Opinion of the Independent Financial Advisor Concerning Asset Acquisition and Connected ...

240 Pages·2011·3.14 MB·English

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-TRANSLATION-
The English Translation of the Independent Financial Advisor’s Opinion has been prepared solely for the convenience of foreign
shareholders of G Steel Public Company Limited and should not be relied upon as the definitive and official document. The Thai
language version of the Independent Financial Advisor’s Opinion is the definitive and official document and shall prevail in all
aspects in the event of any inconsistency with this English Translation.

Opinion of the Independent Financial Advisor Concerning
Asset Acquisition and Connected Transactions of G Steel Public Company Limited

7 July 2011

Subject: Opinion of the Independent Financial Advisor concerning Asset Acquisition and Connected
Transactions of G Steel Public Company Limited

To: Shareholders
G Steel Public Company Limited

Referred to: 1) Resolution of the Board of Directors’ meeting of G Steel Public Company Limited No. 2/2011,
No. 3/2011, No. 5/2011, No. 7/2011 and No. 10/2011 held on 1 March 2011, 4 March 2011, 30
March 2011, 25 May 2011 and 29 June 2011, respectively
2) Information Memorandum regarding asset acquisition and connected transactions of G Steel
Public Company Limited since 2 March 2011 onward, as disclosed in www.set.or.th
3) Information Memorandum regarding connected transactions of G J Steel Public Company
Limited since 2 March 2011, disclosed in www.set.or.th
4) Notification of the Decision to Make a Tender Offer of Securities of G Steel Public Company
Limited and G J Steel Public Company Limited dated 7 April 2011
5) Form 56-1 of G Steel Public Company Limited ending 31 December 2009 (Revised) and 2010
6) Form 56-1 of G J Steel Public Company Limited ending 31 December 2009 (Revised) and 2010
7) Audited financial statements of G Steel Public Company Limited for the year ended 31
December 2008 – 2009 (Restated) , ended 31 December 2010 and the three months period
ended 31 March 2011
8) Audited financial statements of G J Steel Public Company Limited for the year 2008, 2009
(Restated) and 2010 ended 31 December 2008 – 2010 and the three months period ended 31
March 2011
9) The Appraisal report of G Steel Public Company Limited by American Appraisal Company
Limited (“AA”) dated 21 April 2011
10) The Appraisal report of G J Steel Public Company Limited by American Appraisal Company
Limited (“AA”) dated 18 March 2011
11) Certificate of Registration, Memorandum of Association, and other documents including
interviewing with the managements of G Steel Public Company Limited and G J Steel Public
Company Limited including other relevant companies and related parties.
The Report of Opinion of the Independent Financial Advisor
The Report of Opinion of the Independent Financial Advisor
12) Legal documents and Annual Report of 2010 ended 31 December 2010 and information of

ArcelorMittal disclosed on www.arcelormittal.com and ArcelorMittal Netherlands B.V. including The Board of Directors’ meeting of G Steel Public Company Limited (“the Company” or “GSTEEL”) No.
interviewing with the managements of ArcelorMittal 2/2011 and No.5/2011 held on 1 March 2011 and 30 March 2011, respectively, I V Global Securities Public
13) Share Subscription Agreement between G Steel Public Company Limited and ArcelorMittal Company Limited was appointed as an independent financial advisor who will provide opinions regarding the
Netherlands B.V. significant asset acquisition and the connected transaction. The Board of Directors’ meeting No. 10/2011 held on
14) Share Subscription Agreement between G J Steel Public Company Limited and G Steel Public 29 June 2011 had passed the resolution to propose shareholders consideration for the agenda relating all
Company Limited transactions to the Extraordinary General Meeting of Shareholders No. 1/2011 on 15 August 2011 as follows:
15) Credit Facility Agreement between G Steel Public Company Limited, G J Steel Public Company
(1) To consider and acknowledge the rationale, necessity and basis of the proposed transaction for
Limited, and ArcelorMittal Netherlands B.V.
the increase of the Company’s registered capital and the allocation of up to 11,920,000,000 newly issued ordinary
16) Business Assistant Agreement between G Steel Public Company Limited, G J Steel Public
shares of the Company with the par value of THB 1 per share to ArcelorMittal Netherlands B.V. (“AM”)
Company Limited, and ArcelorMittal Netherlands B.V.
(2) To consider and approve (a) the allocation of newly issued ordinary shares to AM up to
17) Shareholders Agreement of G Steel Public Company Limited
11,920,000,000 newly issued ordinary shares (b) the entry into Credit Facility Agreement between the Company

Attachment: 1) Summary of Audited Financial Statements and Analysis of G Steel Public Company Limited and and GJS (as the borrowers) and AM (as the lender) and (c) the entry into Business Assistance Agreement
G J Steel Public Company Limited between the Company, GJS and AM, which are considered connected transactions.
2) Dilution Effect
(3) To consider and approve the purchase of newly issued ordinary shares of GJS by the Company

and OA (a subsidiary of the Company) through a debt-to-equity conversion and newly issued ordinary shares of
Disclaimers: 1) The study of I V Global Securities Company Limited (“IVG” or “independent financial advisor”) in
GJS through a private placement, including ordinary shares that may be acquired from the shareholders of GJS
this report were based on information and assumptions provided by the management of G Steel
through a tender offer.
Public Company Limited and G J Steel Public Company Limited including the information of the
However in Item (1) is for Disclosure only and no voting, Item (2) is the transactions, which are
Company disclosed to the public on the websites of the Securities and Exchange Commission
considered as connected transactions under the Notification of the Capital Market Supervisory Board No. TorJor
(www.sec.or.th) and the Stock Exchange of Thailand (www.set.or.th).
21/2551 and the Notification of the Board of Governors of the SET on Disclosure of Information and Other Acts of
2) IVG shall not be responsible for the profits or the losses, including any impacts resulting from
Listed Companies concerning Connected Transactions B.E. 2546, of which the aggregate size of the transactions
this transaction.
are significant to have the Opinion of Independent Financial Advisor for shareholders’ consideration, and Item (3)
3) IVG conducted the study with knowledge, skills, and cautiousness on the basis of the
is the transactions which are considered as Type 1 transactions under the Notification of the Capital Market
professional ethics.
Supervisory Board No. TorJor 20/2551 and the Notification of the Board of Governors of the SET on Disclosure of
4) IVG considers and provides opinion based on the situation and information at the present time.
Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets 2547,
If such situation and information have been changed significantly, the study in this report may
which are required to have the Opinion of Independent Financial Advisor for shareholders’ consideration.
be affected.
I V Global Securities Public Company Limited as an Independent Financial Advisor (“IFA”) of the
5) The study to shareholders of G Steel Public Company Limited provides fairness opinion
1
regarding the Allocation of Newly Issued Ordinary Shares to ArcelorMittal Netherlands B.V., Company would like to provide the Opinion of Independent of Financial Advisor to shareholders in Item (2) and
Credit Facility Agreement, and Business Assistance Agreement, not including possibilities or Item (3) as follows:
successes of the transaction.
6) The study to shareholders of G Steel Public Company Limited provides fairness opinion
regarding Share Acquisition of G J Steel Public Company Limited resulting from Debt-to-Equity
Conversion and the Subscripton of Newly Issued Ordinary Shares, and the Fair Value of the
Acquired Shares, not including possibilities or successes of the transaction.

1 Please see item (1) for more details.
page 2
page 3
The Report of Opinion of the Independent Financial Advisor

The Board of Directors’ meeting of G Steel Public Company Limited (“the Company” or “GSTEEL”) No.
2/2011 and No.5/2011 held on 1 March 2011 and 30 March 2011, respectively, I V Global Securities Public
Company Limited was appointed as an independent financial advisor who will provide opinions regarding the
significant asset acquisition and the connected transaction. The Board of Directors’ meeting No. 10/2011 held on
29 June 2011 had passed the resolution to propose shareholders consideration for the agenda relating all
transactions to the Extraordinary General Meeting of Shareholders No. 1/2011 on 15 August 2011 as follows:
(1) To consider and acknowledge the rationale, necessity and basis of the proposed transaction for
the increase of the Company’s registered capital and the allocation of up to 11,920,000,000 newly issued ordinary
shares of the Company with the par value of THB 1 per share to ArcelorMittal Netherlands B.V. (“AM”)
(2) To consider and approve (a) the allocation of newly issued ordinary shares to AM up to
11,920,000,000 newly issued ordinary shares (b) the entry into Credit Facility Agreement between the Company
and GJS (as the borrowers) and AM (as the lender) and (c) the entry into Business Assistance Agreement
between the Company, GJS and AM, which are considered connected transactions.
(3) To consider and approve the purchase of newly issued ordinary shares of GJS by the Company
and OA (a subsidiary of the Company) through a debt-to-equity conversion and newly issued ordinary shares of
GJS through a private placement, including ordinary shares that may be acquired from the shareholders of GJS
through a tender offer.
However in Item (1) is for Disclosure only and no voting, Item (2) is the transactions, which are
considered as connected transactions under the Notification of the Capital Market Supervisory Board No. TorJor
21/2551 and the Notification of the Board of Governors of the SET on Disclosure of Information and Other Acts of
Listed Companies concerning Connected Transactions B.E. 2546, of which the aggregate size of the transactions
are significant to have the Opinion of Independent Financial Advisor for shareholders’ consideration, and Item (3)
is the transactions which are considered as Type 1 transactions under the Notification of the Capital Market
Supervisory Board No. TorJor 20/2551 and the Notification of the Board of Governors of the SET on Disclosure of
Information and Other Acts of Listed Companies Concerning the Acquisition and Disposition of Assets 2547,
which are required to have the Opinion of Independent Financial Advisor for shareholders’ consideration.
I V Global Securities Public Company Limited as an Independent Financial Advisor (“IFA”) of the
1
Company would like to provide the Opinion of Independent of Financial Advisor to shareholders in Item (2) and
Item (3) as follows:

1 Please see item (1) for more details.
page 3
The Report of Opinion of the Independent Financial Advisor The Report of Opinion of the Independent Financial Advisor
Executive Summary The Analysis and Opinion of Independent Financial Advisor of the afore-mentioned 2 transactions are
summarized as follows:
As a result of the global economic crisis beginning mid-2008 and the high fluctuations in steel costs,
both Company and GJS, a subsidiary of the Company, experienced operational difficulties which ultimately Transaction 1 Connected Transaction
resulted in financial losses from 2008 onwards. This in turn led to liquidity problem and the inadequacy of working (cid:131)
Summary of IFA Opinion
capital. The Companies had tried to solve the liquidity problems in many ways but there the inadequacy of
The IFA opines that the Shares Allocation to AM, the entry into Credit Facility Agreement and Business
working capital for business operations still existed. The Companies had to reduce the production capacity down,
Assistance Agreement with AM are Appropriate under current circumstances of the Company and will benefit
which in turn directly affect the operation profits and the ability to reach profitability. As a result of these issues
both the Company and its shareholders. Also the offering price is appropriate, thus the shareholders should vote
affecting both Companies, the auditors were unable to issue unqualified reports due to the going concerns of
for the approval in favor of three connected transactions
both Companies.
The Board of Directors had explored and considered and compared many options and deemed that However, the connected transaction with AM includes
seeking a strategic investor would be in the best interest of both Companies. On 1 March 2011, an agreement a) The allocation of newly issued ordinary shares to AM up to 11,920,000,000 newly issued ordinary shares
was reached with ArcelorMittal Netherlands B.V., a subsidiary of ArcelorMittal (referred to collectively and with the par value of THB 1 per share
interchangeably as “AM”) to invests directly in GSTEEL and subsequently have GSTEEL use some of the funding b) The entry into Credit Facility Agreement with AM
provided by the capital injection to inject new capital into GJS so that both Companies can begin their business c) The entry into Business Assistance Agreement with AM
rehabilitation.
Therefore, the transactions would be considered and analyzed separately as follows:
The Board of Directors Meeting no. 2/2011 on 1 March 2011 resolved to accept the rationale and

justifications for the increase in capital by way of a private placement of new common shares in the amount of no
A) Share Allocation to AM no greater than 11,920,000,000 shares with a par value of THB 1 per share
more than 11,920,000,000 shares with a par value of THB 1 per share to AM and The Board of Directors Meeting
(cid:131)
No. 10/2011 of the Company held on 29 June 2011, had proposed to shareholders consideration for the agenda Summary of AM Assistance
items relating AM investment to the Extraordinary General Meeting of Shareholders No. 1/2011 on 15 August
Assistance Assistance Value Payment to AM
2011, which also includes other related agenda items to the shareholders of the Company. There are 2 relating
(1) Capital Increase from the issuance THB 7,509.60 million Dividends (In case dividend is paid in any given
agendas which Independent Financial Advisor provides the opinion in this report, as follows:
and allocation of new ordinary shares period.)
Transaction 1 The connected transactions include the allocation of newly issued ordinary shares to AM up
of GSTEEL to AM
to 11,920,000,000 newly issued ordinary shares, the entry into Credit Facility Agreement
AM will provide indirect assistance to GJS through GSTEEL injecting funding provided by AM in the amount of THB
and Business Assistance Agreement with AM.
3,600 million to subscribe newly issued shares of GJS
Transaction 2 The acquisitions of newly issued ordinary shares of GJS by the Company through a debt-to-
(2) Credit Facility Agreement by USD 500 million or equivalent Interest of 12 percent per annum and commitment
equity conversion and newly issued ordinary shares of GJS through a private placement, providing Credit Facility to GSTEEL to THB 15,305.50 million fee of 2 percent per annum
including ordinary shares that may be acquired from the shareholders of GJS through a and GJS In the assumption that GSTEEL draw downed
tender offer, resulting from the requirement to conduct a Mandatory Tender Offer of GJS USD 500 million all entire amount over the
securities in accordance to the SEC notification GorJor 53/2545 No.6*, which this transaction contract period of 5 years, the maximum
compensation payment which GSTEEL is required
is deemed as the asset acquisition of the listed company.
to pay AM for 5 years equals to USD 350 million
(Note: The SEC has ammended the regulations governing tender offers and should thus refer to the
or equivalent to THB 10,713.85 million.
Notification of the Capital Market Supervisory Board Tor.Jor 12/2554 Re: Rules, conditions, and procedures
(3) Business Assistance Agreement Assistance Provided: 2 percent of total consolidated revenue but no
for the acquisition of securities for business takeovers dated 13 May 2011 and will be effective 1 June 2011)
between GSTEEL, GJS and AM Technology, production, more than USD 40 million per year or USD 800

marketing, human million over a period of 20 years or equivalent
page 4 page 5
The Report of Opinion of the Independent Financial Advisor
The Analysis and Opinion of Independent Financial Advisor of the afore-mentioned 2 transactions are
summarized as follows:
Transaction 1 Connected Transaction
(cid:131)
Summary of IFA Opinion

The IFA opines that the Shares Allocation to AM, the entry into Credit Facility Agreement and Business
Assistance Agreement with AM are Appropriate under current circumstances of the Company and will benefit
both the Company and its shareholders. Also the offering price is appropriate, thus the shareholders should vote
for the approval in favor of three connected transactions
However, the connected transaction with AM includes
a) The allocation of newly issued ordinary shares to AM up to 11,920,000,000 newly issued ordinary shares
with the par value of THB 1 per share
b) The entry into Credit Facility Agreement with AM
c) The entry into Business Assistance Agreement with AM
Therefore, the transactions would be considered and analyzed separately as follows:

A) Share Allocation to AM no greater than 11,920,000,000 shares with a par value of THB 1 per share
(cid:131)
Summary of AM Assistance
Assistance Assistance Value Payment to AM
(1) Capital Increase from the issuance THB 7,509.60 million Dividends (In case dividend is paid in any given
and allocation of new ordinary shares period.)
of GSTEEL to AM
AM will provide indirect assistance to GJS through GSTEEL injecting funding provided by AM in the amount of THB
3,600 million to subscribe newly issued shares of GJS
(2) Credit Facility Agreement by USD 500 million or equivalent Interest of 12 percent per annum and commitment
providing Credit Facility to GSTEEL to THB 15,305.50 million fee of 2 percent per annum
and GJS In the assumption that GSTEEL draw downed
USD 500 million all entire amount over the
contract period of 5 years, the maximum
compensation payment which GSTEEL is required
to pay AM for 5 years equals to USD 350 million
or equivalent to THB 10,713.85 million.
(3) Business Assistance Agreement Assistance Provided: 2 percent of total consolidated revenue but no
between GSTEEL, GJS and AM Technology, production, more than USD 40 million per year or USD 800

marketing, human million over a period of 20 years or equivalent
page 5
The Report of Opinion of the Independent Financial Advisor The Report of Opinion of the Independent Financial Advisor
Assistance Assistance Value Payment to AM In any event, AM reserves the right to waive any of the Condition Precedents as it deems necessary or
appropriate.
resources, procurement etc. to THB 1,224.44 million per year or THB
which cannot be estimated 24,488.80 million over 20 years (cid:131)
Summary of Impacts to GSTEEL after Transaction with AM
in value.

Remark: Calculating by based on the exchange rate as at 28 February 2011 stated by the Bank of Thailand (www.bot.or.th) equals to THB 30.611 per 1 USD
Transaction Commitments Benefits Results

Conversion of debt to Issue new shares to Pacific Reduce debt by THB Pacific Harbor will hold 1.84
(cid:131)
Summary of Condition Precedents
Pacific Harbor Harbor in the amount of 546,862,275 percent of GSTEEL (Fully Diluted)

546,862,275 shares
o Shareholder Approvals of both GSTEEL and GJS relating to the transactions.
Conversion of debt to Issue new shares to Kwang Reduce debt Kwang Sogo will hold 3.36 percent
Other than the share acquisition of GJS and the related party transactions with AM as detailed in this
Kwang Sogo Sogo in the amount of commitment 2 of GSTEEL (Fully Diluted)
report, there exists other agendas which will also be proposed to the Extraordinary Shareholders Meeting No.
850,032,300 shares
1/2011 that also relate to the transactions with AM including consideration on changes to share capital of the
Conversion of debt of GJS Conversion of GJS debt of Receive 6,854,166,667 After Debt-to-Equity Conversion,
company, consideration to amend the articles of Association, and consideration to amend BOI certificates.
to GSTEEL and OA THB 1,645,000,000 to an shares of GJS GSTEEL will hold 28.58 percent of
The resolutions approving or not approving any of these agendas may have an effect on the
equity investment in GJS GJS, and OA will hold 23.54
completeness of the Condition Precedents set out by AM and may have an impact on the decision by AM to
percent of GJS. After all
invest. In addition, the success of the transactions also depend on other factors including the shareholders’
transaction, OA will hold 17.82
approval of GJS in the agendas related transactions. percent (Fully Diluted).

Share issuance to AM Issue 11,920,000,000 new Receive THB AM will hold 40 percent of GSTEEL
o Success of the debt restructuring plan and the reduction of current debt of GSTEEL and GJS as at the
shares to AM 7,509,600,000 in new (Fully diluted)
Statement Closing Date
equity
As at 31 December 2010 and 31 March 2011, GSTEEL and GJS had total liabilities represented in the
Use new funds from share THB 3,600,000,000 to be Receive 15,000,000,000 GSTEEL will hold 45.93 percent of
consolidate financial statement of THB 27,736 million, THB 26,694 million, respectively and following the debt
subscription by AM to used to subscribe to GJS shares of GJS GJS (Fully Diluted)
conversion of 2 creditors will result in a reduction of the debt to a certain extent. Therefore, the liabilities of
subcribe to new shares of shares
GSTEEL and GJS on a consolidated basis will be reduced to THB 26,000 million. In any event, GSTEEL is in GJS
process of making an agreement with various creditors to restructure the debt and reduce the debt, the Post-investment by AM USD 500 Million credit Interest rate of 12 percent p.a. and
management of GSTEEL is of the opinion that the liabilities will be successfully reduced as less as it should be facility provided by AM commitment fee of 2 percent p.a.
before the shareholder meeting. However as of the date of the Independent Financial Advisor’s report, the for 5 years
restructuring has not been completed, and thus, the shareholders should wait for the company announcement on Business Assistance 2 percent of consolidated revenue
from AM for 20 years as stated in financial statements
this matter. The success of the restructuring and the reduction is significantly to the liabilities of GSTEEL and GJS

at the present which is an essential to the success of dealing with AM.

Approval from regulatory and government agencies including the SET, SEC as required for the
o

transactions

With respect to the investment by AM, there are several approvals by several government agencies that

need to receive. There are some approvals that need to take some time such as the amendments to the BOI

certificates that have a separate process and procedure. Should any of the approvals not be received, the
investment by AM could be affected negatively.
2 Shares issued to Kwang Sogo in the amount of 850,032,300 shares or equivalent to THB 427,859,031 as at 31 December 2010.

page 6 page 7
The Report of Opinion of the Independent Financial Advisor
In any event, AM reserves the right to waive any of the Condition Precedents as it deems necessary or
appropriate.
(cid:131)
Summary of Impacts to GSTEEL after Transaction with AM

Transaction Commitments Benefits Results
Conversion of debt to Issue new shares to Pacific Reduce debt by THB Pacific Harbor will hold 1.84
Pacific Harbor Harbor in the amount of 546,862,275 percent of GSTEEL (Fully Diluted)
546,862,275 shares
Conversion of debt to Issue new shares to Kwang Reduce debt Kwang Sogo will hold 3.36 percent
Kwang Sogo Sogo in the amount of commitment 2 of GSTEEL (Fully Diluted)
850,032,300 shares
Conversion of debt of GJS Conversion of GJS debt of Receive 6,854,166,667 After Debt-to-Equity Conversion,
to GSTEEL and OA THB 1,645,000,000 to an shares of GJS GSTEEL will hold 28.58 percent of
equity investment in GJS GJS, and OA will hold 23.54
percent of GJS. After all
transaction, OA will hold 17.82
percent (Fully Diluted).
Share issuance to AM Issue 11,920,000,000 new Receive THB AM will hold 40 percent of GSTEEL
shares to AM 7,509,600,000 in new (Fully diluted)
equity
Use new funds from share THB 3,600,000,000 to be Receive 15,000,000,000 GSTEEL will hold 45.93 percent of
subscription by AM to used to subscribe to GJS shares of GJS GJS (Fully Diluted)
subcribe to new shares of shares
GJS
Post-investment by AM USD 500 Million credit Interest rate of 12 percent p.a. and
facility provided by AM commitment fee of 2 percent p.a.
for 5 years
Business Assistance 2 percent of consolidated revenue
from AM for 20 years as stated in financial statements

2 Shares issued to Kwang Sogo in the amount of 850,032,300 shares or equivalent to THB 427,859,031 as at 31 December 2010.

page 7
The Report of Opinion of the Independent Financial Advisor The Report of Opinion of the Independent Financial Advisor
(cid:131) (cid:131)
Shareholding Structure in GSTEEL Pre-Post Investment by AM Summary of Dilution Impact

Number of Shares Share Price Control Dilution Price Dilution

Pre – Investment by AM Post – Investment by AM Impact from (Shares) (THB/share) (%) (%)
กลEMxุ่มisaผtjionู้ถrg ือ ผู้ถือหุ้น กลุ่Mมaผjoู้ถr ือ AM ผM้iูถnoือritหie้sุน Case 1 : Share Issuance from Debt-to-Equity Conversion
SShหhaaุ้นrreehhเooดllddิมeerrss รMาinยoยrit่อiesย Sหhaุ้นreเhดolิมders รายย่อย
(a) Conversion of Debt-to-Equity to Kwang Sogo 850,032,300 0.63 4.90 0.42
(b) Conversion of Debt-to-Equity to Pacific Harbor 546,862,275 1.00 3.21 (1.45)
13.05% 86.95% 10.07% 40.00% 49.93% Total Debt Conversion 1,396,894,575 7.81 (0.97)
GSTEEL GSTEEL
Case 2 : Allocation of Newly Issued Ordinary Shares to AM 11,920,000,000 0.63 41.97 3.61
99.99% 99.99% 99.99% 99.99%
Case 3 : Debt-to-Equity Conversion and the Allocation of Newly
SPH GSN SPH GSN
Issued Ordinary Shares to AM 13,316,894,575 44.69 2.86
99.97% 99.97% Remark Due to net loss of the Company's financial statements and consolidated financial statements ending 31 March 2011, the
OA OA earnings dilution cannot be calculated.
22.33% 45.93%
21.57% GJS 17.82% GJS (cid:131)
Summary of the Appropriateness of Investment by AM

Investment by AM together with various supports involves a suitable structured support and the

Remark: Major shareholders include (1) Khunying Patama Leeswadtrakul Group hold GSTEEL shares totaling 11.35 percent Pre-Investment by AM and 6.27 proposed transaction is considered a comprehensive problem solving in terms of financial, operational, and
percent Post- Investment by AM and (2) another 3 shareholders hold GSTEEL shares totaling 1.70 percent Pre- Investment by AM and 3.80 percent
management assistance in the Company and GJS. Providing funds to the Companies is to enhance liquidity and
Post- Investment by AM (calculated from the list of shareholder at the closing date of share registrar on 17 June 2011)
(cid:131) working capital in the business and also improve financial strengths, additionally, business assistance will bring
Effect on the Balance sheet of GSTEEL Post-Investment by AM
efficiency in operation and management and boost up expertise in cost management, which in turn positively
Based on the Consolidated Financial Statements of GSTEEL as the three months period ended 31 March
affect the competitiveness and turning around the performance of the Companies as a group.
2011
In addition, AM is a leading steel manufacturer of the world with financial resources, technology,

Pre-debt Post-Debt Consolidated management, a good relationship with its vendors and its own mine. With an experienced management team who
conversion Conversion Financials of
posses expertise in turnaround many steel companies around the world, the IFA is of the opinion that AM Group
GSTEEL post-
will be able to solve the Companies’ problems, enhance the Companies’ competitive advantages and improve the
Unit: THB Million invesment by AM
Companies’ operational standard.
Total Assets 44,659 44,659 52,169
(cid:131)
Total Liabilities 26,694 25,719 25,719 Summary of Benefits and Negative Impacts of entering into the Transaction
Shareholder Equity 17,956 18,940 26,450
Benefits Negative Impacts
An increase in Shareholders’ Equity resulting from:
(cid:131) (cid:131)
Receive liquidity for working capital and for further Dilution Impact
- Share issued of 546,862,275 shares -Pacific Harbor 547
expansions in the future
- Share issued of 850,032,300 shares -Kwang Sogo 850 (cid:131) (cid:131)
Being a business alliance with the top global steel Opening the Thai market to international players
- Discount on share capital – Share issued to Kwang Sogo (314)
producer should enhance the Company’s technology
- Loss on Debt-to-Equity Conversion - Kwang Sogo (108) (cid:131)
Increase efficiency in operational and cost
- Share issued to AM of 11,920,000,000 shares 11,920
management and other joint benefits
- Discount on share capital – Share issued to AM (4,410) (cid:131)
Benefits from the experiences of AM’s management
Liquidity ratio 0.31 0.31 0.85
(cid:131)
Positive impact in accounting terms
Debt-to-Equity ratio 1.49 1.36 0.97
(cid:131)
Continue to be the leader of Thailand’s Hot Rolled Steel

producer

page 8 page 9
The Report of Opinion of the Independent Financial Advisor
(cid:131)
Summary of Dilution Impact
Number of Shares Share Price Control Dilution Price Dilution
Impact from (Shares) (THB/share) (%) (%)
Case 1 : Share Issuance from Debt-to-Equity Conversion
(a) Conversion of Debt-to-Equity to Kwang Sogo 850,032,300 0.63 4.90 0.42
(b) Conversion of Debt-to-Equity to Pacific Harbor 546,862,275 1.00 3.21 (1.45)
Total Debt Conversion 1,396,894,575 7.81 (0.97)
Case 2 : Allocation of Newly Issued Ordinary Shares to AM 11,920,000,000 0.63 41.97 3.61
Case 3 : Debt-to-Equity Conversion and the Allocation of Newly
Issued Ordinary Shares to AM 13,316,894,575 44.69 2.86
Remark Due to net loss of the Company's financial statements and consolidated financial statements ending 31 March 2011, the
earnings dilution cannot be calculated.

(cid:131)
Summary of the Appropriateness of Investment by AM
Investment by AM together with various supports involves a suitable structured support and the
proposed transaction is considered a comprehensive problem solving in terms of financial, operational, and
management assistance in the Company and GJS. Providing funds to the Companies is to enhance liquidity and
working capital in the business and also improve financial strengths, additionally, business assistance will bring
efficiency in operation and management and boost up expertise in cost management, which in turn positively
affect the competitiveness and turning around the performance of the Companies as a group.
In addition, AM is a leading steel manufacturer of the world with financial resources, technology,
management, a good relationship with its vendors and its own mine. With an experienced management team who
posses expertise in turnaround many steel companies around the world, the IFA is of the opinion that AM Group
will be able to solve the Companies’ problems, enhance the Companies’ competitive advantages and improve the
Companies’ operational standard.
(cid:131)
Summary of Benefits and Negative Impacts of entering into the Transaction
Benefits Negative Impacts
(cid:131) (cid:131)
Receive liquidity for working capital and for further Dilution Impact
expansions in the future
(cid:131) (cid:131)
Being a business alliance with the top global steel Opening the Thai market to international players
producer should enhance the Company’s technology
(cid:131)
Increase efficiency in operational and cost
management and other joint benefits
(cid:131)
Benefits from the experiences of AM’s management
(cid:131)
Positive impact in accounting terms
(cid:131)
Continue to be the leader of Thailand’s Hot Rolled Steel
producer

page 9
The Report of Opinion of the Independent Financial Advisor The Report of Opinion of the Independent Financial Advisor
(cid:131)
Summary of Benefits and Negative Impacts from entering into the Transaction with connected party vs should not be less than the adjusted book value of the business as it is based on the independent appraisal of the
third party underlying assets under the current market conditions. In other words, should the assets be liquidated, the net
cash available would be based on the sale of assets. Therefore, the adjusted book value is a widely accepted
Benefits Negative Impacts
(cid:131) methodology in valuing the business.
Full support from expert in the Steel Industry (cid:131)
Setting aside a fund for the Tender Offer for all of
The IFA is of the opinion that fair value of the GSTEEL shares is THB 0.62 per share based on the Adjusted
GSTEEL’ shares
(cid:131) Gaining Benefits from AM Management’s Book Methodology. Therefore, the offering price at THB 0.63 baht per share is an appropriate price.
Experiences
B) Entering into Credit Facilities Agreement with AM

(cid:131)
Summary of risks associate with the Transaction (cid:131)
Summary of considerations and observations of the IFA
o Risk that the Extraordinary General Meeting of Shareholders No. 1/2011 of GSTEEL does not
Considerations IFA’s Observation
approve the related transactions
Ability of securing other sources of funds for both Management has used their utmost endeavors to secure sources of funding
o The conditions precedent may not all be completed due to external factors
Companies in the form of loans and investments by mandating many financial advisors
o Risk associated to the future uncertainties after the Tender Offer to assist on their endeavors. The Companies were offer a loan facility from

o The risk that the expected benefits from AM Investment including Credit Facility and Business an International financial institution for USD 150 Million with an interest rate of
Assistance Agreement are not fulfilled as expected 15 percent including other fees that would also be charged. Additionally, the
fixed assets of both GSTEEL and GJS would need to be pledged with the
(cid:131)
Summary of IFA’s opinion on the appropriate of the offering price to AM financial institution as collateral for the loan facility.
Credit Line and Drawdown
Valuation Price per Higher (Lower) than Offering
Valuation Approach The terms and conditions does not specify maximum Since obligation and necessity of each company may change from time to
share (THB) Price (Percent)
credit limits to anyone of the Companies time, GSTEEL and GJS should collaborate to utilize the loan to ensure that
1 Market Value Approach 0.58 – 0.71 (7.94) – 12.70
both companies will have sufficient source of fund to timely respond to such
2 Book Value Approach 0.62 (1.59)
obligation and necessity.
3 Adjusted Book Value Approach 0.62 (1.59) Combined, the Companies will receive net proceeds The total proceeds will increase the Companies’ liquidity to support working
4 Market Multiples Approach from both the capital increase and the loan totaling of capital requirement, and to sufficiently repay some of the debts, including
4.1 Price to Book Value Approach 0.53 – 0.58 (8.53) – (15.87) THB 22,815 million. the restructuring of debts to the appropriate proportion.
4.2 Price to Earnings Ratio Approach n.a.1/ n.a. Can gradually drawdown the loan but has to repay one The drawdown is flexible as the Companies can gradually drawdown the
4.3 Enterprise Value to EBITDA Approach n.a.2/ n.a. time on the expiration date of the FAA loan as needed, but the one-time repayment on the expiration date of the
FAA will cause the Companies unnecessary interest payment in case where
5 Discounted Cash Flow Approach n.a.3/ n.a.
the Companies have the capability to early repay the loan before the
Offering Price to AM 0.63
expiration date of the FAA.
Note: 1/ Not applicable as GSTEEL recorded a net loss for the three months period ending 31 March 2011 of THB 227.77
Can terminate the loan, without paying the cancellation In case where the Companies can improve their operation and be able to
million.
fee of 3.0 – 5.0 percent depending on the period, only if refinance the loan with other credit facilities with a lower interest rate from
2/ Not Applicable as GSTEEL recorded a negative EBITDA of THB 10.74763 Billion. While the EBITDA as at three
the Companies can find a new credit facility charging financial institutions, the Companies must take into account the cancellation
months period ending 31 March 2011 was THB 591.37 million, the trailing 12 month EBITDA was still negative.
interest exceeding 12 percent. fee in the consideration of the refinancing benefits.
3/ Not applicable as the valuation under the DCF model was negative
Interest Charges and Commitment Fee
The loan charges an interest rate at 12 percent per Total financial costs of 14 percent per annum which is higher than domestic
The IFA is of the opinion that the fair value of the shares of GSTEEL should be based on the adjusted book
annum and a commitment fee at 2 percent per annum financial market rate.
value method with a value of THB 0.62 per share, and the market comparable approach with a fair value of Default interest rate of 15 percent per annum; and if Default interest rate at 15 percent per annum is equal to the default interest
between THB 0.58-0.71 per share. In any event, the IFA is of the opinion that in any valuation, the business value defaulting more than 1 year all accrued interest will be rate of some domestic financial institutions. However, interest charged on
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