Hill & Smith Regulatory News (HILS)

1 Mar 2007 08:21

Hill & Smith Hldgs PLC01 March 2007 Proposed Acquisition of a controlling interest in Zinkinvent GmbH (the"Acquisition") Introduction The board of Hill & Smith Holdings PLC ("Hill & Smith" or the "Group") announcesthat it has entered into a conditional agreement (the "Acquisition Agreement")to purchase up to a further 34.9% shareholding in its associated company,Zinkinvent GmbH ("Zinkinvent") for €26.0 million. Hill & Smith has also agreed to vary the agreements which govern the terms ofits existing investment in Zinkinvent and its relationship with the othershareholders of Zinkinvent, with the result that its existing 33.3% shareholdingin Zinkinvent is no longer subject to re-purchase by the other shareholders inZinkinvent. As a result of these agreements, and on the basis that the Acquisition Agreementbecomes unconditional, Zinkinvent will become a subsidiary undertaking of Hill &Smith. In view of its size, the Acquisition constitutes a Class 1 transaction for thepurposes of the Listing Rules. Completion of the Acquisition is thereforeconditional on approval by the shareholders of Hill & Smith and is also subjectto any applicable regulatory clearances being obtained. A circular will be sentto shareholders in due course, setting out full details of the Acquisition andconvening an Extraordinary General Meeting at which shareholder approval for theAcquisition will be sought. Background to and reasons for the Acquisition In May 2005 Hill & Smith acquired 33.3% of Zinkinvent's issued share capital ata cost of €25.0 million. Since then it has had representation on the boards ofZinkinvent and its principal subsidiary Vista NV ("Vista") and has carried outextensive due diligence investigations into Zinkinvent and its subsidiaries.Through Hill & Smith's representation on the board of Vista, a number of changeshave been implemented which have led to an improvement in its underlyingperformance. As part of its original investment, Hill & Smith also advanced a €10.0 millioninterest bearing loan to Zinkinvent. It has now been agreed that this loan willbe repaid in three equal annual instalments commencing in January 2008. Information on Zinkinvent Zinkinvent is a German holding company currently owned by the Schweitzer familyand its associates (34.9%), Hill & Smith (33.3%) and other shareholders (31.8%).Zinkinvent is the holding company of a group whose principal asset is the entireissued share capital of Vista. During 2006 a number of minority interests were bought out. Zinkinvent increasedits shareholding in Vista from 86% to 100% and Vista increased its shareholdingin its USA operations from 52% to 90%. Hill & Smith's direct ownership of Vistaand its operating subsidiaries therefore increased during 2006. Vista is a Belgian group with operations in Benelux, France and the UnitedStates of America in the hot dip galvanizing and lighting column markets. Thequality of its operations has benefited from a focus on technical innovation. Special purpose consolidated accounts of Zinkinvent will be prepared forinclusion in the circular to be sent to shareholders, based on theunconsolidated accounts of Zinkinvent and the consolidated accounts of Vista. Inthe latest available draft unaudited special purpose consolidated accounts ofZinkinvent (adjusted to reflect International Financial Reporting Standards andHill & Smith's accounting policies) profit before taxation for the year ended 31December 2006 was €23.6 million. The directors of Hill & Smith expect to show a share of associate company aftertax earnings of £3.2 million attributable to Zinkinvent within Hill & Smith'sresults for the year ended 31 December 2006. The same draft unaudited special purpose consolidated accounts show gross assetsat 31 December 2006 of €230.6 million and external borrowings of €85.0 million . Principal terms of the Acquisition Under the terms of the Acquisition Agreement, Hill & Smith has conditionallyagreed to purchase the 34.9 % holding of Zinkinvent shares owned by theSchweitzer family and its associates (the "Sale Shares") for an aggregate cashconsideration of €26.0 million. Under the terms of the existing shareholder agreements, the Sale Shares have tobe offered to all other Zinkinvent shareholders pro rata to their existingholdings. Subject to the take up by the other shareholders of their pro rata entitlementof the Sale Shares, Hill & Smith's resultant shareholding in Zinkinvent afterthe Acquisition will range between 51.2% and 68.2%, with the associated cashconsideration ranging between €13.3 million and €26.0 million. UnderZinkinvent's Articles of Association, a simple majority of voting rights issufficient to exercise management control over Zinkinvent. The cash consideration will become payable following approval of the Acquisitionby Hill & Smith shareholders at the Extraordinary General Meeting. In order to allow the position regarding the intentions of other Zinkinventshareholders to be clarified, and to complete the audit of Zinkinvent's andVista's accounts for the year ended 31 December 2006, it is expected that thecircular to shareholders will not be posted until April 2007. Following completion of the Acquisition, Hill & Smith anticipates that theexisting senior management of Vista will remain in place. Financial effects of the Acquisition The Directors of Hill & Smith are confident that the Acquisition will beearnings enhancing for the enlarged Hill & Smith group in the current financialyear and in future years. This should not, however, be interpreted to mean thatthe earnings of Hill & Smith for the current year or in future years willnecessarily be greater than those for any preceding financial period. Current trading and prospects Hill & Smith will be providing a full update on its current trading on 6 March2007 when it announces its preliminary results for the year ended 31 December2006. Commenting on the Acquisition, Hill & Smith's Chief Executive, David Grove,said: "The partnership between Hill & Smith and Zinkinvent has been very valuable tous, both commercially and financially, since we made our original investmentjust under two years ago. Our initial expectations of the benefits of thatinvestment have been exceeded. The full integration of Zinkinvent within the Group will open the way to furtherdevelopment in terms of both new markets and new opportunities." Further information: David Grove, Group Chief ExecutiveHill & Smith Holdings PLCTel: 0121 704 7430 Chris HardieArden Partners plcTel: 020 7398 1630 Edward Carter / Anna McNeilFreshwater UKTel: 0121 633 7775 End 1 March 2007 This information is provided by RNS The company news service from the London Stock Exchange