PETALING JAYA - Two months ago, the entry of a steel company from China as a white knight to rescue beleaguered Perwaja Holdings Bhd was uncertain because of Tan Sri Abu Sahid Mohamed.
The man, tasked by the Government to manage Perwaja in the late 1990s, did not give a definite go-ahead nor was he averse to the entry of China’s Tianjin Zhiyuan Investment Group Co Ltd into the loss-making Perwaja.
But now, Abu Sahid is agreeable to Tianjin Zhiyuan’s proposed RM1.8bil plan to revitalise Perwaja.
In May, Abu Sahid, a major shareholder of Perwaja together with Kinsteel Bhd, was not sure if the deal would go through because both parties had just signed a memorandum of understanding.
Hence, his absence at the signing ceremony was conspicuous.
However, it is a done deal now as a conditional master framework agreement has been signed, according to Abu Sahid.
Tianjin Zhiyuan is a diversified group involved in chemicals, minerals, construction materials and logistics, among others.
“The Chinese party met me before they signed the deal. They said they won’t proceed without my agreement. I think they’re very happy about it,” he told StarBiz over the phone.
The injection means his stake would be diluted, but Abu Sahid said he is okay with it as long as it was in the interest of the company.
“I saw the prospects of diversifying into stainless steel products many years back. Now, it’s going to happen,” he added.
The new partner from China has the know-how in producing stainless steel and other alloys of higher value compared with its traditional steel-making business.
Asked what he has been busy with lately, Abu Sahid said he was focusing on property development. During his Hari Raya open house, his employees were handing out brochures on a project in Sungai Besi called Maju Kuala Lumpur.
The project consists of 4,200 loft apartments with 850,000 square feet of retail space.
As for the details on the latest deal, he said it was best to ask the Chinese investor or his trusted lieutenant Datuk Alan Ong, who sits on the Perwaja board.
In the past two signing ceremonies, Abu Sahid, who is still a major shareholder, was absent. Representing Perwaja was Ong and Kinsteel’s Tan Sri Pheng Yin Huah.
Abu Sahid retired as the company’s chairman on July 22, 2013.
In an interview with StarBiz before he stepped down, he had defended the steel company and said that there was still hope.
In August 2013, its Kemaman plant in Terengganu stopped operations, as the company could not pay its utility bills amid the prolonged low steel prices. Three months later, it slipped into Practice Note 17 category due to its financial shortcomings.
The group owes RM2.2bil to Petronas Gas Bhd, Tenaga Nasional Bhd, the Government, financial institutions and creditors.
With the entry of the Chinese investor, it is looking at using coal gas instead of natural gas to cut costs.
Ong hoped the group would become profitable by March 2017 with the new plan.
Tianjin Zhiyuan will subscribe for Perwaja’s entire proposed special issue of shares amounting to RM1.7bil and provide irrevocable written undertaking to Perwaja to subscribe for its entitlement of up to RM100mil under a proposed rights issue.
The RM1.8bil capital injection will be split into four tranches.
Tianjin Zhiyuan will pump in RM600mil for the proposed special and rights issues at the initial stage.
Subsequently, the diversified group will inject RM400mil each for the remaining three tranches.
Tianjin Zhiyuan said it would be able to leverage on Perwaja’s strategic location to reduce logistics expenses.
The first capital injection of RM600mil will see Tianjin Zhiyuan emerge as a major shareholder in Perwaja with a 37% stake.
Upon the completion of the RM1.8bil injection, its shareholding will increase to 64%. By then, Tianjin Zhiyuan will be seeking an exemption from the regulator from undertaking a mandatory takeover offer for the remaining shares in Perwaja.
Kinsteel and Abu Sahid’s Maju Holdings Sdn Bhd, which hold 64% in Perwaja, will see their holdings being reduced to about 25% upon the completion of the corporate exercise. The deal is expected to be completed by June 2016 before the Kemaman plant restarts operations. - ANN
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