KUALA LUMPUR (Sept 11): Southern Steel Bhd (KL:SSTEEL) may see a new controlling shareholder as it has proposed undertake an issuance of new shares, representing not less than 50.1% of its enlarged issued share capital, to Singapore company Green Esteel Pte Ltd.

The shares are to be subscribed by Green Esteel at 42 sen per share, which is a 16% discount from Southern Steel's closing price of 50 sen on Wednesday.

In its filing with Bursa Malaysia, Southern Steel did not state the exact amount of new shares to be issued to Green Esteel.

Southern Steel said the issuance of new shares will provide an avenue for the group to raise funds more expeditiously and in a cost effective manner as opposed to bank borrowings and any issuance of debt instruments which will incur interest cost.

In addition, the move is expected to create synergies between Southern Steel and Green Esteel as both entities are involved in the steel industry.

"In view of the proposed use of the proceeds to be raised to upgrade the manufacturing and operational capabilities of the company, coupled with the experience and expertise of Green Esteel and its subsidiaries in the steel related industry, the operational capability and efficiency of the company are expected to improve," said Southern Steel.

Green Esteel is involved in refabrication of steel reinforcement for use in concrete, trading of steel reinforcing bars, manufacturing and sale of wire mesh fences, and production of hot briquetted iron.

The full subscription of the new Southern Steel shares by Green Esteel will trigger the obligation to undertake a mandatory takeover offer to acquire all the remaining shares not already owned by the company.

However, Southern Steel said Green Esteel intends to seek an exemption from the Securities Commission Malaysia from the obligation to undertake the mandatory offer.

According to Southern Steel's latest annual report, Hong Leong Investment Holdings Pte Ltd and its group of companies, including its co-founder tycoon Tan Sri Quek Leng Chan, are the largest shareholders in the group with a cumulative stake of 71.21%.

Southern Steel returned to profitability with a net profit of RM1.06 million for its fourth financial quarter ended June 30, 2024 (4QFY2024) after being in the red for four consecutive quarters.

For FY2024 as a whole, the group incurred a narrowed net loss of RM55.84 million, compared with RM141.44 million in the previous year, despite revenue coming down to RM2.25 billion from RM2.39 billion.

At Wednesday's market close, shares of Southern Steel were down 0.5 sen or 0.99% at 50 sen, with a market capitalisation of RM295.23 million.