GSTEL will propose to the shareholders’ meeting on 29 May 2019 to  ratify the entering into a financial assistance agreement with Mahachai Steel Center Co., Ltd. and Mr. Nirum Ngamchamnanrith, collectively referred to as the “Mahachai Group”, as the sponsor and lender whereby GSTEL had entered into the agreement on 17 February 2014. 

According to the opinion of the independent financial advisor (IFA), the shareholders should not  ratify this transaction because the agreement contains a condition  requiring GSTEL to appoint the Mahachai Group as its sole sales distributor for a period of five years and to pay a  sales distribution fee at the rate of 1.5 percent of the sales of GSTEL to the Mahachai Group.  The agreement also provides that most products from the manufacturing process must be placed as collateral in favour of Mahachai Group, and a representative from the Mahachai Group must be appointed to jointly approve with GSTEL in the procurement, sale, and payment processes, and this will affect the internal control system and the good corporate governance and may lead to conflicts of interest.  In addition, it is forecast that GSTEL may incur additional expenses which will affect its profitability and liquidity problem in the future.  

However, the Board of Directors considered that with financial assistance from the Mahachai Group in 2014, GSTEL was able to reproduce hot-rolled coil after it had  shut down this manufacturing for almost two years.  As a result, the machinery was maintained and did not deteriorate, its employees were not terminated, and the company had more opportunity and time to find investors in order to undergo its debt restructuring.  In addition, the company was subject to a serious loss at the time and was unable to seek financial assistance from any financial institution.  Despite the fact that the conditions for  receipt the financial assistance from the Mahachai Group might not be commercially reasonable,  in order for the company to survive and to have opportunities for growth in the future, as well as to maintain its status as a listed company on the Stock Exchange so that its securities such as  shares and warrants may be traded on the Stock Exchange, it was, therefore, necessary for GSTEL to receive  the financial assistance from the Mahachai Group.   

Accordingly, the transaction was considered a connected transaction, as at the time of entering into the transaction in 2014 the Mahachai Group held 10.02 % of GSTEL’s shares.  Therefore, a resolution of the shareholders’ meeting to approve a decision to enter into a connected transaction hereunder must consist of at least three-fourths of the total votes of shareholders attending the meeting and having voting right, excluding interested shareholders’ equity.

The shareholders are strongly advised to review the information and exercise their right to protect their interest, as well as to ask for information from the executives of GSTEL in order to have complete information for their decision-making.

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