Union Steel plans to sell engineering unit Fastweld to associate Eneco Energy
Logistics remains a 'key pillar' but Eneco says it has been 'exploring opportunities' to diversify its portfolio and revenue base.
SEATTLE (Scrap Monster): Union Steel Holdings is selling its indirectly held subsidiary Fastweld Engineering Construction to its separately-listed associate Eneco Energy.
Under an MOU, the parties involved have given themselves 180 days to firm up definitive terms of the deal.
Union Steel bought Fastweld Engineering Construction in late 2022 for $2.5 million to help it diversify into complementary business areas. According to Union Steel then, as at end of December 2021, Fastweld's book value was just over $6 million.
Union Steel, citing a 'strategic review', is of the view that while Fastweld has contributed positively since its acquisition, its 'business profile, operating model and dynamics' differ from its core engineering and manufacturing businesses, which are more focused on fabrication, structured project delivery and production-oriented operating platforms.
Union Steel says it has been 'exploring strategic options' for Fastweld that included discussions with interested third parties for whom Fastweld’s business model may represent a stronger strategic fit.
'The entry into the MOU represents a preliminary and nonbinding step to facilitate further discussions, due diligence and evaluation of a potential transaction,' says Union Steel.
Assuming the sale is completed, the company plans to channel the sales proceeds to lower debt and to fund future growth.
In its concurrent but separate announcement, Eneco Energy says this possible acquisition of Fastweld will help it diversify its existing business.
According to Eneco, its current core business is via Richland Logistics Services.
Logistics remains a 'key pillar' but Eneco says it has been 'exploring opportunities' to diversify its portfolio and revenue base.
Union Steel took a strategic stake of 29.4% in Eneco back in 2024, paying 1.1 cents per share.
Courtesy: www.theedgesingapore.com