Acquisition of increased interest in South American joint venture
02/09/2004
Charter announces that it has today increased its indirect shareholding in its South American welding and cutting joint venture (the “Joint Venture”) from 41.7 per cent to 51.0 per cent. The Joint Venture operates under the Esab, Conarco and Electrodos brands.
The transaction involves Charter’s wholly owned subsidiary, Exelvia Holdings BV (“Exelvia”) and one of its existing Joint Venture partners, Mercoweld S.A. (“Mercoweld”), between them acquiring the entire Joint Venture interests of their two other partners, Prateleira Trading S.A. and Ponta Do Sol Comercio e Investimentos S.A. (the “Sellers”).
Due to a complex ownership structure, the transaction was effected in two parts: the acquisition by Exelvia of all the Sellers’ indirect interest in the Joint Venture (the “Acquisition”) and the sale by two of Exelvia’s subsidiaries of an increased interest in the Joint Venture to Mercoweld (the “Sell-down”). The two parts of the transaction were completed simultaneously and on an interconditional basis.
The overall result of today’s transaction is that Charter’s indirect shareholding in the Joint Venture has increased from 41.7 per cent to 51.0 per cent and Mercoweld’s shareholding has increased from 38.0 per cent to 49.0 per cent.
The total purchase price for the acquisition of the Sellers’ interests is US$9.0 million. Under the terms of the agreement, the purchase price payable by Exelvia is limited to US$4.12 million, of which US$1.37 million is payable immediately with the balance of US$2.75 million (plus interest at the rate of LIBOR plus two per cent) in instalments, the last of which is in September 2007. The purchase price is subject to downward adjustment in certain circumstances. Consideration payable by Exelvia will be settled in cash from existing resources.
The balance of US$4.88 million is payable by Mercoweld directly to the Sellers (in satisfaction of the consideration payable for the Sell-down) on the same instalment basis.
A number of amendments to the Joint Venture shareholders’ arrangements have also been agreed, principally regarding operational matters and termination arrangements.
As holders of more than 10 per cent of the voting rights in Charter subsidiaries, the Sellers and Mercoweld are each related parties of Charter and the Acquisition and the Sell-down therefore constitute related party transactions under the Listing Rules of the UK Listing Authority. The board of Charter, having been so advised by its financial advisers, Bridgewell Limited, consider that the terms of the Acquisition, the Sell-down and the transaction as a whole are fair and reasonable so far as Charter shareholders are concerned. In providing its advice to the Company, Bridgewell Limited has taken into account the board’s commercial assessment of the Acquisition, the Sell-down and the transaction as a whole.
David Gawler, Chairman and Chief Executive, commenting on the transaction said: “I am pleased to announce this transaction which has taken some time to negotiate. It considerably simplifies the ownership, management and operations of our South American welding and cutting business. We look forward to continuing our strong relationship with Mercoweld who have been excellent local joint venture partners in South America.”
Contact
Andrew Fenwick; Pamela Small, Brunswick +44 (0) 7404 5959
Giles Elliott; Nick Lovering, Bridgewell Limited +44 (0) 7003 3000
Bridgewell Limited, which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Charter plc in connection with the Acquisition, the Sell- down and the transaction as a whole and for no one else and will not be responsible to anyone other than Charter plc for providing the protections afforded to clients of Bridgewell Limited nor for providing advice in relation to the Acquisition, the Sell-down and the transaction as a whole. No one other than Charter plc and its shareholders may rely on the opinion of Bridgewell Limited referred to above, which opinion is given to Charter plc solely for the purposes of chapter 11 of the Listing Rules.