Steelmaker Posco prepares to take over Thailand's largest stainless steel maker, Thainox Stainless Plc

Construction News

The South Korean steelmaker Posco Ltd is preparing to purchase additional shares in Thailand’s largest stainless steel maker, Thainox Stainless Plc (INOX) and to make a tender offer for all remaining shares.

The shares would be acquired from the family of Prayudh Mahagitsiri, a key financial supporter of the now-defunct Thai Rak Thai party allied with Thaksin Shinawatra, in a deal that has been under discussion for two years.

Mr Prayudh and his siblings Suvimol, Ausanee, Chalermchai and Ausana Mahagitsiri have entered into an agreement to sell shares to Posco at 2.20 baht each, Thainox said in a statement to the Stock Exchange of Thailand.

In a statement yesterday to the Korea Exchange, Posco said it aimed to buy as many as 6.6 billion Thainox shares, depending on the response to the open offer that would start in September and close the following month.

INOX shares closed yesterday on the SET at 2.08 baht, up 9.47%, in trade worth 612.5 million baht. The shares have risen by 41.5% from 1.47 baht since the end of last week in heavy turnover on speculation about a deal.

Thainox’s book value as of March 2011 was estimated at 1.52 baht a share.

”Southeast Asia is one of the promising markets for stainless steel products as it is crowded with Japanese automakers,” said Chung Sung Yop, an analyst at Daiwa Securities Capital Markets in Seoul. ”The purchase will help Posco boost its edge there.”

Thainox has a production capacity of 200,000 tonnes a year.

Currently, Posco holds 15.39% of the shares of Thainox. Listed on the Korea Stock Exchange (KSE), it is the largest steel manufacturer in South Korea.

The Mahagitsiri family holds 57% of Thainox but the amount of shares they will sell was still being decided, said managing director Jitender P. Verma.

He said that Posco would not proceed with the deal unless at least 51% of the shares in the company were tendered in a voluntary tender offer.

Mr Verma added that the company would have to divest some of its non-productive assets such as a nearly completed golf course in Nakhon Ratchasima and an office building under construction on Rama IV Road. These assets would be considered illegal businesses as the company would be majority owned by foreigners, who cannot hold non-productive land or assets.

The Mahagitsiri family had won approval from shareholders earlier to allow foreigners to take a majority stake in the company. The deal that has been in the making since 2009 but negotiations were put on hold amid the political upheavals in Thailand last year.

Mr Verma said Thainox would hold a board meeting on July 21 to consider the Posco deal and also the disposition of non-productive assets.

Thainox reported a consolidated net profit in the first quarter of 72.63 million baht, compared with 157.63 million in the same period last year. Its net profit last year was 643 million baht, a 59% increase from a year earlier.

The Mahagitsiri family gained control of the steelmaker in 2004 after buying a 96% stake from Arcelor SA.


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