Go Back Email this Link to a friend


Omnia Holdings Limited - Announcement

Release Date: 05/06/2003 10:00:03      Code(s): OMN
OMNIA HOLDINGS LIMITED - ANNOUNCEMENT                                           
(Incorporated in the Republic of South Africa)                                  
(Registration number: 1967/003680/06)                                           
Share Code: OMN                                                                 
ISIN: ZAE000005153                                                              
("Omnia" or "the Group")                                                        
ACQUISITION BY OMNIA OF THE BUSINESSES OF PROCHEM (PROPRIETARY) LIMITED AND     
DURAVIN CHEMICALS (PROPRIETARY) LIMITED ("PROCHEM") AND FURTHER CAUTIONARY      
ANNOUNCEMENT                                                                    
1.   Introduction                                                               
Further to the cautionary announcement dated 13 May 2003, Omnia shareholders are
advised that on 3 June 2003, Omnia entered into an agreement with Prochem ("the 
agreement") to acquire the business, as a going concern, of Prochem ("the       
acquisition") for a cash consideration of R541 770 000 together with the        
assumption of an estimated R 76 million in interest bearing debt.               
2.   Background information                                                     
The purchase consideration of R 541 770 000 will be settled as follows:         
* R187 973 000 from Omnia"s existing cash resources;                            
* R35 631 625 by the issue of new Omnia shares, which shares will be distributed
to the existing Prochem management shareholders and the participants in the     
Prochem share trust.                                                            
* R300 000 000 via long-term debt raised from a consortium of banks; and        
* R18 165 375 from existing short term banking facilities.                      
3.   The acquisition                                                            
In terms of the agreement, Omnia will acquire the business assets and business  
liabilities of Prochem.  The shareholders of Prochem are Standard Corporate and 
Merchant Bank Capital Investments Division and Prochem management.              
4.   Effective date                                                             
The acquisition will become effective once all suspensive conditions have been  
fulfilled which is expected to be 1 September 2003.                             
5.   Rationale                                                                  
Omnia is a specialised manufacturer and distributor of chemicals, explosives and
fertilizer products.                                                            
Omnia has for many years given consideration to the best method of expanding its
chemical interests in South Africa. Although its industrial chemicals business  
has been steadily gaining momentum, it has lacked critical mass. Much of the    
business is concentrated on marketing chemicals produced or handled by the Group
to industrial chemical clients.                                                 
Omnia conducted a strategic evaluation process, which identified that the       
acquisition of a strong service-based chemical distribution business focused on 
the customer interface, would be the best method of expansion due to the        
immediate low-risk access it would provide to in-depth knowledge of chemical    
markets.  Prochem was identified as an entity that would provide Omnia with the 
desired means to fulfil its expansion plans.                                    
Prochem is the largest distributor and trader of chemicals in South Africa and  
the major distributor for a number of domestic and international companies, many
of them amongst the world"s leading chemical companies. Prochem has a diverse   
range of customers, products and suppliers, with no disproportionate            
contribution from any one customer or supplier.                                 
Prochem has a number of well-known brands in its stable, namely Protea          
Chemicals, Chempro, Montan Chemicals and Duravin Chemicals. Prochem also owns   
50% of a chemical distribution business in Zimbabwe.                            
Prochem brings with it a very experienced management team with a strong focus on
service and a reputation for rapid delivery. Prochem has developed an excellent 
and competitive national distribution infrastructure, with 12 points of presence
throughout South Africa.                                                        
Prochem has grown organically over its 40 years in existence and has invested in
warehousing, bulk storage, transportation, laboratories and its people. Prochem 
has consistently delivered strong results, with current turnover in excess of R 
1.5 billion, and compounded turnover growth over the last five years in excess  
of 20% per annum.                                                               
The acquisition will provide Omnia with a more diversified portfolio of         
businesses, with a better balance between the agricultural and chemical         
interests. Although Omnia has proven its ability to manage risk in the          
fertilizer industry despite the effects of weather phenomena like El Nino, the  
new balance will strengthen this ability further by continuing to reduce        
earnings and cash flow volatility and limiting weather-related risk.            
The acquisition establishes a new platform for growth for Omnia, bringing with  
it a host of synergistic benefits that will enhance Omnia"s business model of   
adding value to customers by leveraging its intellectual capital and technology.
It provides an established chemical distribution network across South Africa and
serves to strengthen Omnia"s interface with customers in this market.           
6.   Future prospects                                                           
The acquisition represents a carefully considered and decisive move to position 
the Group for sustainable profitable growth into the future. Although the       
acquisition is large relative to Omnia"s market capitalisation and will increase
debt levels in the short term, it substantially alters the profile of the Group 
and achieves a much improved balance across its interests, resulting in a lower 
relative exposure to Southern African agriculture.                              
Having paid in full for Prochem, but without receiving a full year"s worth of   
cash flow, Omnia"s gearing will increase to moderate levels by the end of the   
financial year to March 2004. However, with the strong cash flow generation of  
both Omnia and Prochem, the debt is expected to reduce quickly, aided by        
expected lower interest rates in the foreseeable future.                        
As a result of the critical mass the acquisition provides to Omnia"s industrial 
chemicals business, the Group is appropriately positioned to generate further   
opportunities in this area.                                                     
7.   Conditions precedent                                                       
The acquisition is conditional upon, inter alia, the following conditions       
precedent:                                                                      
- the approval of Omnia shareholders in general meeting;                        
- the granting of the requisite regulatory approvals, including the Competition 
Commission;                                                                     
- Omnia securing funding arrangements for payment of part of the purchase price 
to the reasonable satisfaction of the parties;                                  
- the approval of Prochem shareholders in general meeting;                      
- the acceptance by Omnia of the results of its due diligence investigation;    
- Omnia entering into service agreements with the key executives of Prochem.    
8.   Financial effects                                                          
As Omnia is expected to release its results for the year ended 31 March 2003 on 
or about 12 June 2003, the pro forma financial effects of the acquisition ("the 
pro forma financial effects") will be published simultaneously with those       
results.                                                                        
9.   Circular to shareholders                                                   
A circular containing full details of the transaction and convening a general   
meeting of shareholders to be held on or about 15 August 2003 will, subject to  
the approval of the JSE, be posted to shareholders on or about 31 July 2003.    
10.  Further cautionary announcement                                            
Omnia shareholders are advised to continue to exercise caution when dealing in  
their Omnia shares until such time as the pro forma financial effects have been 
published.                                                                      
Johannesburg                                                                    
5 June  2003                                                                    
Corporate adviser and sponsor    Legal adviser to Omnia                         
to Omnia Holdings Ltd            Holdings Ltd                                   
Barnard Jacobs Mellet Corporate  Goldman Judin Maisels Inc.                     
Finance                                                                         
(Pty) Limited                                                                   
                                 Due diligence investigation                    
Lead finance arranger to Omnia   PricewaterhouseCoopers Inc.                    
Holdings Ltd                                                                    
Standard Corporate and Merchant  Legal advisor to Prochem                       
Bank                             Cliffe Dekker                                  
Corporate adviser to Prochem                                                    
Standard Corporate and Merchant                                                 
Bank                                                                            
Capital Investments Division                                                    
Date: 05/06/2003 10:00:10 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             
                                                                                
                                                                                
                                                                                



                                        
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.