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Sasol - Acquisition Of Condea

Release Date: 11/12/2000 07:30:50      Code(s): SOL SOLD
SASOL LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 1979/003231/06)
("SASOL")
AGREEMENT BETWEEN SASOL AND RWE-DEA AKTIENGESELLSCHAFT FOR MINERALOEL UND
CHEMIE ("RWE-DEA") FOR THE ACQUISITION BY SASOL OF RWE-DEA'S ENTIRE CHEMICAL
BUSINESS KNOWN AS CONDEA ("CONDEA") ("THE ACQUISITION")
1.   INTRODUCTION
FURTHER TO THE CAUTIONARY ANNOUNCEMENT PUBLISHED ON 17 NOVEMBER 2000, SASOL
ANNOUNCES THAT IT HAS CONCLUDED AN ASSET AND SHARE PURCHASE AGREEMENT ("THE
AGREEMENT") WITH RWE-DEA IN TERMS OF WHICH SASOL WILL ACQUIRE CONDEA, SUBJECT
TO THE FULFILMENT OF THE CONDITIONS PRECEDENT SET OUT BELOW.
2.   NATURE OF CONDEA'S BUSINESS
CONDEA IS THE CHEMICAL ARM OF RWE-DEA, A SUBSIDIARY OF RWE AKTIENGESELLSCHAFT,
THE LARGEST UTILITY COMPANY IN GERMANY IN THE LINE OF POWER GENERATION.
CONDEA COMPRISES ASSETS IN GERMANY, 100% OF CONDEA VISTA COMPANY AND CONDEA
SERVO B.V., 99,9% OF CONDEA AUGUSTA SPA, 70% OF CONDEA NANJING CHEMICAL COMPANY
LIMITED AS WELL AS A 50% INTEREST IN CONDEA HUNTSMAN GMBH & CO KG, A JOINT
VENTURE WITH HUNTSMAN CORPORATION OF THE USA FOR THE PRODUCTION AND MARKETING
OF MALEIC ANHYDRIDE.
CONDEA'S BUSINESS IS CONCENTRATED IN THE SURFACTANT VALUE CHAIN AND IN
OXYGENATED SOLVENTS. CONDEA WITH ITS HEADQUARTERS IN HAMBURG, GERMANY, HAS
PRODUCTION FACILITIES IN GERMANY, ITALY, THE NETHERLANDS, THE USA, CHINA, DUBAI
AND SLOVAKIA. CONDEA EMPLOYS APPROXIMATELY 4 600 PEOPLE.
CONDEA COMPETES IN THE NORTH AMERICAN AND EUROPEAN SURFACTANT MARKETS,
ESPECIALLY IN SURFACTANT INTERMEDIATES SUCH AS SYNTHETIC AND NATURAL DETERGENT
ALCOHOLS AND LINEAR ALKYL BENZENE. IT ALSO HAS A STRONG MARKET POSITION IN
EUROPE IN OXYGENATED SOLVENT PRODUCTS SUCH AS ETHANOL, ISO-PROPANOL AND
METHYL-ETHYL-KETONE ("MEK") AND A LEADING POSITION IN HIGH PURITY ALUMINAS.
FOR THE YEAR ENDED 30 JUNE 2000, CONDEA'S EARNINGS BEFORE INTEREST AND TAX
AMOUNTED TO EURO 114 MILLION (R724 MILLION) ON A TURNOVER OF EURO 2 379 MILLION
(R15 107 MILLION). AT 30 JUNE 2000, CONDEA HAD A NET WORTH OF EURO 533 MILLION
(R3 489 MILLION).
3.    RATIONALE AND FUTURE PROSPECTS
THE ACQUISITION ENABLES SASOL TO ACHIEVE SEVERAL OF ITS STRATEGIC GOALS, NAMELY
* EXPANSION OF SASOL'S CHEMICALS PORTFOLIO
THE ALPHA OLEFINS, SOLVENTS AND POLYMERS BUSINESSES HAVE PREVIOUSLY BEEN
IDENTIFIED AS KEY GLOBAL GROWTH AREAS.
A SIGNIFICANT PORTION OF CONDEA'S TURNOVER IS DIRECTLY RELATED TO THE
SURFACTANT VALUE CHAIN. THIS VALUE CHAIN WAS IDENTIFIED AS A GROWTH AVENUE FOR
SASOL'S ALPHA OLEFINS BUSINESS WITH THE RECENT APPROVAL OF SASOL'S DETERGENT
ALCOHOL PROJECT. CONDEA'S SURFACTANT BUSINESS IS AN EXCELLENT FIT WITH SASOL'S
DETERGENT ALCOHOL BUSINESS, AND WILL RESULT IN STRONG MARKET POSITIONS IN
DETERGENT ALCOHOLS, LINEAR ALKYL BENZENE AND PARAFFINS.
THE CONDEA SOLVENT PORTFOLIO, CONSISTING OF ETHANOL, ISO-PROPANOL, MEK AND
GLYCOL ETHERS, FITS WELL WITH THE PORTFOLIO OF SASOL SOLVENTS. CONDEA'S
SOLVENTS MARKETS ARE MAINLY IN EUROPE, WHICH WILL RESULT IN THE REALISATION OF
MARKETING AND LOGISTICAL SYNERGIES WITH SASOL'S CURRENT SOLVENTS BUSINESS
WHILST, AT THE SAME TIME, DIVERSIFYING ITS PRODUCTION BASE.
* SYNERGIES
THE ACQUISITION IS EXPECTED TO DELIVER SUBSTANTIAL SYNERGIES AS A RESULT OF THE
EXCELLENT FIT OUTLINED ABOVE. THESE INCLUDE SYNERGIES RESULTING FROM ACCESS TO
TECHNOLOGY, IMPROVED MARKETING ACCESS FOR SASOL'S DETERGENT ALCOHOLS, SOLVENTS
AND OTHER PRODUCTS, OPTIMISATION OF LOGISTICS, MARKETING AND DISTRIBUTION
CHANNELS AND CORPORATE SERVICES. SASOL ALSO EXPECTS SIGNIFICANT COST REDUCTION
TO BE ACHIEVED THROUGH EFFICIENCY IMPROVEMENTS AT CONDEA.
THESE SYNERGIES AMOUNT TO APPROXIMATELY EURO 150 MILLION (NET PRESENT VALUE).
THE EFFECT ON SASOL'S EARNINGS IS EXPECTED TO BE POSITIVE IN FINANCIAL YEAR
2002/2003.
* PRODUCT DIVERSIFICATION
THE EXPANSION OF SASOL'S CHEMICAL PORTFOLIO PROVIDES FOR A HEDGE AGAINST OIL
PRICE MOVEMENTS.
* GROWTH IN FOREIGN DERIVED INCOME
THE ACQUISITION WILL SUBSTANTIALLY INCREASE SASOL'S FOREIGN DERIVED INCOME FROM
10% TO APPROXIMATELY 35%, PROVIDING GEOGRAPHIC DIVERSIFICATION OF INCOME.
* DIVERSIFICATION OF TECHNOLOGIES AND FEEDSTOCK
4.   SALIENT TERMS OF THE ACQUISITION
4.1   THE EFFECTIVE DATE FOR THE ACQUISITION OF THE SHARES IN CONDEA VISTA
COMPANY, CONDEA AUGUSTA SPA, CONDEA SERVO B.V. AND CONDEA NANJING CHEMICAL
COMPANY LIMITED AS WELL AS THE SHARES IN THE MARKETING SUBSIDIARIES AND CONDEA
HUNTSMAN GMBH AND CO KG IS 1 JULY 2000. THE EFFECTIVE DATE FOR THE ACQUISITION
OF CONDEA'S GERMAN CHEMICAL ASSETS AND BUSINESS WILL BE THE CLOSING DATE;
4.2   THE CLOSING DATE WILL BE THE LAST DAY OF THE MONTH DURING WHICH THE
CONDITIONS PRECEDENT, WHICH ARE SET OUT BELOW, ARE FULFILLED, PROVIDED SUCH
CONDITIONS ARE FULFILLED PRIOR TO THE 20TH DAY OF THE MONTH. SHOULD THE
CONDITIONS PRECEDENT NOT BE FULFILLED BY THE 20TH DAY OF THE MONTH, THE CLOSING
DATE WILL BE THE LAST DAY OF THE FOLLOWING MONTH;
4.3   THE PURCHASE CONSIDERATION AMOUNTS TO EURO 1 295 MILLION ("THE PURCHASE
CONSIDERATION"), BASED ON A NET EQUITY OF EURO 1 105,3 MILLION. AN ADDITIONAL
PAYMENT OR REFUND WILL BE MADE SHOULD THE NET EQUITY AT THE CLOSING DATE AMOUNT
TO MORE THAN EURO 1 115, 3 MILLION OR LESS THAN EURO 1 095,3 MILLION.
4.4   THE PURCHASE CONSIDERATION WILL BE PAID IN CASH ON THE CLOSING DATE.
4.5   APPROPRIATE WARRANTIES NORMALLY CONTAINED IN AGREEMENTS OF THIS NATURE,
ARE CONTAINED IN THE AGREEMENT.
5.   FINANCING
THE ACQUISITION WILL INITIALLY BE FINANCED WITH SASOL'S OWN CASH RESOURCES AND
FOREIGN BANK DEBT. THE BANK DEBT WILL BE REPLACED WITH APPROPRIATE LONGER TERM
FINANCE, TAKING INTO ACCOUNT THE FUNDING REQUIREMENTS OF THE SASOL GROUP.
6.   FINANCIAL EFFECTS
THE TABLE BELOW SETS OUT THE PRO FORMA EFFECTS OF THE ACQUISITION ON THE
EARNINGS AND NET WORTH PER SASOL ORDINARY SHARE BASED UPON THE FOLLOWING
ASSUMPTIONS:
* THE EFFECT ON EARNINGS IS BASED ON THE ASSUMPTION THAT THE ACQUISITION WAS
EFFECTIVE FOR THE 12 MONTHS ENDED 25 JUNE 2000 AND THE EFFECT ON NET WORTH ON
THE ASSUMPTION THAT THE ACQUISITION WAS IMPLEMENTED ON 25 JUNE 2000;
* INTEREST PAID ON FOREIGN BORROWINGS AT 8% PER ANNUM (BEFORE TAX) (90% OF THE
PURCHASE CONSIDERATION);
* INTEREST LOST ON RSA CASH UTILISED AT 10,76% PER ANNUM (BEFORE TAX) (10% OF
THE PURCHASE CONSIDERATION); AND
* THE AVERAGE EXCHANGE RATE USED FOR THE YEAR ENDED 25 JUNE 2000 WAS EURO =
ZAR6,35.
                             BEFORE     AFTER     CHANGE
                             (CENTS)    (CENTS)   (%)
NET WORTH PER
ORDINARY SHARE AT
25 JUNE 2000                 2 873      2 873     -
DILUTED EARNINGS
PER ORDINARY SHARE ("EPS")   615        598       (2,8)
DILUTED HEADLINE EPS         674        675       0,1
GOING FORWARD, THE ACQUISITION IS EXPECTED TO DILUTE EPS FOR THE FIRST TWO
YEARS, AFTER WHICH THE ACQUISITION IS EXPECTED TO INCREASE EPS AS ILLUSTRATED
IN THE TABLE BELOW:
FINANCIAL YEAR               00/01      1/2         02/03    03/04
PERCENTAGE CHANGE IN DILUTED
EPS AS A RESULT OF THE
ACQUISITION (%)              (3,0)      -         2,0      4,5
THE PRESENT HIGH OIL PRICE ADVERSELY IMPACTS THE RESULTS OF CONDEA FOR THE
2000/2001 FINANCIAL YEAR.
7.  CONDITIONS PRECEDENT
THE ACQUISITION IS SUBJECT TO THE FULFILMENT, BY 31 DECEMBER 2001 OR ANY
EXTENSION OF THAT DATE AS MAY BE AGREED TO BETWEEN SASOL AND RWE-DEA, OF THE
FOLLOWING CONDITIONS PRECEDENT:
7.1   THE ISSUANCE BY THE EU-COMMISSION OF A CLEARANCE CERTIFICATE RELATING TO
COMPETITION MATTERS, OR THE APPLICABLE WAITING PERIOD FOR SUCH CLEARANCE
CERTIFICATE LAPSING;
7.2   ANY APPLICABLE WAITING PERIODS UNDER THE USA HART-SCOTT-RODINO ANTI-TRUST
IMPROVEMENTS ACT LAPSING OR BEING TERMINATED WITHOUT ANY ORDER PROHIBITING THE
ACQUISITION;
7.3   NO ENFORCEABLE JUDGEMENT, INJUNCTION, ORDER OR DECREE BY ANY COURT OR
GOVERNMENTAL AUTHORITY IN GERMANY, ITALY OR THE USA PROHIBITING THE FINAL
CONSUMMATION OF THE ACQUISITION;
7.4   THE REPRESENTATIONS AND WARRANTIES OF RWE-DEA CONTAINED IN THE AGREEMENT
NOT BEING BREACHED, BETWEEN 8 DECEMBER 2000 AND THE CLOSING DATE, IN A MANNER
WHICH WOULD REASONABLY BE EXPECTED TO RESULT IN SASOL INVOKING ITS
INDEMNIFICATION CLAIMS UNDER THE AGREEMENT FOR MORE THAN THE AGREED AMOUNT;
7.5   THE WORKS COUNCIL OF CONDEA SERVO B.V., AFTER HAVING BEEN GIVEN THE
OPPORTUNITY TO TENDER ADVICE WITH RESPECT TO THE ACQUISITION, ISSUING A
POSITIVE STATEMENT THERETO OR ONE MONTH LAPSING FROM THE TIME IT IS INFORMED OF
THE DECISION RELATING TO THE ACQUISITION WITHOUT AN APPEAL TO THE APPROPRIATE
FORUM;
7.6   WAIVERS TO CERTAIN PRE-EMPTIVE RIGHTS IN RESPECT OF CERTAIN SITES BEING
OBTAINED;
7.7   THIRD PARTIES TO CERTAIN AGREEMENTS APPROVING THE TRANSFER OF SUCH
AGREEMENTS TO SASOL;
7.8   SASOL OBTAINING FORMAL APPROVAL FROM THE SOUTH AFRICAN RESERVE BANK TO
CONSUMMATE THE ACQUISITION; AND
7.9   RWE-DEA'S SUPERVISORY BOARD APPROVING THE CONSUMMATION OF THE ACQUISITION
8.   CIRCULAR TO SHAREHOLDERS
A CIRCULAR, PROVIDING SHAREHOLDERS WITH FULL DETAILS OF THE ACQUISITION, WILL
BE POSTED TO SASOL SHAREHOLDERS WITHIN 28 DAYS OF THIS ANNOUNCEMENT.
9.   TELEPHONE CONFERENCE
A TELEPHONE CONFERENCE CALL FOR EUROPEAN AND NORTH AMERICAN ANALYSTS AND FUND
MANAGERS HOSTED BY MR PV COX, MANAGING DIRECTOR AND CEO OF SASOL, WILL BE HELD
AT 15:00 UK TIME TODAY (11 DECEMBER 2000). THE NUMBER TO DIAL IN THE UK IS +44
(020) 8400 6356, FOR THE USA TOLL FREE (1800) 218 0713, AND YOU SHOULD ASK TO
BE CONNECTED TO THE SASOL CONFERENCE CALL. THE PRESENTATION TO ANALYSTS BY
MESSRS PV COX AND R HAVENSTEIN CAN BE VIEWED ON THE SASOL WEB-SITE
WWW.SASOL.COM AFTER 10:00 SOUTH AFRICAN TIME (08:00 UK TIME) TODAY.
JOHANNESBURG
11 DECEMBER 2000
MERCHANT BANK AND
SOUTH AFRICAN CORPORATE ADVISERS TO SASOL
  INVESTEC CORPORATE FINANCE
  INVESTEC BANK LIMITED
  (REGISTRATION NUMBER 1969/004763/06)
SPONSORING BROKER
  INVESTEC SECURITIES LIMITED
  MEMBER OF THE JOHANNESBURG STOCK EXCHANGE
  REGISTRATION NO. 1972/008905/06
SOUTH AFRICAN CORPORATE LAW ADVISERS TO SASOL
  EDWARD NATHAN & FRIEDLAND (PTY) LTD
  (REGISTRATION NUMBER 1999/026464/07)
INTERNATIONAL CORPORATE ADVISERS TO SASOL
  CREDIT SUISSE
  FIRST BOSTON
INTERNATIONAL LEGAL ADVISERS TO SASOL
  LINKLATTERS & ALLIANCE
  FULBRIGHT & JAWORSKI L.L.P.
REGISTERED ACCOUNTANTS AND AUDITORS
  KPMG
  REGISTERED CHARTERED ACCOUNTANTS (SA)
INTERNATIONAL ENVIRONMENTAL ADVISERS TO SASOL
  PILKO & ASSOCIATES, INC.



                                        
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