| Tue 22 Apr 2008, 10:07 | | HVL - Highveld - Announcement relating to the disp |
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HVL
HVL
HVL - Highveld - Announcement relating to the disposal of certain vertically
integrated vanadium assets of highveld
Highveld Steel and Vanadium Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1960/001900/06)
JSE share code: HVL
ISIN: ZAE000003422
("Highveld" or "the Corporation")
ANNOUNCEMENT RELATING TO THE DISPOSAL OF CERTAIN VERTICALLY INTEGRATED VANADIUM
ASSETS OF HIGHVELD
INTRODUCTION
In a circular dated 19 June 2007, Highveld shareholders were advised that Evraz
Group S.A. ("Evraz") was obliged to procure the disposal of certain vertically
integrated vanadium assets of Highveld ("the disposal") as a condition to the
approval, by the European Commission, of the acquisition of a majority interest
in the Corporation by Evraz. Shareholders were also cautioned on the uncertainty
inherently attendant on the disposal in relation to the offer extended by Evraz
to the minority shareholders of Highveld.
Shareholders were further advised, in Highveld`s interim report for the six
months to June 2007, and in announcements dated 21 November 2007, and 21 January
2008, that the disposal process was ongoing and that the European Commission had
finally extended its deadline for the conclusion of the disposal to 20 April
2008. As 20 April 2008 was a Sunday, the European Commission confirmed that the
deadline was effectively 21 April 2008.
Pursuant to a competitive tender process, and after extensive efforts to procure
a suitable purchaser, Highveld has now entered into definitive agreements with
Vanchem Vanadium Products (Proprietary) Limited ("VVP"), a special purpose
company controlled by Duferco Investment Partners Inc, a Swiss incorporated
company, in relation to the disposal.
THE VERTICALLY INTEGRATED VANADIUM ASSETS
In terms of the definitive agreements, Highveld will dispose of:
a) A ordinary shares in the issued share capital of Mapochs Mine (Proprietary)
Limited ("Mapochs Newco"), a special purpose company that has been
incorporated by Highveld for purposes of acquiring and holding the
Corporation`s Mapochs Mine;
b) the Corporation`s Vanchem operations ("Vanchem"); and
c) the Corporation`s 50% shareholding in South Africa Japan Vanadium
(Proprietary) Limited ("SAJV").
The Mapochs Mine is presently a wholly-owned, unincorporated and independently
managed division of Highveld. It produces lumpy titaniferous magnetite ore,
which is supplied exclusively to Highveld`s steelworks, and fines ore, which is
used by the Corporation`s Vanchem operations in the production of a variety of
vanadium products. In order to facilitate the disposal, the Mapochs Mine will be
transferred into Mapochs Newco in an internal restructuring.
Vanchem is also a wholly-owned, unincorporated and independently managed
division of Highveld, which has, pursuant to the aforementioned approval of the
European Commission, been held separately from Highveld, and managed by a Hold
Separate Manager appointed for that purpose by Highveld. These operations
comprise the Vanchem facility, located in Ferrobank, eMalahleni, and a
ferrovanadium smelter located within Highveld`s steelworks. Vanchem produces
ferrovanadium, vanadium pentoxide and a range of vanadium chemicals, which are
sold to third party customers in South Africa and internationally, as well as to
SAJV.
SAJV is an incorporated joint venture between Highveld, Mitsui & Co. Limited and
Nippon Denko Co, which converts vanadium pentoxide purchased from Highveld into
ferrovanadium in a facility that is also located in Highveld`s steelworks.
SAJV`s products are sold into the Japanese market.
SALIENT FEATURES OF THE DEFINITIVE AGREEMENTS
In terms of the disposal, VVP will acquire, from Highveld:
- the A ordinary shares in Mapochs Newco;.
- the Vanchem business as a going concern; and
- Highveld`s entire shareholding in SAJV.
VVP will acquire the above interests for an aggregate consideration of US$160
million, which will be discharged by the immediate payment of US$100 million in
cash, and by the purchaser`s commitment to undertake specific environmental
projects in relation to Vanchem.
The rights attached to the A ordinary shares are limited to rights required to
enable VVP to protect its rights under the fines ore supply agreement, namely to
veto decisions which otherwise would effectively cause Highveld and/or Mapochs
Newco to breach the supply agreements referred to below. The A ordinary shares
carry no entitlement to dividends or obligations to contribute to the capital
expansion and other financial requirements of the mine.
Highveld has given VVP warranties that are ordinarily given in respect of a
transaction in the nature of the disposal. Highveld has agreed to retain
specific historical environmental liabilities associated with the abovementioned
interests. In the event that VVP is unable to operate Vanchem in certain
circumstances beyond the control of the parties, to make a termination payment
to VVP.
In addition, Highveld has entered into supply agreements with VVP for the supply
of fines ore from the Mapochs Mine, which cannot be used by Highveld in its
steelworks, and for the supply of vanadium-bearing slag, which is produced by
Highveld as a by-product of steel, both at market-related prices. The agreements
will remain in force for as long as ore is produced from the Mapochs Mine, which
is expected to be a minimum of 8 years.
Highveld has also entered into further ancillary agreements which are required
to give effect to the disposal, including leases of certain immovable property
on which some of Vanchem`s assets are situated, and agreements for the provision
of administrative services during a brief transitional period.
CONDITIONS
The implementation of the disposal, by means of the abovementioned definitive
agreements, which are interrelated and interdependent, is subject to the
following conditions:
a) the acquisition of Vanchem and of the A ordinary shares in Mapochs Newco
are subject to the approval of the European Commission, the South African
competition authorities, the South African Reserve Bank and the JSE
Limited;
b) in addition to the abovementioned conditions, the acquisition of Highveld`s
shares in SAJV is subject to the consent of the other shareholders of that
company; and
c) the ultimate transfer of the Mapochs Mine into Mapochs Newco (but not the
disposal itself), is subject to the conversion of the old order rights
which Highveld holds in relation to the mine, and the consent of the
Minister of Minerals and Energy for the transfer thereof.
The effective date of the disposal will be the last day of the calendar month in
which the conditions in a) and b) above are fulfilled.
RATIONALE AND APPLICATION OF PROCEEDS
The disposal is consequent upon the regulatory requirements relating to Evraz`s
acquisition of control of Highveld. The board of Highveld considers the
continued support of the holding company, Evraz, with its prominent position in
the international steel industry, to be in the best interests of Highveld.
Possible uses of the proceeds will be considered by the board in due course and,
until such time, the proceeds will be invested.
PRO FORMA FINANCIAL EFFECTS
The table below sets out the pro forma financial effects of the disposal on the
Corporation`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 audited results for the financial year ended 31 December
2007. The pro forma financial effects have been prepared for illustrative
purposes only, and, because of their nature, may not give a true reflection of
the Corporation`s financial position, changes in equity, results in operations
or cash flows. The pro forma financial effects are the responsibility of the
Corporation`s directors.
Results as Results Percentage
published(cents) adjusted for change
the impact of %
the disposal
(cents)
EPS 1 919.4 1 933.4 0.72
HEPS 1 456.8 1 391.3 (4.70)
NAV 3 408.0 3 530.7 3.47
TNAV 3 052.0 3 473.5 12.14
Note:
1. The profit attributable to the net assets subject to the transaction
were as follows:
R`0002005 R`0002006 R`0002007
Headline earnings 984 318 289 421 322 388
Attributable earnings 969 844 289 421 322 388
2. The pro forma financial effects were calculated based on 99 148 750
weighted average ordinary shares in issue as at 31 December 2007
3. EPS and HEPS impact assumes an effective date of 31 December 2007,
whilst NAV and TNAV impact assumes an effective date of 1 January 2007
4. The pro forma financial effects assume that the proceeds from the
disposal were invested at 9 percent per annum
22 April 2008
eMalahleni
Investment bank and transaction advisor
The Standard Bank of South Africa Limited
Sponsor
JP Morgan
Corporate Law Advisors
Tabacks
Date: 22/04/2008 10:07:31 Produced by the JSE SENS Department.
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