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Disposal of the Schirm Business
Imperial Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1946/021048/06)
ISIN: ZAE000067211
Share code: IPL
(“Imperial” or “Company” or “Group”)
DISPOSAL OF THE SCHIRM BUSINESS
Introduction
Shareholders are advised that Imperial, through its wholly owned
subsidiary Imperial Chemical Logistics GmbH (“ICL”), has reached
agreement with AECI Limited (“AECI”) to dispose of the Group’s total
interest in and claims against Schirm Gmbh and related assets
(“Schirm”) for a cash consideration of EUR110.5 million (“Purchase
Consideration”), in line with the invested capital of the business
(“the Transaction”) as at 30 June 2017 (“Effective Date”).
In terms of the Transaction, ICL will retain the customer warehousing,
transportation and distribution services on the sites on which Schirm
operates. Related to the Transaction, for a period of one year from
the closing date, Schirm GmbH retains an option to acquire four
warehouses at the Schirm plant in Schönebeck for a maximum purchase
consideration limited to EUR9.0 million. Furthermore, ICL has entered
into an ancillary agreement with AECI to lease warehouse capacity at
the Wolfenbuettel site to meet Schirm’s finished goods storage
requirements, in terms of which AECI will make a pre-payment of EUR3.5
million.
Overview of Schirm
Schirm, headquartered in Germany and active mainly in Europe, became
part of the Group in 2011 through the acquisition of Lehnkering.
Schirm is an established contract chemical manufacturer which provides
an integrated service across the entire value chain of synthesis,
formulation and packaging of agrochemicals and fine chemicals.
Agrochemical products include herbicides, fungicides and insecticides
while the fine chemicals portfolio comprises raw materials for the
biocides, personal and home care, adhesives and rubber industries.
Schirm is the leading provider of formulation services for
agrochemicals in Europe and its services include:
• Synthesis: raw materials from suppliers or customers are converted
to chemical products and either sold to customers or utilised by
Schirm in formulation processes;
• Formulation: Schirm uses products from its synthesis process and/or
products from customers and sells formulations in bulk to those
customers; and
• Packaging and labelling of liquid and solid chemical products in
all packaging sizes.
Rationale for the Transaction
Imperial Logistics has established capabilities in transportation,
warehousing, distribution and synchronization management, and
international freight management, which capability is being
expanded. The specialisation and capital requirements of chemical
contract manufacturing are not aligned with Imperial Logistics’
capabilities and stated objective of reducing capital intensity.
Moreover, there are limited operational or financial synergies between
chemical contract manufacturing and Imperial Logistics’ other
operations. As a result, Imperial has decided to divest from Schirm.
Imperial Logistics will continue to provide warehousing,
transportation and distribution services to the Schirm operations,
adding to its valued relationship with AECI, and further enhance its
value-add logistics and supply chain management solutions to the
broader chemical industry in all the regions in which Imperial
Logistics operates.
Purchase Consideration
The Purchase Consideration for the Transaction has been structured on
a “locked-box” mechanism basis from the Effective Date, subject to a
separate trade working capital adjustment mechanism on the closing
date.
The Purchase Consideration will be settled in cash upon fulfillment
of the conditions precedent. The proceeds from the Transaction will
be re-invested in the expansion of the Group’s core businesses in due
course, while initially reducing short term debt.
Financial Information
The net asset value of Schirm including goodwill that is the subject
of the Transaction at a Group level was EUR55.4 million on the
Effective Date. Including group loans of EUR55.9 million, the invested
capital on the Effective Date amounted to EUR111.3 million.
Schirm generated revenue of EUR115.6 million, EBIT of EUR9.7 million
and profit after tax of EUR5.2 million for the year ended 30 June
2017. Adjusted for allocation of Group costs and amortization of
intangibles, the EBIT was EUR8.9 million and profit after tax of
EUR1.3 million at Group level.
Conditions Precedent
Finalisation of the Transaction is subject to fulfilment or waiver,
as the case may be of the following conditions precedent:
• approval by the German Federal Cartel Office, Germany’s national
competition regulator;
• the German Federal Ministry of Economics and Energy issuing a
clearance certificate for the Transaction;
• approval by the Financial Surveillance department of the South
African Reserve Bank;
• registration of the review of a first ranking priority notice in
respect of the transfer of the ownership of the Wolfenbüttel
Property in favour of Schirm GmbH; and
• the municipal authority waiving its statutory rights of pre-emption
(or issuing a certificate of non-applicability) relating to the
Wolfenbüttel Property.
Transaction Categorisation
The Transaction is classified as a Category 2 transaction for Imperial
in terms of the Listings requirements of the JSE Limited.
Bedfordview
8 November 2017
JSE Sponsor:
Merrill Lynch South Africa (Pty) Limited
Corporate advisors:
Rothschild & Co
Legal advisors:
Taylor Wessing
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