December 03, 2008

Sino Hua-An to acquire 49% stake in Linyi Jiangxin

It is reported that Malaysian electronic retailer Sino Hua-An International Bhd is expecting to formalize its proposed acquisition of a 49% stake in Chinese steel maker Linyi Jiangxin Steel Company Limited, which owns a steel plant located next to its metallurgical coke plant in Linyi city of Shandong province in China, for about CNY 500 million by 2007 end.

In a statement to Bursa Malaysia Bhd, Sino Hua said that its directors had in principal agreed to the plan and is set to sign a MoU in due course. It said “The acquisition would enable it to synergistically diversify into downstream steel production activity and give it another earnings stream.”

Sino Hua said that the proposed acquisition would be subject to, among others, satisfactory completion of legal and financial due diligence, independent valuation on the steel plant and profit guarantee by the vendors.

Mr Tunku Naquiyuddin executive chairman of Sino Hua in an interview with The Edge Financial Daily said that the relevant parties would sign a MoU on the proposed acquisition very soon. He said it is yet to finalize the funding method for the acquisition but would opt for one that would not drain its cash flow or cause earnings dilution in the company. He said "We are looking at all options. It could be bond issuance or bank borrowings, but we will examine the effect of the US sub prime mortgage market first. We do not envisage any problem with funding needs."

He added that the planned acquisition would pave the way for its coke plant to further increase its production capacity to beyond 1.8 million tonnes a year from its current capacity of 1.2 million tonnes.

Linyi Jiangxin Steel Company is jointly established by Huasheng Jiangquan Group and Shandong Wen Ting Investment Company Limited.