China Special Steel Holdings, which makes bearings and springs for cars and machinery, has agreed to pay HK$2.73 billion to its controlling shareholder for a sourcing firm that will give it the exclusive right to buy ores from an Indonesian mine.
Special Steel will settle the deal mainly by issuing 1.34 billion new shares worth HK$2.32 billion or HK$1.73 each, a 16.83 per cent discount to the stock's last traded price before the announcement. It will also pay HK$95.6 million in cash and HK$316 million in three-year convertible notes.
The company will also sell 56.1 million shares at HK$1.73 each and HK$625 million worth of five-year convertible bonds to Deutsche Bank to keep the required minimum public float as well as to raise funds for expansion.
It will raise net proceeds of HK$700 million for working capital and to build a new ore-processing plant in the mainland.
Shares of Special Steel, suspended since February 16, slumped as much as 24.04 per cent to HK$1.58 before closing with a loss of 13.46 per cent at HK$1.80 after they resumed trading yesterday as investors worried their stakes would be diluted by the new shares.
Special Steel's outstanding shares will rise more than fourfold to 2.45 billion from 578.6 million if all the bonds are converted.