HG Metal Manufacturing’s Strategic Rights Issue: A Bold Move for Growth

HG Metal Manufacturing Limited has unveiled a significant renounceable non-underwritten rights issue aimed at raising approximately S\$19.75 million. This initiative, designed to bolster the company’s financial flexibility and support strategic expansion, is backed by a strong commitment from its controlling shareholder, Green Esteel Pte. Ltd.

Key Highlights of the Rights Issue

• Issue Price and Discount: The rights shares are priced at S\$0.266 each, reflecting a 12.8% discount to the last traded price of S\$0.305 and a 9.7% discount to the theoretical ex-rights price of S\$0.29.
• Allotment Ratio: Existing shareholders are offered 10 rights shares for every 27 existing shares held, with fractional entitlements disregarded.
• Size and Ranking: Up to 74,254,237 new shares will be issued, increasing the company’s share capital from 200,486,441 to 274,740,678 shares, with new shares ranking pari passu with existing shares.

Strategic Backing and Commitment

Green Esteel, holding approximately 29% of the existing share capital, has pledged strong support through an irrevocable undertaking. This includes subscribing to their pro-rata entitlement of 21,533,330 rights shares and covering any excess shares not taken up by other shareholders. This commitment ensures the rights issue will be fully subscribed, eliminating the need for underwriting fees.

Utilization of Proceeds

The net proceeds of approximately S\$19.35 million, after deducting expenses, will be allocated as follows:

• Core business expansion: S\$4.84 – S\$5.81 million (25-30%)
• General working capital: S\$6.77 – S\$7.74 million (35-40%)
• Strategic investments and acquisitions: S\$5.81 – S\$7.74 million (30-40%)

The company aims to expand its operational facilities, enhance global presence, and explore strategic investments, though no definitive agreements are in place yet.

Potential Impact on Shareholding and Market Position

The rights issue could significantly alter the shareholding dynamics. In the minimum resultant holding scenario, Green Esteel’s shareholding will remain at 29%. However, if no other shareholders participate, Green Esteel could increase its stake to 48.19%, potentially triggering a mandatory general offer under the Singapore Code on Take-overs and Mergers.

Eligibility and Participation

Eligible shareholders include those with Singapore-registered addresses. Foreign shareholders and those purchasing entitlements from outside Singapore will not be able to participate. Shareholders can accept, decline, or trade their rights entitlements, with preferences given to rounding odd lots for excess applications.

Disclaimer

This article is for informational purposes only and does not constitute financial advice. Shareholders and potential investors should exercise caution and seek their own professional advice before making any investment decisions.

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