Go Back Email this Link to a friend

Acquisition Of Interest - Aeci

Release Date: 12/12/1997 13:12:38      Code(s): AFE AFEPAED5
ACQUISITION OF INTEREST IN AECI EXPLOSIVES FROM ICI
1.   INTRODUCTION
AECI IS PLEASED TO ADVISE THAT AN AGREEMENT HAS BEEN CONCLUDED WITH IMPERIAL
CHEMICAL INDUSTRIES PLC ("ICI") OF THE UK IN TERMS OF WHICH AECI WILL PURCHASE
ICI EXPLOSIVES HOLDINGS (PTY) LTD. ("IEH"), WHICH HOLDS ICI'S 51% INTEREST IN
THE AECI EXPLOSIVES PARTNERSHIP, AND WILL OBTAIN EXCLUSIVE MANUFACTURING RIGHTS
TO THE USE IN AFRICA OF ICI'S EXPLOSIVES TECHNOLOGY. THE PURCHASE WILL BE
EFFECTED EARLY IN JANUARY 1998 AND THE PURCHASE CONSIDERATION OF US$117 MILLION
WILL BE SETTLED IN CASH.
2.  BACKGROUND
AECI EXPLOSIVES IS A JOINT VENTURE BETWEEN AECI AND ICI IN THE COMMERCIAL
EXPLOSIVES AND ACCESSORIES BUSINESS AND REPRESENTS THE AFRICAN COMPONENT OF
ICI'S GLOBAL EXPLOSIVES BUSINESS. FURTHER TO ICI'S INTENTION TO RE-POSITION ITS
BUSINESS PORTFOLIO, IT RECENTLY EXITED FROM A PORTION OF THE GLOBAL EXPLOSIVES
BUSINESS BY VIRTUE OF THE SALE OF ITS INTEREST IN ICI AUSTRALIA LTD. SUBSEQUENT
DISCUSSIONS BETWEEN AECI AND ICI HAVE LED TO THIS AGREEMENT WHEREBY AECI BY
PURCHASING ICI'S INTEREST IN THE PARTNERSHIP WILL SECURE ITS POSITION IN THE
AFRICAN EXPLOSIVES MARKET.
3.   RATIONALE
FOLLOWING ITS RE-POSITIONING AS THE AFRICAN REGIONAL COMPONENT OF ICI'S GLOBAL
EXPLOSIVES BUSINESS, AFTER THE RESTRUCTURING OF AECI IN 1994, AECI EXPLOSIVES
HAS DEVELOPED FROM A MAINLY SOUTH AFRICAN OPERATION TO A BUSINESS SERVING THE
MINING INDUSTRY THROUGHOUT AFRICA. AECI EXPECTS MINING OF LARGELY
UNDERDEVELOPED MINERAL RESOURCES IN AFRICA TO EXPAND CONSIDERABLY IN FUTURE AS
THE SOCIO-POLITICAL ENVIRONMENT IMPROVES. WITH MANUFACTURING SITES IN GHANA AND
ZAMBIA, AECI EXPLOSIVES WILL BE WELL POSITIONED TO BENEFIT FROM THESE
DEVELOPMENTS, AND ACQUISITION OF ICI'S INTEREST IN IEH PRESENTS AN ATTRACTIVE
INVESTMENT OPPORTUNITY FOR AECI.
4.   PURCHASE CONSIDERATION
THE PURCHASE CONSIDERATION AGREED WITH ICI IS $111 MILLION FOR THE INTEREST IN
IEH AND $6 MILLION FOR THE RIGHTS TO INTELLECTUAL PROPERTY, REPRESENTING A 10,7
PRICE EARNINGS MULTIPLE ON FORECAST 1997 RESULTS. WITH RESERVE BANK APPROVAL,
THE PURCHASE CONSIDERATION WILL BE PAID IN CASH TO ICI EARLY IN JANUARY 1998.
AECI HAS OFFSHORE FACILITIES IN PLACE TO PROVIDE THE FUNDS FOR THE PURCHASE. IT
IS AECI'S INTENTION TO ACQUIRE DIRECT OWNERSHIP OF THE EXPLOSIVES BUSINESS AND
ASSETS AND TO THIS END IEH WILL BE PLACED IN VOLUNTARY LIQUIDATION IMMEDIATELY
AFTER ACQUISITION.
5.   FINANCIAL EFFECTS OF THE ACQUISITION
5.1  ON THE ASSUMPTION THAT THE ACQUISITION HAD BEEN EFFECTED ON 1 JANUARY 1997
AND AT THE INTEREST RATES PREVAILING IN THE FIRST HALF OF 1997 AND THE EXCHANGE
RATE RULING ON 5 DECEMBER 1997 (R4,8735/$), THE EFFECT ON AECI'S EARNINGS PER
SHARE FOR THE FIRST HALF OF THE 1997 FINANCIAL YEAR WOULD HAVE BEEN A DECREASE
FROM 103 CENTS PER SHARE TO 98 CENTS PER SHARE AND A DECREASE IN NET ASSETS PER
SHARE AT 30 JUNE 1997 FROM 1917 CENTS PER SHARE TO 1659 CENTS PER SHARE.
5.2   IT IS PROJECTED THAT THE ACQUISITION WILL RESULT IN A SLIGHT INCREASE IN
HEADLINE EARNINGS DURING THE 1998 FINANCIAL YEAR WITH MORE SIGNIFICANT BENEFITS
TO EARNINGS IN SUBSEQUENT YEARS.
6.   STRATEGIC CONSIDERATIONS
AECI EXPLOSIVES' STRATEGIC DIRECTION WILL INCREASINGLY INVOLVE OPERATIONS AND
INVESTMENT IN AFRICA WITH THE NEED FOR ON-GOING TECHNOLOGY DEVELOPMENT TO
SUPPORT THOSE OPERATIONS. IN TERMS OF THE AGREEMENT WITH ICI, AECI EXPLOSIVES
WILL HAVE EXCLUSIVE MANUFACTURING RIGHTS TO THE USE IN AFRICA OF EXISTING ICI
EXPLOSIVES TECHNOLOGY AND CERTAIN DEVELOPMENTS OF THAT TECHNOLOGY. AECI
EXPLOSIVES WILL ALSO SEEK NEW TECHNOLOGY AND BUSINESS ALLIANCES INCLUDING
POSSIBLE JOINT VENTURES.
JOHANNESBURG
12 DECEMBER 1997



                                        
Email this JSE Sens Item to a Friend.

Send e-mail to
© 2017 SHARENET (PTY) Ltd, Cape Town, South Africa
Home     Terms & conditions    Privacy Policy
    Security Notice    Contact Details
Market Statistics are calculated by Sharenet and are therefore not the official JSE Market Statistics. The calculation/derivation may include underlying JSE data.