Thailand’s largest hot-rolled steel producer in financial raising for Steel plant acquisition and expansion in the UK

Thailand's largest hot-rolled steel producer is mulling a UK investment that will see it buy a plant and expand it in the coming two years. Sahaviriya Steel Industries (SSI) is mobilizing US$1 billion partly through an issue of 5.24 billion new shares to finance the purchase of a steel plant in the UK and expand the facility in the next two years.

The acquisition of Teesside Cast Products (TCP) in northern England from India's Tata Steel Group will be completed in the first quarter of next year and lift SSI's sales to three million tonnes in 2012 from this year's 2.3 million, with targeted revenue of 70 billion baht, said president Win Viriyaprapaikit.

SSI's board of directors yesterday approved the increase in registered capital by six billion baht ($200 million) as part of its fund-raising plan. In a statement to the Stock Exchange of Thailand, SSI said it would sell 2.62 billion shares at 1.40 baht apiece to existing shareholders at a ratio of five existing shares for a new share. It would also offer another 2.62 billion shares in a private placement at a price of at least 1.20 baht a share.

The company will spend $500 million to acquire TCP's assets with another $350 million required for working capital and inventory. About $150 million is planned to expand the facility, including $55 million for the pulverized coal injection (PCI) unit, as well as environmental and technology upgrading.

Sahaviriya Steel Industries UK (SSI UK), a wholly owned subsidiary, will seek bank loans of $650 million while the remaining $350 million would be equity injected by the Thai steelmaker.

Mr. Win further said the increase in registered capital is to support the acquisition of the UK plant, which is part of SSI's expansion plan to integrate backward to upstream steel manufacturing and become the largest integrated producer of steel plate in Southeast Asia.

According to him, this deal offers huge benefits to both SSI shareholders and the company itself.  He noted that higher economies of scale would allow SSI to reduce production costs by $5.60 per tonne and have a higher EBITDA margin by $147 per tonne within two years.

TCP, located 10 km northeast of Middlesbrough, operates the second-largest steel smelting plant in Europe with a capacity of 3.5 million tonnes of slab per year, of which two-thirds will serve SSI's production in Thailand with the rest for other buyers.

29 Dec 2010.