Union Steel Holdings Announces Potential Divestment of Fastweld Engineering Construction Pte Ltd to Eneco Singapore

Key Highlights

• Union Steel Holdings Limited (“Union Steel” or the “Company”) has announced that its wholly-owned subsidiary, Union Engineering Pte Ltd, has entered into a non-binding Memorandum of Understanding (MOU) with Eneco Singapore Pte. Ltd. for the proposed disposal of Union Engineering’s entire interest in Fastweld Engineering Construction Pte Ltd (“Fastweld”).
• The MOU marks the beginning of an exclusivity period of up to 180 days (extendable by mutual consent) for both parties to carry out due diligence and negotiate a definitive Sale and Purchase Agreement (SPA).
• No legally binding obligations have been created yet except for the exclusivity, confidentiality, and certain general provisions. The completion of the deal is subject to satisfactory due diligence and negotiation of the SPA.

Details of the Involved Parties

• Seller: Union Engineering Pte Ltd, a wholly-owned subsidiary of Union Steel Holdings Limited, listed on the Mainboard of SGX. Union Engineering holds 100% of Fastweld.
• Buyer: Eneco Singapore Pte Ltd, a subsidiary of Eneco Energy Limited, which is also listed on the SGX Mainboard.
• Target Company: Fastweld Engineering Construction Pte Ltd, a Singapore-based contractor specializing in engineering, procurement, maintenance, and construction services for the marine, offshore, and industrial sectors.
• Notably, Union Steel is a major shareholder of Eneco Energy Limited, holding approximately 25.02% of its share capital.

Rationale Behind the Proposed Disposal

Union Steel undertook a strategic review of its business following the integration of recent acquisitions, including Fastweld in November 2022. The Board noted that, while Fastweld has contributed positively, its project-based, execution-driven business model differs from Union Steel’s core focus on fabrication, structured project delivery, and production-oriented platforms.

As a result, the Company is exploring the divestment of Fastweld as part of its efforts to optimize capital allocation, management focus, and long-term strategic positioning. The entry into the MOU is a preliminary step to facilitate further discussions, due diligence, and evaluation of the transaction.

If completed, the proposed disposal is expected to allow Union Steel to streamline its operations and reallocate resources toward business segments that better align with its strategic priorities. Potential uses of any net proceeds include debt reduction, working capital, and future growth opportunities.

Salient Terms of the MOU

• Exclusivity: 180-day exclusivity period (extendable), during which Union Engineering cannot negotiate with other parties regarding Fastweld.
• Representations and Warranties: The eventual SPA will include customary warranties regarding authority, clear title to Sale Shares, and matters relating to Fastweld.
• Non-binding Nature: The MOU is not legally binding except for exclusivity, confidentiality, and certain general provisions.

Regulatory and Shareholder Implications

• Interested Person Transaction: The proposed disposal will constitute an interested person transaction under Chapter 9 of the SGX Mainboard Rules, due to cross-shareholdings between Union Steel and Eneco Energy Limited.
• Chapter 10 Transaction: The disposal will also be classified under Chapter 10 of the SGX Mainboard Rules, with the exact category to be determined when terms are finalized.

What Shareholders Need to Know

• The transaction is currently non-binding and there is no certainty that a definitive agreement will be reached or that the disposal will proceed.
• The disposal, if completed, may have a significant impact on Union Steel’s business profile and strategic direction, potentially affecting share value depending on the final terms, proceeds, and redeployment of capital.
• Shareholders are advised to exercise caution, refrain from taking any action that may be prejudicial to their interests, and await further announcements.
• Union Steel will provide updates on any material developments, including the signing of definitive agreements.

Cautionary Statement

The Board reminds all shareholders and potential investors that the completion of the Proposed Disposal is subject to satisfactory due diligence and the fulfillment of certain conditions precedent. Investors should consult their professional advisers if in doubt, and monitor future announcements from the Company for further information.

Disclaimer: This article is a summary and analysis of a company announcement for informational purposes only. It does not constitute investment advice. Investors should consider seeking independent advice from a qualified professional before making any investment decisions. The Company has not yet entered into any binding agreement regarding the Proposed Disposal, and there is no assurance that the transaction will proceed.

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