RHI Magnesita N.V. Proposed merger of Indian subsidiaries

TIDMRHIM

RHI Magnesita N.V.

01 August 2018

RHI Magnesita: proposed merger of Indian subsidiaries

RHI India and RHI Clasil to merge with Indian listed Orient Refractories

 
      --   Simplification of corporate structure and consolidation 
            of RHI Magnesita's operating entities to better capture 
            growth potential in the Indian market and enhance shareholder 
            value 
      --   On completion of the merger, RHI Magnesita will own 
            approximately [70%] in Orient Refractories which will 
            be renamed RHI Magnesita India 
      --   Combined company in India will have pro-forma operating 
            revenues of approximately 
            EUR154 million, two production facilities and more 
            than 700 employees 
 

Vienna, August 01, 2018 - RHI Magnesita, the leading global supplier of high-grade refractory products, systems and services, has today announced the proposed merger of its three Indian subsidiaries. The merger is designed to optimally position RHI Magnesita's operations in the strategically important Indian market to capture growth opportunities more effectively and efficiently.

The Boards of Directors of Orient Refractories Limited ("Orient Refractories"), RHI India Private Limited ("RHI India") and RHI Clasil Private Limited ("RHI Clasil"), at their respective meetings held this Tuesday, approved the proposal to merge RHI India and RHI Clasil with Orient Refractories, pursuant to a composite scheme of amalgamation (the "Scheme"). Orient Refractories is listed on the Mumbai stock exchange. On completion, RHI Magnesita will own approximately [70%] in Orient Refractories which will be renamed RHI Magnesita India. The transaction is expected to be completed in the next 9-12 months.

RHI Magnesita's three Indian operating entities to be merged

Orient Refractories is currently 70% owned [by RHI Magnesita] and a leading manufacturer and supplier of special refractory products, systems and services for the steel industry. RHI India, a wholly-owned RHI Magnesita subsidiary, is the Indian sales company of RHI Magnesita group offering a full range of refractories and related services sourced from various RHI Magnesita group entities to Indian customers. RHI Clasil, is 53.7% owned [by RHI Magnesita], is a manufacturer and supplier of mainly Alumina based refractories for steel and cement.

The key objective of the proposed Scheme is to combine the strengths and competencies of all three companies to establish one consolidated listed company that is well positioned to seize future growth opportunities and enhance shareholder value.

One strong local organization to tap growth potential in the strategically important Indian market

This merger is part of RHI Magnesita's strategic pillar "markets" which focuses on building a global presence with strong local organizations and solid market positions. India's growth prospects in the refractory market derive primarily from the steel sector, which is by far RHI Magnesita's largest customer industry (74% of 2017 pro-forma revenues). India became the third largest steel producer in the world after a decade of solid growth and an ambitious government program aims to reach 300m tons of steel production by 2030, triple the output of 2016. With one strong and integrated local organization, the industry's most comprehensive product portfolio and proven supply and sales capabilities RHI Magnesita India will be optimally positioned to leverage the positive local market developments in India.

Key Benefits

The proposed merger is expected to:

-- Simplify the corporate structure and consolidate RHI Magnesita's operating entities in India by creating a leading manufacturer and supplier of refractories with operating revenues of Rs. [12,356] mn (EUR154 million) (on a FY 2018 pro-forma basis), two production facilities and more than 700 employees

-- Establish the industry's most comprehensive product portfolio including, among others, Magnesia and Alumina based bricks and mixes for large industrial clients as well as specialty refractory products, with proven supply and sales capabilities

-- Realize business efficiencies by bundling product offerings, leveraging sales/ distribution networks and optimizing the utilization of resources due to pooling of management, expertise, technologies and other resources

-- Improve the allocation of capital and enhance cash flows contributing to the overall growth prospects of the combined company

   --      Create a larger asset base and facilitate access to better financial resources 
   --      Enhance shareholder value as a result of economies of scale and business efficiencies 

Key Highlights of the Scheme

-- Equity shares of Orient Refractories will be issued to the shareholders of RHI India and RHI Clasil as consideration for the merger in the following ratios, as approved by the Board of Directors:

- 7,044 equity shares of Orient Refractories (of face value of Re. 1 each) for every 100 equity shares of RHI India (of face value of Rs. 10 each); and

- 908 equity shares of Orient Refractories (of face value of Re. 1 each) for every 1,000 equity shares of RHI Clasil (of face value of Rs. 10 each).

-- Post the Scheme, the shareholding of RHI Magnesita, through Dutch US Holding B.V. and other group companies, in the combined company is likely to be around [70%]. Furthermore, around [5%] of the shareholding will be held by certain individual shareholders of RHI Clasil who are not part of the RHI Magnesita group.

-- The Scheme will be subject to approvals from various relevant regulatory authorities including approvals from the stock exchanges, shareholders and creditors of the respective companies, the National Company Law Tribunal (NCLT) in India and necessary corporate approvals and filings with the registrar of companies and the stock exchanges.

   --      The transaction is expected to be completed in the next 9-12 months 

Mr. Stefan Borgas, CEO of RHI Magnesita, said: "The proposed merger of our Indian subsidiaries marks an important milestone towards expanding RHI Magnesita's market leadership in the refractory market in India. One strong, integrated organization and management will increase long term value for all stakeholders and efficiently combine resources and capabilities. This merger will significantly enhance the profile of RHI Magnesita in India and creates a stronger foundation to tap the immense growth potential we see in the Indian market."

About RHI Magnesita

RHI Magnesita is the leading global supplier of high-grade refractory products, systems and services which are indispensable for industrial high-temperature processes exceeding 1,200degC in a wide range of industries, including steel, cement, non-ferrous metals, and glass, among others. With a vertically integrated value chain, from raw materials to refractory products and full performance-based solutions, RHI Magnesita serves more than 10,000 customers in nearly all countries around the world.

With more than 14,000 employees in 35 main production sites and more than 70 sales offices, the company has unmatched geographic diversification. RHI Magnesita intends to use its global leadership in revenue, greater scale, complementary product portfolio and diversified geographic presence to target markets and regions benefitting from more dynamic economic growth prospects.

The combined company generated pro forma EUR2.7 billion in revenues in the financial year 2017. For further information please visit www.rhimagnesita.com.

Enquiries:

RHI Magnesita N.V.

Stefan Rathausky, Senior VP Corporate Communications

Tel [phone]

E-mail: [e-mail]

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August 01, 2018 02:01 ET (06:01 GMT)