Lion Industries to acquire Megasteel assets and pay off its debts

KUALA LUMPUR: Lion Industries Corp Bhd has entered into a preliminary agreement to acquire the assets of Megasteel Sdn Bhd and pay off its debts.

“With the recovery of steel prices across the globe, the Lion Industries group may be able to expand its steel manufacturing operation from long products to include flat products,” it said in a filing with Bursa Malaysia today.

“The proposals are expected to contribute to the future earnings of the group." The two companies, Lion Industries and Megasteel, have a common substantial shareholder - Tan Sri William Cheng.

Under a memorandum of understanding (MoU) signed today, Lion Industries will acquire Megasteel's flat steel manufacturing plant in Banting, Selangor for RM537.7mil cash.

Lion Industries' long products are mainly used in the construction industry whilst the Megasteel's flat products are targeted for the manufacturing industry.

The proposed acquisition, Lion Industries said today,  will add 3.2 million tonnes of hot-rolled coil (HRC) a year and 700,000 tonnes of cold-rolled coil (CRC) a year to its production capacity.

The company will also acquire other “unencumbered assets” of Megasteel for RM24.5mil cash. The assets, Lion Industries said will facilitate future plans for a new blast furnace at the mill.

Meanwhile, as part of the MoU, Lion Industries has also proposed to takeover the debts owed by Megasteel.

Under the deal, Lion Industries will pay RM8.5mil to the secured lenders of Megasteel, which works out to two sen from every RM1 debt. It has also proposed to settle Tenaga Nasional Bhd’s entire claim against Megasteel for RM35.8mil.

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 and the proposed TNB settlement is essential to ensure supply of electricity for the operation of the flat steel mill,” it said.