RNS Number:1060S
Hill & Smith Hldgs PLC
01 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") announces
that 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 of
its existing investment in Zinkinvent and its relationship with the other
shareholders of Zinkinvent, with the result that its existing 33.3% shareholding
in Zinkinvent is no longer subject to re-purchase by the other shareholders in
Zinkinvent.
As a result of these agreements, and on the basis that the Acquisition Agreement
becomes unconditional, Zinkinvent will become a subsidiary undertaking of Hill &
Smith.
In view of its size, the Acquisition constitutes a Class 1 transaction for the
purposes of the Listing Rules. Completion of the Acquisition is therefore
conditional on approval by the shareholders of Hill & Smith and is also subject
to any applicable regulatory clearances being obtained. A circular will be sent
to shareholders in due course, setting out full details of the Acquisition and
convening an Extraordinary General Meeting at which shareholder approval for the
Acquisition will be sought.
Background to and reasons for the Acquisition
In May 2005 Hill & Smith acquired 33.3% of Zinkinvent's issued share capital at
a cost of 25.0 million. Since then it has had representation on the boards of
Zinkinvent and its principal subsidiary Vista NV ("Vista") and has carried out
extensive due diligence investigations into Zinkinvent and its subsidiaries.
Through Hill & Smith's representation on the board of Vista, a number of changes
have been implemented which have led to an improvement in its underlying
performance.
As part of its original investment, Hill & Smith also advanced a 10.0 million
interest bearing loan to Zinkinvent. It has now been agreed that this loan will
be repaid in three equal annual instalments commencing in January 2008.
Information on Zinkinvent
Zinkinvent is a German holding company currently owned by the Schweitzer family
and 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 entire
issued share capital of Vista.
During 2006 a number of minority interests were bought out. Zinkinvent increased
its shareholding in Vista from 86% to 100% and Vista increased its shareholding
in its USA operations from 52% to 90%. Hill & Smith's direct ownership of Vista
and its operating subsidiaries therefore increased during 2006.
Vista is a Belgian group with operations in Benelux, France and the United
States of America in the hot dip galvanizing and lighting column markets. The
quality of its operations has benefited from a focus on technical innovation.
Special purpose consolidated accounts of Zinkinvent will be prepared for
inclusion in the circular to be sent to shareholders, based on the
unconsolidated accounts of Zinkinvent and the consolidated accounts of Vista. In
the latest available draft unaudited special purpose consolidated accounts of
Zinkinvent (adjusted to reflect International Financial Reporting Standards and
Hill & Smith's accounting policies) profit before taxation for the year ended 31
December 2006 was 23.6 million.
The directors of Hill & Smith expect to show a share of associate company after
tax earnings of 3.2 million attributable to Zinkinvent within Hill & Smith's
results for the year ended 31 December 2006.
The same draft unaudited special purpose consolidated accounts show gross assets
at 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 conditionally
agreed to purchase the 34.9 % holding of Zinkinvent shares owned by the
Schweitzer family and its associates (the "Sale Shares") for an aggregate cash
consideration of 26.0 million.
Under the terms of the existing shareholder agreements, the Sale Shares have to
be offered to all other Zinkinvent shareholders pro rata to their existing
holdings.
Subject to the take up by the other shareholders of their pro rata entitlement
of the Sale Shares, Hill & Smith's resultant shareholding in Zinkinvent after
the Acquisition will range between 51.2% and 68.2%, with the associated cash
consideration ranging between 13.3 million and 26.0 million. Under
Zinkinvent's Articles of Association, a simple majority of voting rights is
sufficient to exercise management control over Zinkinvent.
The cash consideration will become payable following approval of the Acquisition
by Hill & Smith shareholders at the Extraordinary General Meeting.
In order to allow the position regarding the intentions of other Zinkinvent
shareholders to be clarified, and to complete the audit of Zinkinvent's and
Vista's accounts for the year ended 31 December 2006, it is expected that the
circular to shareholders will not be posted until April 2007.
Following completion of the Acquisition, Hill & Smith anticipates that the
existing senior management of Vista will remain in place.
Financial effects of the Acquisition
The Directors of Hill & Smith are confident that the Acquisition will be
earnings enhancing for the enlarged Hill & Smith group in the current financial
year and in future years. This should not, however, be interpreted to mean that
the earnings of Hill & Smith for the current year or in future years will
necessarily 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 March
2007 when it announces its preliminary results for the year ended 31 December
2006.
Commenting on the Acquisition, Hill & Smith's Chief Executive, David Grove,
said:
"The partnership between Hill & Smith and Zinkinvent has been very valuable to
us, both commercially and financially, since we made our original investment
just under two years ago. Our initial expectations of the benefits of that
investment have been exceeded.
The full integration of Zinkinvent within the Group will open the way to further
development in terms of both new markets and new opportunities."
Further information:
David Grove, Group Chief Executive
Hill & Smith Holdings PLC
Tel: 0121 704 7430
Chris Hardie
Arden Partners plc
Tel: 020 7398 1630
Edward Carter / Anna McNeil
Freshwater UK
Tel: 0121 633 7775
End 1 March 2007
This information is provided by RNS
The company news service from the London Stock Exchange
END
