05.10.2016,
18013 Zeichen
Corporate news transmitted by euro adhoc. The issuer/originator is solely
responsible for the content of this announcement.
Mergers - Acquisitions - Takeovers
§ RHI and the controlling shareholders of Magnesita, GP and Rhône ("Magnesita's
Controlling Shareholders"), have reached an agreement to combine the operations
of RHI and Magnesita to create a leading refractory company. The combined
company, to be named RHI Magnesita, will be established in the Netherlands and
listed in London
§ Accordingly, RHI's Management Board has agreed to sign a share purchase
agreement with Magnesita's Controlling Shareholders regarding the acquisition
of a controlling stake of at least 46%, but no more than 50% plus one share of
the entire share capital in Magnesita, pending RHI's Supervisory Board approval
§ The consideration for the 46% stake will consist of cash amounting to EUR 118
million and 4.6 million new shares to be issued by RHI Magnesita
§ A subsequent mandatory tender offer will be launched as a result of which a
maximum number of 5.4 million RHI Magnesita shares will be issued, bringing the
total number of newly issued RHI Magnesita shares to up to 10.0 million. The
Offer will also include a cash-only alternative amounting to EUR 8.19 per
Magnesita share
§ As a result of the Transaction, GP, Magnesita's largest shareholder, will
become a relevant shareholder of RHI Magnesita and will be represented on its
board of directors
§ Following registration of the corporate restructurings, RHI's shares will
cease to be listed on the Vienna Stock Exchange. RHI's migration from Austria
and listing in London are subject to approval by RHI's shareholders' meeting.
The Transaction is also subject to approvals by relevant competition
authorities. The place of effective management will be Austria
§ The Transaction is expected to complete in 2017. Both companies will remain
completely separate and independent until then
§ RHI Magnesita will be a leading refractory company with an enhanced growth
profile due to improved regional presence and complementary asset portfolios.
RHI, based in Austria, is a global supplier of high-grade refractory products,
with 2015 revenues of EUR 1,753 million Brazil-based Magnesita is a global
provider of integrated refractory solutions, services and industrial minerals,
with revenues of US$ 1,013 million (EUR 914 million) in 2015
Transaction Overview RHI AG ("RHI") and the controlling shareholders of
Magnesita Refratários S.A. ("Magnesita"), investment vehicles affiliated with
GP Investments ("GP") and Rhône Capital ("Rhône", and together with GP,
"Magnesita's Controlling Shareholders"), announce that they have reached an
agreement to combine the operations of RHI and Magnesita to create a leading
refractory company to be named RHI Magnesita.
Accordingly, RHI's Management Board has agreed to sign a share purchase
agreement ("SPA") with Magnesita's Controlling Shareholders regarding the
acquisition of a controlling stake of at least 46%, but no more than 50% plus
one share of the total share capital in Magnesita (the "Transaction"), pending
RHI's Supervisory Board approval. The purchase price for the 46% stake will be
paid in cash amounting to EUR 118 million and 4.6 million new shares to be
issued by RHI Magnesita, a new RHI entity to be established in the Netherlands
and listed in London. Based on RHI's six-month volume-weighted average price
("VWAP") of EUR 19.52, the implied value of the 46% stake amounts to EUR 208
million.
As a result of the Transaction, GP will become a relevant shareholder of RHI
Magnesita. The combined company's corporate governance will be constituted on a
one-tier board structure while GP will be represented on the board of
directors. All RHI Magnesita shares issued as a result of the Transaction and
subsequent mandatory tender offer will be subject to a minimum 12-month lock-up
period.
The resulting combination will be a leading refractory company. Refractories
are materials that retain their strength at high temperatures and are used in
various industrial processes in the steel, cement, nonferrous metals, glass and
chemicals industries. The combination will bring under one roof two
complementary businesses, both in terms of products and geographical footprint.
RHI, based in Austria, is a global supplier of high-grade refractory products,
with 2015 revenues of EUR 1,753 million and adjusted EBITDA of EUR 198 million.
Brazil-based Magnesita is a global provider of integrated refractory solutions,
services and industrial minerals, with revenues of US$ 1,013 million (EUR 914
million) and adjusted EBITDA of US$ 145 million (EUR 131 million) in 2015. (1)
The completion of the Transaction is amongst others subject to (i) approvals by
the relevant competition authorities, (ii) the migration of RHI to the
Netherlands, (iii) the listing of RHI Magnesita's shares in the premium segment
of the Official List on the Main Market of the London Stock Exchange and (iv)
RHI's shareholders not having exceeded statutory withdrawal rights in an amount
of more than EUR 70 million in connection with organizational changes preceding
RHI's migration from Austria. The migration and the preceding organizational
changes in Austria require qualified approval by RHI's shareholders' meeting.
If the Transaction is terminated for reasons not under the control of
Magnesita's Controlling Shareholders, an aggregate break fee of up to EUR 20
million is payable by RHI to Magnesita's Controlling Shareholders.
The migration of RHI to the Netherlands and the subsequent listing on the
London Stock Exchange have the objective of reinforcing and underlining the
truly international scope of the enlarged combined company, enhancing its
capital markets presence and maximizing value potential for the company's
shareholders. The migration of RHI will be effected by RHI Magnesita becoming
the ultimate holding company of RHI Group and the shareholders of RHI will
cease to hold shares in RHI and instead hold RHI Magnesita shares. Following
registration of the corporate restructurings, RHI's shares cease to be listed
on the Vienna Stock Exchange. The place of effective management of RHI
Magnesita will be Austria.
The Transaction is expected to complete in 2017. Until then, the two companies
will remain completely separate and independent. Therefore customers,
suppliers, employees and other stakeholders should expect no change in
management teams, commercial relationships, supply chains and product offerings
during this period.
Mandatory Tender Offer Following completion of the Transaction, a mandatory
tender offer will be launched by RHI Magnesita or one of its affiliates
("Offer") for the remaining shares in Magnesita. As part of the Offer, a
maximum number of 5.4 million RHI Magnesita shares will be issued, resulting in
an aggregate number of no more than 10.0 million newly issued shares to finance
the acquisition. The Offer will include the option to sell shares on the same
payment terms as the Transaction as well as a cash-only alternative amounting
to EUR 8.19 per Magnesita share (subject to certain adjustments according to
the SPA). If some or all of Magnesita's other shareholders elect not to receive
RHI Magnesita shares in the Offer, Magnesita's Controlling Shareholders have
committed to purchase additionally at least 1.9 million and at most 3.4 million
of the remaining new RHI Magnesita shares, thereby increasing their total
number of RHI Magnesita shares to a maximum of 8.0 million. RHI may decide to
combine the Offer with a delisting offer and/or a voluntary offer to exit
Magnesita from the "Novo Mercado" listing segment. The Offer will follow
applicable Brazilian laws and regulations. Any RHI Magnesita shares that are
not taken up in the Offer by Magnesita's shareholders may be either placed into
the market or with institutional investors.
Financial Terms of the Transaction Based on RHI's six-month VWAP of EUR 19.52,
the implied value for the entire share capital of Magnesita will be EUR 451
million, 45% above Magnesita's market capitalization as of October 4, 2016. (2)
The Transaction will be financed by additional debt and the issuance of 4.6
million RHI Magnesita shares to Magnesita's Controlling Shareholders. The
Transaction will increase RHI's current financial leverage, measured as net
debt to EBITDA, to 4.0x at closing of the Transaction when assuming an
acquisition of Magnesita's entire share capital. RHI expects, however, that
leverage will decline to below 2.0x by 2020 as a result of the strong cash
generation profile of the newly combined company. Magnesita will continue to
finance itself on a standalone basis without credit support from RHI Group.
Before or at completion of the Transaction, Magnesita is expected to adopt
RHI's accounting practices, which, according to RHI, could lead to significant,
however substantially non-cash adjustments in Magnesita's book equity value.
Enhanced Growth Profile and Global Footprint The combination of RHI and
Magnesita represents a unique opportunity to accelerate growth in certain
regions, resulting from the high complementary of the businesses both in terms
of geographic footprint and products.
Magnesita's presence in South America and the United States fits well with
RHI's presence in Europe and Asia. It results in strengthened geographic
clusters of the combined company by adding production facilities in several
markets in which RHI and Magnesita are lacking capacity on their own. This
combination will also strengthen the competitive position against the Chinese
refractory industry, which is expected to consolidate in the coming years as
announced by the Chinese government. Moreover, Magnesita's position in
dolomite-based products is highly complementary to RHI's asset portfolio, which
traditionally has a strong focus and an excellent market reputation for
high-quality magnesite products.
The combination of RHI and Magnesita will enable the combined company to offer
its customers an even broader product and service portfolio thereby delivering
enhanced value-add. Additional potential for value creation will be realized
through synergies and the implementation of common proven standards of
operational and commercial excellence.
Significant Value Creation and Synergy Potential The Transaction will result in
meaningful synergies in the following key areas, amongst others:
(i) a highly complementary offering of value-added products and services as a
result of the combination of both product portfolios;
(ii) a more efficient cost structure, benefitting from economies of scale in
important operational areas such as raw materials supply, freight,
marketing and administration, as well as an optimized operational set-up
leading to enhanced flexibility in production and an improved cost basis;
(iii) an optimized working capital structure, especially given Magnesita's
presence in the Americas, by means of improved inventory management and
related costs, resulting from the complementary regional footprint of RHI
and Magnesita's operations and customer base; and
(iv) a relevant reduction in capital expenditure requirements and maintenance
costs.
As a result of the Transaction, RHI expects minimum net run-rate synergies on
EBIT level of approx. EUR 36 million by 2020. However, RHI is optimistic that
as a result of the Offer, RHI Magnesita's stake in Magnesita will significantly
exceed 46%. In this case, RHI expects substantially higher synergies of approx.
EUR 72 million, especially in the areas of enhanced production efficiency and
cost benefits in research and development, marketing and administrative
functions. In addition, capital expenditure synergies are expected to amount to
between EUR 2 million and EUR 7 million annually, while aggregate working
capital savings of EUR 40 million are expected in the coming years.
Cash integration costs as a result of the Transaction are expected by RHI to be
of the magnitude of EUR 50 million to EUR 90 million, while non-cash
integration costs, effectively write-offs, should vary between EUR 20 million
and EUR 35 million, depending on the amount of Magnesita shares acquired
pursuant to the Transaction and subsequent Offer. Both cash and non-cash
integration costs will mainly crystallize in 2017 and 2018.
Increased Financial Targets As a result of the Transaction, RHI's mid-term
financial targets will surpass RHI's current targets. RHI expects the combined
company to generate fully consolidated revenues of EUR 2.6 billion to EUR 2.8
billion (previously EUR 2.0 to EUR 2.2 billion) with an operating EBIT margin
of more than 12% (previously more than 10%) by 2020. It projects a cumulative
operating cash flow of approx. EUR 1.1 billion for the period from 2017 to 2020
for the combined business, assuming an acquisition of Magnesita's entire share
capital.
RHI expects RHI Magnesita to pay stable dividends in 2017 and 2018, in line
with RHI's previous years' payment levels. In the mid- to long-term, however,
RHI Magnesita aims to increase its dividend payments, as a result of stronger
cash flow generation resulting from synergies, organic growth and de-leveraging
of the company's capital structure.
About RHI RHI is a globally operating supplier of high-grade refractory
products, systems and services, which are indispensable for industrial
high-temperature processes exceeding 1,200 °C. With approx. 7,900 employees,
over 30 production facilities and more than 70 sales offices, RHI serves more
than 10,000 customers in the steel, cement, nonferrous metals, glass, energy
and chemical industries in nearly all countries around the world. RHI produces
more than 1.5 million tons of refractory products p.a. and supplies customized
product and system solutions. The Company's shares are listed on the Vienna
Stock Exchange under the symbol RHI, with RHI being a member of the ATX index.
About Magnesita Magnesita is a Brazilian publicly traded company, dedicated to
mining, producing and marketing an extensive line of refractory and industrial
mineral materials. Its products are mainly used by the cement, glass, and steel
industries. Industrial activities began in 1940, soon after the discovery of
magnesite deposits in Brumado, in the Brazilian state of Bahia. Today, it
operates 26 industrial and mining units, sixteen in Brazil, three in Germany,
one in China, one in the United States, two in France, one in Belgium, one in
Taiwan and one in Argentina, with a refractory production capacity of more than
1.3 million tons per year. The company is a leader in refractories in the
Americas and in dolomite-based refractories worldwide, and its products were
sold to more than 100 countries in 2015. Its shares trade on the Novo Mercado
of BM&FBOVESPA in Brazil and through level 1 ADRs in the United States.
About GP Investments GP Investments is a leader in alternative investments in
Latin America. Since its inception, the company has raised approx. US$5.0
billion from international investors and has acquired 54 companies in 15
sectors. In May 2006, GP Investments concluded its initial public offering
(IPO), becoming the first listed private equity firm in Brazil.
About Rhône With 20 years of investing experience, Rhône, together with its
affiliates, is a global alternative asset management firm with a focus on
investments in market leading businesses with a pan-European or transatlantic
presence and expansion prospects. Currently investing capital from its fifth
private equity fund, Rhône has offices in London and New York and prior
investment experience in the business services, chemicals, consumer products,
food, packaging, security services, specialty materials and transportation
sectors.
(1) Magnesita net revenues and adjusted EBITDA converted at 2015 average
EUR/US$ exchange rate of 1.11. Magnesita EBITDA adjusted for other operating
income and expenses. RHI EBITDA adjusted for negative effects on earnings of
approx. EUR 58 million related to a necessary change in the measurement of
long-term energy supply contract.
(2) Assuming that 10 million RHI Magnesita shares will be issued
For further information please contact
RHI
Investor Relations / Simon Kuchelbacher
Phone +43 (0)50213-6676
E-mail: simon.kuchelbacher@rhi-ag.com
Media Relations / Randolf Fochler
Phone +43 (0)50213-6120
E-mail: randolf.fochler@rhi-ag.com
Magnesita CFO and Investor Relations Officer / Eduardo Gotilla
Phone +55 (11) 3152-3203
E-mail: ri@magnesita.com
GP Investments CFO and Investor Relations Officer / Alvaro Lopes
Phone +55 (11) 3556-5505
E-mail: ir@gp-investments.com
_
Disclaimer:
This document is for information purposes and shall not be treated as giving
any investment advice, financial analysis and/or recommendation whatsoever; it
does not constitute an offer or marketing of securities of RHI, nor a
prospectus. This press release contains forward-looking statements based on the
management's current views and certain presumptions and is subject to risks and
uncertainties; if those materialize, actual results may vary materially. Many
factors could cause our results of operations, financial condition, liquidity,
and the development of the industries in which we compete, to differ materially
from those expressed or implied by the forward-looking statements contained
herein. Subject to applicable securities law requirements, RHI does not intend
or assume any obligation to update or revise these forward-looking statements.
This document is addressed exclusively to persons legally entitled to receive
it and is in particular not addressed to U.S. persons or persons residing in,
Australia, Canada, Japan, Ireland or the United Kingdom; it may not be
distributed to the USA.
end of announcement euro adhoc
company: RHI AG
Wienerbergstrasse 9
A-1100 Wien
phone: +43 (0)50213-6676
FAX: +43 (0)50213-6130
mail: rhi@rhi-ag.com
WWW:
http://www.rhi-ag.com
sector: Refractories
ISIN: AT0000676903
indexes: ATX Prime, ATX
stockmarkets: official market: Wien
language: English
Digital press kit:
http://www.ots.at/pressemappe/1644/aom
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