| Tue 12 Oct 2004, 13:31 | | AVI RESTRUCTURES |
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AVI - AVI RESTRUCTURES TO FOCUS ON BRANDED CONSUMER PRODUCTS AND SERVICES
AVI LIMITED
(Incorporated in the Republic of South Africa)
(`AVI` or `the Group`)
(Registration number 1944/017201/06)
Share code: AVI
ISIN: ZAE000049433
AVI RESTRUCTURES TO FOCUS ON BRANDED CONSUMER PRODUCTS AND SERVICES
1 INTRODUCTION AND RATIONALE
AVI`s strategy, since the reorganisation of the old Anglovaal Industries
group in 1999, has been to focus on branded consumer products and services.
The Group has however continued to manage material assets that were part of
the Group historically, but are not directly aligned to the current
strategy. These are Consol Limited (`Consol`), South Africa`s leading glass
packaging company, and what is now Vector Logistics (Proprietary) Limited
(`Vector`), a leading third party distribution and logistics business. Both
Consol and Vector were substantially restructured by AVI in the years
following 1999 and have become profitable market leaders in their
respective categories.
The AVI board has determined that, having established sound fiscal and
market positions for both Consol and Vector, it is an opportune time to
fully align the Group`s portfolio to the branded consumer products and
services strategy.
Accordingly, subject to the necessary regulatory and shareholder approvals,
AVI:
- has concluded the purchase of Owens-Illinois, Inc.`s (`O-I`) 19.3%
minority stake in Consol;
- has resolved to effect the unbundling and listing of Consol on the JSE
Securities Exchange South Africa (`the JSE`) by March 2005; and
- is currently in negotiations regarding the sale of Vector to Rainbow
Chicken Limited (`Rainbow`).
Details of these transactions are contained below.
1.1 VECTOR
AVI shareholders were advised in the results announcement for the year
ended 30 June 2004 that discussions had been entered into with Rainbow
regarding a possible sale of Vector (`the Vector disposal`).
Negotiations are nearing completion and shareholders will be advised
of the outcome of the negotiations once finalised.
1.2 CONSOL
Consol was delisted in January 1998. Following operational refocusing,
it has established market leadership in the Southern African glass
container market and in addition operates a profitable niche plastics
packaging portfolio.
O-I, the world`s largest producer of glass containers and a major
supplier of glass forming equipment and technology, has held an
interest in Consol since 1966. Recently O-I indicated to AVI that it
wished to divest from Consol. AVI has acquired O-I`s 19.3%
shareholding in Consol for a cash consideration of R525 million (`the
O-I purchase`). Consol`s long-standing technology agreement with O-I
has been restructured and will be extended until 2016, on more
favourable terms, ensuring Consol`s continued access to O-I`s
technology and know-how.
Details of the O-I purchase are set out in paragraph 2 of this
announcement.
Consol has built a strong operational and financial track record
outside of AVI`s branded consumer products and services strategy.
AVI`s board has concluded that the realisation of AVI`s stated
objectives will increasingly constrain the development of Consol and
that it is now opportune for Consol to operate independently of AVI.
Consol`s relative size, ongoing performance and future opportunities
are sufficiently developed for it to continue to prosper as a stand-
alone company. Consequently, it is intended, subject to regulatory and
shareholder approvals, to unbundle Consol and list it separately on
the JSE by March 2005. Given O-I`s intended exit, the O-I purchase
will remove the potential overhang in Consol`s shares that could
result post the listing.
1.3 CONCLUSION
Despite the reduction in AVI`s size, as a consequence of these
transactions, AVI`s board believes that this restructuring is
extremely positive for shareholders in that:
- AVI will attain its long-stated objective of becoming a focused
branded consumer products and services group with a leading
portfolio of brands that will support ongoing growth through
innovation and acquisition;
- the re-listing of Consol creates a substantial, focused,
packaging company with the financial strength to pursue an
independent long-term strategy; and
- shareholder choice is enhanced.
2 SALIENT TERMS OF THE O-I PURCHASE
The salient terms of the O-I purchase are set out below.
2.1 EFFECTIVE DATE
The effective date of the O-I purchase is 11 October 2004. The O-I
purchase is cum dividend in respect of the final dividend for the year
ended 30 June 2004, which is estimated at R19 million.
2.2 PURCHASE CONSIDERATION
In terms of the agreement concluded between AVI and O-I, AVI has
acquired O-I`s 19.3% equity interest in Consol for a cash
consideration of R525 million.
2.3 SOURCE OF FUNDS FOR THE O-I PURCHASE
The O-I purchase will be funded from AVI`s internal cash resources and
the proceeds of the Vector disposal once finalised.
2.4 FINANCIAL EFFECTS OF THE O-I PURCHASE
The table below sets out the pro forma financial effects of the O-I
purchase on the net asset value (`NAV`) and tangible net asset value
(`TNAV`) per AVI ordinary share and headline earnings per AVI ordinary
share (`HEPS`) and earnings per AVI ordinary share (`EPS`), based on
the Group`s audited results for the year ended 30 June 2004. These
financial effects have been prepared for illustrative purposes only,
to provide information about the financial position and results of AVI
assuming that the O-I purchase had been implemented on 30 June 2004
and 1 July 2003, respectively. Because of its nature, the pro forma
financial information may not give a fair reflection of AVI`s
financial position and results of operations subsequent to the O-I
purchase.
Pro forma
Before the after the Percentage
O-I purchase O-I purchase change
(cents) (cents)
NAV per AVI ordinary
share 1 007.4 (1) 1 007.4 (2) -
TNAV per AVI ordinary
share 942.4 (1) 874.9 (2) -7.2%
HEPS 186.2 (3) 197.4 (4) 6.0%
EPS 179.5 (3) 186.9 (4) 4.1%
Notes:
(1) The NAV and TNAV per AVI ordinary share, before the O-I purchase, have been
extracted from AVI`s audited financial statements for the year ended 30
June 2004 and calculated based on 309 981 206 AVI ordinary shares in issue
at 30 June 2004.
(2) The pro forma NAV and TNAV per AVI ordinary share, after the O-I purchase,
have been calculated based on 309 981 206 AVI ordinary shares in issue at
30 June 2004, assuming that the O-I purchase was implemented on 30 June
2004.
(3) The HEPS and EPS, before the O-I purchase, have been extracted from AVI`s
audited financial statements for the year ended 30 June 2004 and have been
calculated based on a weighted average of 315 809 761 AVI ordinary shares
in issue.
(4) The pro forma HEPS and EPS, after the O-I purchase, have been calculated
based on a weighted average of 315 809 761 AVI ordinary shares, assuming
that the O-I purchase was implemented on 1 July 2003 and that the cash used
to implement the O-I purchase had been invested at a pre-tax rate of
interest of 8.7% per annum with effect from 1 July 2003. The goodwill
arising on the O-I purchase has been assumed to be written off over 20
years.
Chislehurston
Sandton
12 October 2004
Investment bank and sponsor to AVI
Standard Bank
Attorneys to AVI
Tabacks
Enquiries:
AVI
Angus Band, Group Managing Director
Tel: +27 11 779 2703
Cell: + 27 82 990 4404
Robert Katzen, Group Financial Director
Tel: +27 11 779 2704
Cell: + 27 82 443 5922
Sam Denoon-Stevens, Investor Relations Officer
Tel: +27 11 779 2721
Cell: + 27 83 450 7654
