shares it is seeking.
”Thus, the money would go directly to the company, not the existing shareholders,” said the source.
G Steel recently finished a share swap with Whiterock Global fund, registered in the British Virgin Islands, resulting in a 19.3% stake in G Steel held by the fund, while G Steel acquired almost 50% in another leading Thai steelmaker, Nakornthai Strip Mill (NSM).
G Steel’s revenue rose 103% year-on-year to 10 billion baht in the quarter to June 30, helped by a 46% increase in steel prices over the period. Its net profit rose 117% to 492 million baht.
Shares of G Steel (GSTEEL) closed yesterday on the Stock Exchange of Thailand at 1.11 baht, down 13 satang, in trade worth 322 million baht.
