Press Metal Bhd plans to venture into upstream aluminum manufacturing in China with the proposed acquisition of China’s Hubei Huasheng Aluminum and Electric Co Ltd (HHAE) for 360 million renminbi (RM168 million).
It said on Nov 28 the proposed acquisition, to be funded by internal funds and borrowings, would involve HHAE's aluminum smelting plant and a power generation plant and certain current liabilities.
HHAE has two business divisions under Huasheng Aluminium Smelter (HAL) and Huasheng Electricity Generation (HEG).
Press Metal said the HHAE acquisition would involve the setting up of a company in China, which would then acquire the HHAE stake from Qianjian City Qinsheng State-owned Enterprise and Qianjiang City Huashin State-owned Enterprise.
Press Metal would hold 90% stake in the new company and the other 10% held by Qianjian City Qinsheng.
Press Metal said the acquisition would enable its 80%-owned Press Metal International Ltd (PMI), a downstream aluminum manufacturing plant in Guangzhou, to procure the aluminum ingots produced by HAL, the major raw material for aluminum billet and extrusion.
"Through this arrangement, PMI will be able to secure its supply chain, reduce its dependency on overseas suppliers and decrease its exposure to foreign exchange risks.
"The proposed acquisition is expected to lead Press Metal group to further economies of scale through creating greater operating synergies between PMI and HAL and cost savings arising between HAL and HEG," it said.
The company said it could also expand its presence in the China market through a wider distribution channel upon completion of the acquisition.
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