Last checked at 17 Jul 2007 12:06
AECI LIMITED
Incorporated in the Republic of South Africa
(Registration No. 1924/002590/06)
Share code: AFE
ISIN No. ZAE000000220
AECI LIMITED: SALE OF BUSINESS
AECI Limited ("AECI" or "the Company") has agreed to sell its decorative coatings business, trading as Dulux, to ICI plc ("ICI") for a cash consideration of R745 million. The sale includes the South African operations as well as the subsidiaries in Botswana, Malawi, Namibia, Swaziland and Zambia. Subject to the fulfillment of the conditions precedent as set out below, it is expected that the transaction will take effect from 1 October 2007, when a gain on disposal of some R500 million will be recognised by AECI. The proceeds will be used to fund the Company's major capital projects and potential acquisitions.
Rationale
AECI's strategic focus is increasingly on the supply of specialty products and services based on chemistry to customers in the mining and manufacturing sectors in Africa and elsewhere, with an emphasis on technical support and application know how. The Dulux business, which targets primarily the retail consumer market, is not well aligned with this strategy.
ICI operates a leading international decorative coatings business which owns the Dulux brand outside of Southern Africa and Australia. ICI's global expertise in marketing, technology and procurement, amongst other capabilities, is expected to accelerate the profitable growth of the regional Dulux business and to bring significant benefit to its people.
Conditions precedent
The sale of the South African business is subject to the following conditions:
*the unconditional approval of the Exchange Control division of the Reserve Bank of South Africa, for the implementation of the sale of the South African business in accordance with the terms of the Sale of Business Agreement; and
*the unconditional approval of the competition authorities in terms of the Competition Act for the sale of the South African business in accordance with the Sale of Business Agreement;
The sale of the subsidiaries is subject to the following conditions:
*the sale of the South African business becoming unconditional; and
*all government and other forms of regulatory approval being complied with in the applicable jurisdictions.
Financial effects
Set out in the table below are the pro forma financial effects of the transaction on the Company's earnings per share ("EPS"), headline earnings per share ("HEPS"), net asset value per share ("NAV") and tangible net asset value per share ("TNAV") , based on the annual results for the year ended 31 December 2006, had the transaction been implemented as at 1 January 2006 for income statement purposes and on 31 December 2006 for balance sheet purposes.
The pro forma financial effects have been prepared for illustrative purposesonly and, because of their nature, may not give a true reflection of theCompany's financial position, changes in equity, results of operations or cashflows. The pro forma financial effects are the responsibility of the Company'sdirectors. Results as Results adjusted for Percentage published the impact of the change disposal of Dulux (cents) (cents) (%) EPS (see notes 1 and 2) 829 1 296 56 HEPS (see notes 1 and 853 846 -1 2) NAV (see note 3) 3 255 3 672 13 TNAV (see note 3) 2 333 2 749 18 Notes:
1. Dulux assumed to be sold for R745 million effective 1 January 2006 and the proceeds used to reduce AECI borrowings.
2. Interest rate on AECI borrowings assumed to average 7.7 per cent during 2006.
3. Dulux assumed to be sold for R745 million effective 31 December 2006.
4. Based on the number of shares in issue throughout 2006, being 110 431 458 shares excluding treasury shares held.
Sandton
17 July 2007
Sponsor: J.P.Morgan Equities Limited
AECI LTD