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Thursday, June 23, 2011

Lion seeks foreign partner for steel ops

Written by Chong Jin Hun   
Thursday, 23 June 2011 11:47

KUALA LUMPUR: The Lion group is expected to consolidate its steel business soon, in order to pave the way for the entry of a foreign strategic partner to help grow its steel operations, sources said.

It is learnt that the Lion group has started meeting steel players from various countries, including China’s Baosteel Group, which have shown interest in its steel operations.

“The talks are still in the preliminary stage…no decision has been made yet. The foreign partner will eventually participate in the entire steel business,” the source told The Edge Financial Daily yesterday. “It is not that they (the Lion group) want to sell out of the steel business.”

Bloomberg, meanwhile, reported that Baosteel Group, the world’s third largest steel producer by output, is in talks with Lion group to acquire a stake in Amsteel Mills Sdn Bhd.

The report, quoting two people familiar with the matter, indicated that the size of the Amsteel stake to be acquired by Baosteel has yet to be finalised.

Asked to comment yesterday, Lion group executive director Datuk Albert Cheng said: “We cannot comment at the moment... but we will make an announcement at the right time.”

An industry observer said the rationale behind Lion group bringing in a foreign strategic partner could be that it wants better technology to improve product quality. “Having a strong foreign strategic partner does help in the competitive operating environment,” he said.

Others speculated that Lion group wants to rope in a foreign partner to participate in its massive RM3.2 billion blast furnace project.

The project was initially undertaken by Lion Diversified Holdings Bhd. Later, cash-rich Lion Industries Bhd and Lion Forest Industries Bhd were brought in. Only 17% of the projects was completed as at March this year.

The Lion group, controlled by Tan Sri William Cheng, is the biggest steel maker in the country. It is involved in upstream as well as downstream steel production.

Steel is the second largest revenue contributor to the Lion group after the retail and trading division. For FY10 ended June 30, steel generated 40% or RM7.24 billion.

The retail and trading division accounted for half of the group’s revenue of RM17.99 billion in FY10.

According to the conglomerate’s website, the Lion group began its first rolling mill in 1978 and ventured into upstream steelmaking with the establishment of a steel meltshop in 1982.

Since then, it has grown its steel operations into one of the major producers of long steel products such as billets, steel bars and light sections.

The group undertakes its long steel product operations under various units -- Antara Steel Mills Sdn Bhd, Amsteel Mills Sdn Bhd, and Bright Steel Sdn Bhd. Subsequently, the group ventured into flat steel products via Megasteel Sdn Bhd.

Other businesses in the Lion Group include property development and automobile parts.

Lion has five companies listed on Bursa Malaysia with another two each in Indonesia and Singapore and one in Hong Kong.

In March, its unit Lion Forest Industries Bhd announced a proposal to sell its local tyre manufacturing business to Japan’s Toyo Tire & Rubber Co Ltd for RM462 million cash.

This article appeared in The Edge Financial Daily, June 23, 2011.

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