Wah Seong to Become Largest Pipe-Coating Group in Asia

Wah Seong Corporation Berhad's subsidiary, PPSC Industrial Holdings Sdn Bhd (PPSCIH) has through a wholly owned unit PPSC (HK) Ltd (PPSCHK) entered into a conditional sales and purchase agreement with a group of vendors to acquire 1,489,192 shares representing 53.13% of Kanssen (Yadong) Pipe-Coating Services Ltd (Kanssen). The acquisition will cost in excess of HK$ 223 million and will be substantially satisfied through internal funding.

PPSCHK will also enter into various put and call option deeds which will enable it to acquire a further 34.37% shareholding in Kanssen. This would take the total shareholding acquired to 87.5%.

According to WSC's Group Chief Executive Officer and Managing Director Mr Chan Cheu Leong, "This acquisition will make the PPSC group under WSC the largest pipe-coating entity in Asia. Currently, PPSC group is among the top 3 pipe-coating companies in the world.

Mr. Chan expects the acquisition to have a major impact on WSC's financial performance in 2005. "We are extremely excited over the acquisition. The company's extensive track records and the strategic locations of its facilities will substantially boost PPSC group's pipe-coating businesses. It will make us a leading player in China and the world.

The acquisition of Kanssen is WSC's biggest merger and acquisition (M & A) exercise since its listing almost three years ago on the main board of Bursa Malaysia. This acquisition is in-line with WSC's expansion plans and its objective of becoming a major Asian oil and gas group.

For WSC's financial year 2004, its oil and gas division which is spearheaded by the PPSC group, contributed 42% of WSC's total revenue and a substantial 93% of profit before tax.

The PPSC group presently has five pipe-coating facilities, two of which are in Kuantan, Malaysia and three in China namely in Shashi, Ningbo and Shenzhen. The acquisition of Kanssen will provide PPSC group with seven additional pipe-coating facilities in China and a pipe coating plant each in Saudi Arabia and Nigeria, giving the PPSC group an almost immediate foothold in the major pipe-coating markets of the Middle East and Africa.

"China's oil and gas industry is expected to grow tremendously. In fact it is already the world's largest energy market in the world. Our combined 10 pipe-coating facilities in China will definitely give us substantial synergy and competitive edge," he added.

The principal activities of Kanssen's subsidiaries and associated companies are in the provision of pipe-coating services to guard against pipeline corrosion for pipelines that are used in the transportation of oil and gas both onshore and offshore. The coating systems applied by Kanssen are similar to those currently provided by the PPSC group which include fusion bonded epoxy (FSE), 2 Layer Polyethylene (2 LPE), 3 Layer Polyethylene (3 LPE), 3 Layer Polypropylene (3 LPP), internal coating and concrete weight coating.

The PPSC group is renowned world wide for its proven track records and established world class safety management system.

The acquisition of Kanssen is subject inter alia to shareholders' approval at the forthcoming EGM to be convened as well as approvals from the relevant authorities.