Oct. 14--The South Korean steelmaker Posco is preparing to make a tender offer for the remaining 85 percent of shares of Thainox Stainless Steel Plc within a month at 2.10 to 2.20 baht a share, said a source familiar with the situation.

"The deal is 95 percent complete and everything has been agreed upon with the pricing of the deal way above what the local Thai media has been reporting," said the source who asked not to be named.

The source said the price would likely be 2.20 baht a share rather than the 1.60 baht that was reported in some outlets, a 45 percent increase from the current price of 1.50 baht.

"Only something silly can derail the process now, and it should not take more than a month before Posco makes the tender offer for all the shares of Thainox," the source said.

Reports suggest Posco was not very keen to delist and had been looking at ways to keep the company listed on the Stock Exchange of Thailand (SET). But the rules of the Securities and Exchange Commission state that if Posco purchases the 59.7 percent stake held by Prayudh Mahagitsiri it would trigger the tender offer clause. Under the clause, Posco would be forced to pay the same price for all remaining shares.

The source said all the paperwork was ready and leaks from South Korea have suggested Posco would be willing to pay $428 million for the remaining 85 percent, or about 2.13 baht a share.

To prepare for the takeover, Thainox raised its foreign ownership ceiling to 100 percent last year from the previous 40 percent limit.

Mr Prayudh had no comment about whether a deal with Posco was imminent and whether the price was between 2.10 to 2.20 baht a share, but he did say, "I will have some news in a few weeks".

In the past, he had said he would be willing to sell shares to any party "if the price was right".

According to SET data, Thainox has 7.79 billion shares outstanding, with Posco among the largest shareholders with a 15 percent stake (1.17 billion shares).

The source said funding for the deal was not an issue as Posco is sitting on nearly $5 billion after its failure to acquire the shipbuilding business of Daewoo earlier this year for $7 billion.

The source said that if the price of 1.60 baht a share suggested by local media were offered, it was likely Mr Prayudh would withdraw the deal. Posco paid 1.67 baht a share to acquire its 15 percent stake, while Mr Prayudh paid 1.49 baht a share for 500 million shares he acquired on Dec 12, 2008 at the peak of the economic crisis.

"There is no way he would accept a price that is not a 30-40 percent premium to the price he paid when the crisis was at its peak," the source added.

The company has not made a statement or appointed a financial adviser, but Samsung Securities has been a key adviser for Posco and it is likely they would advise for this transaction as well.

A deal could give the South Korean firm access to the domestic cold-rolled steel market, as any import is currently subject to anti-dumping duties.

Posco could also provide 100 percent of the raw material to Thainox. Under the current deal, Posco supplies only 85 percent.

Thainox has a capacity of 300,000 tonnes a year and analysts believe that as an integrated operation, the valuation of the company would be higher.

"The expected price should be 14.3 billion baht, equivalent to 2 baht a share. ... We believe INOX is worth more as part of an integrated operation than a stand-alone company. If INOX is taken over, we believe it is worth at least 2.20 baht a share," Kim Eng Securities said.

INOX shares closed yesterday on the SET at 1.50 baht, unchanged, in trade worth 7.97 million baht.

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