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Release Date: 12/09/2003 14:31:06      Code(s): AFE
SERVICES LIMITED ("CHEMSERVE")                                                  
AECI Limited                                                                    
(Incorporated in the Republic of South Africa)                                  
(Registration number 1924/002590/06)                                            
ISIN: ZAE000000220   Code: AFE                                                  
1.   INTRODUCTION                                                               
Further to the cautionary announcement published over SENS on Thursday, 4       
September 2003, it is announced that AECI has now made a firm offer (the        
"Offer") to acquire the entire issued share capital of Chemserve which it does  
not already own. AECI currently holds 74% of the issued share capital of        
Chemserve. It is intended that the Offer will be implemented by way of a scheme 
of arrangement in terms of section 311 of the Companies Act, (Act 61 of 1973) as
amended (the "Act"), between Chemserve and its shareholders (the "scheme") or,  
if the scheme fails as a result of the non-fulfilment of the conditions to which
it is subject, by means of a general offer in terms of section 440 et seq of the
Act (the "general offer").                                                      
Upon implementation of the Offer an application will be made to the JSE         
Securities Exchange, South Africa ("JSE") to terminate the listing of the entire
issued share capital of Chemserve on the JSE.                                   
2. RATIONALE FOR THE OFFER                                                      
In its 2001 Annual Report, AECI disclosed its long-term intent to acquire all   
the issued ordinary shares in Chemserve ("Chemserve shares").  This element of  
the AECI group"s transformation strategy was designed to create a single entity,
facilitate sharing of best practice between AECI businesses and, in particular, 
enable the rapid spread of the entrepreneurial and performance culture and style
of Chemserve throughout the AECI group.  Access to the underlying cash flows of 
Chemserve as opposed to dividends was also an important motivation.             
In addition, the relatively small free float and market capitalisation of       
Chemserve with consequent limited tradability of the Chemserve shares are       
considered to have impacted negatively on the market rating of Chemserve shares 
over many years.  In terms of the Offer, current shareholders in Chemserve will 
retain exposure to the company through their holding of more liquid and tradable
ordinary shares in AECI ("AECI shares") with the potential for a more           
appropriate rating of the underlying Chemserve business.  Any such potential re-
rating would clearly benefit all AECI shareholders.                             
3. TERMS OF THE OFFER                                                           
   3.1 The consideration payable in terms of the Offer                          
In terms of the Offer, AECI is proposing, subject to the fulfilment of the      
conditions precedent reflected in paragraph 3.2, a consideration equivalent to  
95 AECI shares for every 100 Chemserve shares held. This consideration will be  
in the form of:                                                                 
60 new AECI shares; plus                                                        
R 885.15 in cash, (equivalent to 35 AECI shares valued at the volume weighted   
average price for the 27 day trading period prior to 4 September 2003, being the
day on which AECI published the detailed cautionary announcement in relation to 
the Offer).                                                                     
In terms of the Offer a maximum amount of R200 million is expected to be paid,  
in cash, to Chemserve shareholders.                                             
The aggregate number of new AECI shares to be issued in terms of the Offer is   
expected to represent approximately 14% of the current AECI issued share        
capital. The AECI shares to be issued will rank pari passu in all respects with 
the existing ordinary shares in AECI.                                           
JPMorgan has confirmed to the Securities Regulation Panel ("SRP") that AECI has 
sufficient resources to discharge its obligations in terms of the Offer.        
   3.2 Conditions precedent                                                     
The Offer, if implemented by way of the scheme, is subject, inter alia, to
the fulfilment or where appropriate, waiver, of the following conditions        
     3.2.1 the approval, to the extent necessary, of any regulatory authorities 
having jurisdiction over AECI and Chemserve in respect of the Offer, including  
the SRP, the JSE and the Exchange Control Division of the South African Reserve 
     3.2.2 the JSE granting a listing of the new AECI shares to be issued as    
part consideration for the Offer;                                               
     3.2.3 the High Court of South Africa granting an order convening a meeting 
(the "scheme meeting") of shareholders of Chemserve at which such shareholders, 
excluding AECI ("scheme members") will consider and vote on the scheme;         
3.2.4 the scheme being approved at the scheme meeting by a majority         
representing not less than three fourths (75%) of the votes exercisable by the  
scheme members present and voting either in person or by proxy at the scheme    
3.2.5 the High Court sanctioning the scheme; and                            
    3.2.6 a certified copy of the Order of Court sanctioning the scheme having  
been lodged with, and registered by, the Registrar of Companies.                
3.3  Pro forma financial effects of the Offer                                   
The table below illustrates the pro forma effects of the Offer per AECI share   
for the twelve months ended 31 December 2002:                                   
                              Note  AECI     AECI     Increa                    
                              s     Before   After    se/                       
transac  transac  decrea                    
                                    tion     tion     se                        
          Attributable              257      231      -10                       
earnings per share  1                                                 
          Headline earnings         340      331      -3                        
          per share (cents)   1                                                 
Net asset value           2 222    2 242    1                         
          per share (cents)   2                                                 
          Net tangible asset        1 724    1 510    -12                       
          value per share     2                                                 
          Weighted average          93       107      15                        
          number of shares                                                      
          in issue - m                                                          
Number of shares          94       107      14                        
          in issue -m                                                           
     1. Attributable earnings per share and Headline earnings per share are     
based on the published audited income statement of AECI for the year ended 31   
December 2002 and the published audited income statement of Chemserve for the   
year ended 31 December 2002 as if the Offer was effective on 1 January 2002.    
     2. Net asset value per share and net tangible asset per share is based on  
the published audited consolidated balance sheet of AECI at 31 December 2002 and
on the assumption that the Offer was effective on 1 January 2002.               
     3. Assumptions:                                                            
         * Approximately 14 million AECI shares issued and R200 million cash    
paid as consideration in terms of the Offer;                                    
         * Goodwill amortised over 20 years. R76 million in goodwill (including 
R17 million arising on implementation of the Offer) reversed for the purpose of 
calculating headline earnings;                                                  
* Interest rate equal to 12.4% on the cash used to fund the cash       
portion of the consideration payable under the Offer;                           
         * All vested Chemserve share options exercised and resulting Chemserve 
shares acquired under the Offer.                                                
4. SHAREHOLDINGS IN CHEMSERVE                                                   
Shareholders holding approximately 65% of the issued share capital of Chemserve 
not held by AECI have, subject to client approval where necessary, given an     
irrevocable undertaking to vote in favour of the scheme or accept the general   
offer in respect of the Chemserve shares held by them at that time. Copies of   
the irrevocable undertakings are available for inspection at the registered     
office of AECI.                                                                 
5. ALTERNATIVE OFFER STRUCTURE                                                  
If the scheme fails as a result of the non-fulfilment of the conditions         
precedent to which it is subject, AECI will make the general offer to Chemserve 
shareholders. The consideration payable under the general offer will remain the 
same as that paid under the scheme and the general offer will be subject to the 
same conditions precedent reflected herein excluding those conditions precedent 
that are specifically applicable to the scheme. In addition, the general offer  
may be conditional on achieving a 90% acceptance level, which may be reduced or 
waived by AECI in its sole and absolute discretion.                             
6. DOCUMENTATION AND ANNOUNCEMENTS                                              
Documentation, which is subject to the approval of the SRP and the JSE, will be 
dispatched to shareholders of Chemserve as soon as practicable. Subject to the  
High Court granting leave to convene the scheme meeting, a further announcement 
will be published by AECI and Chemserve giving the salient dates of the scheme. 
The transaction represents a category 2 transaction for the AECI shareholders as
defined in the JSE Listings Requirements and a circular in this regard will be  
dispatched to AECI shareholders following implementation of the Offer.          
12 September 2003                                                               
Financial adviser to AECI                                                       
Sponsor to AECI                                                                 
Date: 12/09/2003 02:31:09 PM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             

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