Vietnam Industrial plans $12m sale

Perth-based Vietnam Industrial Investments Ltd has entered into a non-binding expression of interest with an interested party for the sale of Vinausteel Ltd, in which it has a 70 per cent interest, and its wholly owned SSESTEEL Ltd for a total of US$9 million (A$12 million).

The company said there would be a significant reduction in future revenue if the transaction were to proceed as Vinausteel and SSESTEEL are considered to be its main undertakings.

The due diligence process is expected to take place in mid-February and conclude in late March.

The company's principal activities include investment in Vietnam and the commercial operations at its two steel rolling mills (Vinausteel and SSESTEEL) in Haiphong, steel roofing factory in Hanoi, weldmesh factory in Ho Chi Minh City and total building solutions provider throughout Vietnam.

Below is the full announcement:

The Company wishes to advise that it has entered into a non-binding expression of interest ("EOI") with an interested party wishing to evaluate the possible full acquisition of Vinausteel Ltd ("Vinaus") and SSESTEEL Ltd ("SSESTEEL"). The Company as a 70% interest in Vinausteel and a 100% interest in SSESTEEL.

The transaction is subject to a number of terms and conditions including a thorough due diligenceprocess which is expected to commence in mid-February and conclude in late March. Most of the provisions of the EOI are non-binding and the offer is subject to revision based on the outcome of the due diligence and the execution of mutually acceptable formal agreements. The target date for
execution of a Share Sale Agreement is 31 March 2006, however, settlement will not be concluded until fulfillment of conditions precedent and post completion audit.

The indicative purchase consideration will be adjusted based on a number of factors, including Vinausteel and SSESTEEL being debt free and a minimum net working capital and tangible fixed asset value. Therefore, the net purchase consideration payable will only be determined at post completion audit. Based on the unaudited financial statements as at 31 December 2005, the Company
calculates that the amount payable to VII, net of consultants fees, would be approximately USD 9 million, however, this may be higher or lower depending on the factors indicated above.

Should this transaction proceed there will be a significant reduction in the future revenue generated bythe Group. However it is expected that the remaining operations; VRC Weldmesh (Vietnam) Ltd(VII: 100%), Austnam Joint Stock Corporation Ltd (VII: 68%) and Total Building Systems Ltd(VII: 100%) should return the Group to profitability.

VII will seek the approval of its shareholders for this transaction as Vinausteel and SSESTEEL are considered to be the Company's main undertakings. Notice of Meeting and supporting explanatory documentation will be circulated to shareholders following the conclusion of the due diligence program and execution of a Share Sale Agreement.

The Board stresses that the transaction may or may not proceed and urges caution in dealing in the Company's shares.