Hong Leong Asia to acquire 20 percent of BRC Asia for around S$68M

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Hong Leong Asia has entered deals to acquire an around 20 percent stake in steel-reinforcement service provider BRC Asia for a total of around S$68 million in a move to expand its interest in Singapore’s building materials sector, the company said in a filing to SGX Saturday.

“This investment in BRC would help expand the group’s interest in the building materials sector in Singapore and increase technology and automation opportunities for both HLA and BRC,” Hong Leong Asia said in the statement.

“The Prefabricated Prefinished Volumetric Construction (PPVC) building technology is one example where there are synergies in concrete and steel reinforcement solutions. There are also opportunities for growth overseas as China and other Southeast Asian countries work towards improving productivity in the building and construction sector,” the company added.

Share subscription

Under the deal, Hong Leong Asia’s wholly owned subsidiary Hong Leong Asia Investments will subscribe for around 31 million new BRC Asia shares at S$1.48 each for a total of S$45.9 million in cash, the filing said; the new shares will represent an around 11.3 percent stake after the capital is enlarged.

The subscription deal will require BRC Asia shareholders’ approval in an extraordinary general meeting (EGM); Esteel Enterprise, holder of 68.96 percent of BRC Asia, has given an undertaking to vote in favour of the deal, the filing said.

The issue price of S$1.48 is a discount of around 2.06 percent to the volume weighted average price of S$1.5111 a share for BRC on Friday, the filing said.

In addition, Hong Leong Asia will buy 15 million BRC Asia shares, or an around 6.16 percent stake, from five shareholders for S$22.2 million, or S$1.48 a share, in cash, the filing said. The five shareholders are Xinsteel Singapore, Nuocheng International Trading & Investment, Toe Teow Heng, Wu Ai Ping and Shi Yong, the filing said.

Previous share purchases

The BRC Asia shares already held by Hong Leong Asia — representing an around 3.64 percent stake — combined with the two transactions will result in Hong Leong Asia holding around 20 percent of BRC Asia’s enlarged share capital, the filing said. The earlier purchases of shares, conducted in the first half of this year, amounted to S$12.58 million, the filing said.

Hong Leong Asia said it plans to fund the deal with a combination of borrowing from financial institutions and internal cash resources.

After the deal’s completion, Esteel Enterprise’s BRC Asia stake will be around 61.16 percent of the enlarged share capital, the filing said.

BRC Asia provides reinforcing steel products and services, including standard-length rebar, cut and bend services, prefabrication services and standard and customised welded wire mesh for the building and construction industry. It has subsidiaries in Singapore, Malaysia and Australia as well as a joint venture in China.

The deal is expected to close before year-end, the filing said.