HG Metal Manufacturing will pay US$2 million to take a majority stake in and to capitalise a joint venture in Myanmar, according to details of an agreement announced by the steel products maker on Thursday before the market opened.

Under the terms of the agreement, HG Metal will pay US$95,700 to Singapore-incorporated holding company Fortune Peak Investments for a 51.04 per cent stake in First Fortune International Co, a company that will undertake cut and bend, and fabrication services in Myanmar. The acquisition will reduce Fortune Peak's stake in First Fortune to 28.96 per cent, with Myanmar aluminium and glass company, YNJ Engineering Co, holding First Fortune's remaining 20 per cent stake.

Upon completion of the acquisition, the three shareholders of First Fortune will commit to subscribe for US$11.3 million of additional shares proportionate to their shareholdings, of which US$3.8 million will be tapped shortly after the acquisition is completed. The remainder of the capital commitment will be called progressively.

HG Metal's and Fortune Peak's commitments for the additional subscriptions will be satisfied in cash, while YNJ's share will be satisfied by the procurement of a lease agreement for First Fortune's factory in Myanmar.

HG Metal's share of the initial additional subscription is US$1.95 million. Both the acquisition and the initial additional subscription will be funded by either or both of internal resources and bank borrowings.

HG Metal said that the joint venture will give it a modern facility to provide cut and bend, and fabrication services in the fast-growing Myanmar market. HG Metal provides those services through its facility in Singapore, and only focuses on sale and distribution in Mynamar.

HG Metal shares last traded at 33 Singapore cents on Tuesday.