REG - RHI Magnesita N.V. - Acquisition of Dalmia Bharat Refractories Limited

RHI Magnesita NVAnnouncement

21/11/2022 07:00

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RNS Number : 9870G  RHI Magnesita N.V.  21 November 2022

21 November 2022

 

RHI Magnesita N.V.

("RHI Magnesita" or "the Group")

 

Acquisition of Dalmia Bharat Refractories Limited via Share Swap Agreement

 

RHI Magnesita announces the acquisition of the Indian refractory business of
Dalmia Bharat Refractories Limited ("DBRL") via a Share Swap Agreement, in
exchange for 27 million shares in RHI Magnesita India Limited, a 70% owned
subsidiary of the Group which is listed on the Bombay Stock Exchange and
National Stock Exchange of India.

Dalmia Bharat Refractories

DBRL is one of the leading refractory producers in India with approximately
1,200 employees and production capacity of over 300 ktpa, from five refractory
plants and raw material sites. DBRL recorded adjusted EBITDA of ₹945 million
(€12 million) in the year to 31 March 2022 and had Gross Assets of ₹13,925
million (€170 million) at 31 March 2022.

Benefits of the Acquisition

The Acquisition will enable the Group to increase its presence in the high
growth Indian refractory market, with forecast steel production growth in
India of 12% in 2022 and a 7-8% CAGR until 2030. The production footprint (5
plants) and product offering of DBRL is highly complementary to the Group's
existing plant locations (4 plants) and product range with focus in the
industrial segment, where RHI Magnesita is currently under-represented.
Significant network benefits and margin improvement potential have been
identified through the addition of production capacity in important industrial
locations in the south and west of India, where the Group currently has no
assets.

Acquisition details

Under the terms of the Share Swap Agreement, RHI Magnesita India Limited will
acquire all outstanding shares in DOCL in exchange for 27 million new shares
in RHI Magnesita India Limited. Based on the closing share price of RHI
Magnesita India Limited on 18 November 2022 of ₹645.35 per share, the
Consideration Shares had a value of approximately ₹17,424 million (€212
million).

The Group will consolidate DOCL's earnings and approximately €54 million of
net debt held by DOCL through its majority shareholding in RHI Magnesita India
Limited, resulting in a marginal increase in gearing at Group level. The
Acquisition is expected to be accretive to Group earnings per share. Following
completion of the Acquisition and the issuance of the Consideration Shares,
the Group's shareholding in RHI Magnesita India Limited will reduce from its
current level of 70.2% to 60.1% and the Dalmia Bharat Group and minority
shareholders in DBRL will hold a combined 14.4% stake in RHI Magnesita India
Limited.

The Acquisition, which is conditional on the completion of the Business
Transfer Agreement and Share Swap Agreement and other customary closing
conditions, is expected to complete in Q1 2023.

Trading outlook

Following the Q3 trading update announced on 19 September 2022, there has been
a slippage of some orders towards the end of the fourth quarter and some
weakening in the 2023 order book, in particular in Europe and east and
southeast Asia. As a result of this change in the expected timing of shipments
and associated customer payments, there is a risk that the Group may not
achieve its target to reduce Net Debt:EBITDA by the 2022 year end to 2.4x,
although a reduction from the 2.7x recorded at 30 June 2022 is still
anticipated. The Group remains comfortably on track to meet consensus
expectations for EBITA in 2022.

 

Commenting on the Acquisition, Stefan Borgas, Chief Executive, said: "I am
very pleased to announce this highly value creating acquisition which will
accelerate our development in the fast-growing Indian refractory market. It is
another step in the execution of our Group strategy. We see material financial
and operational benefits from the addition of the Dalmia Bharat Refractories
business to our existing network, which will enable us to increasingly serve
our customers with a 'local for local' approach in India and offer a broader
range of products, in particular in the Industrial segment, in which RHI
Magnesita is currently under-represented. This transaction demonstrates our
ability to continue to grow our business in India where the outlook for the
refractory industry is strong, at a time when demand in other geographies is
weakening."

Parmod Sagar, CEO and Managing Director of RHI Magnesita India, said: "As a
trusted and reliable business partner, the integration of the Dalmia Bharat
Refractories business into our network will underline our position as the
leading player in the Indian refractory market. This transaction represents a
strong commitment from the senior management of RHI Magnesita N.V. to continue
strengthening the Group's operations in India and to further expand our
footprint in the region."

Commenting on the transaction, Sameer Nagpal, Managing Director & CEO of
DBRL said: "We were able to scale up the business over the last few years on
the back of product breadth and service capabilities, establishing ourselves
as a reliable Indian player. For the next phase of growth of this business it
is imperative to have access to technology which RHI Magnesita, being a global
leader, brings to the table. We believe our business can be optimally utilised
to serve Indian customers by becoming a part of RHI Magnesita's network."

 

RHI Magnesita retained Deloitte Touche Tohmatsu India LLP as diligence advisor
and Khaitan & Khaitan as legal advisors. DBRL was advised by Arpwood
Capital as M&A advisor and Talwar Thakore & Associates as legal
advisors.

A conference call with analysts will be hosted at 8:15am UK time on Monday 21
November 2022 to discuss the Acquisition:

 

 Dial in (listen only)          UK 020 3936 2999

                                Austria 0800 802 898

                                International +44 20 3936 2999
 Access code (listen only)      223157
 Webcast and playback facility  LINK
                                (https://protect-de.mimecast.com/s/i4amCgpR60Hgj2RQFNO6V6?domain=investis-live.com)

 

For further enquiries, please contact:

Chris Bucknall, Head of Investor Relations

Tel +43 699 1870 6490

E‐mail: chris.bucknall@rhimagnesita.com

 

Hudson Sandler

Tel +44 20 7796 4133

E-mail: rhimagnesita@hudsonsandler.com

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (596/2014/EU).

 

About RHI Magnesita

RHI Magnesita is the leading global supplier of high‐grade refractory
products, systems and solutions which are critical for high‐temperature
processes exceeding 1,200°C in a wide range of industries, including steel,
cement, non‐ferrous metals and glass. With a vertically integrated value
chain, from raw materials to refractory products and full performance‐based
solutions, RHI Magnesita serves customers around the world, with around 13,500
employees in 29 main production sites and more than 70 sales offices. RHI
Magnesita intends to build on its leadership in revenue, scale, product
portfolio and diversified geographic presence to expand further in high growth
markets.

The Group maintains a premium listing on the Official list of the London Stock
Exchange (symbol: RHIM LN) and is a constituent of the FTSE 250 index, with a
secondary listing on the Vienna Stock Exchange (Wiener Börse). For more
information please visit: www.rhimagnesita.com

 

About RHI Magnesita India Limited

RHI Magnesita India Limited is a leading India-based supplier of high-grade
refractory products, systems and solutions to the India and West Asia region,
which are indispensable for industrial high-temperature processes exceeding
1,200°C in a wide range of industries including steel, cement, non-ferrous
metals and glass. RHI Magnesita India Limited is listed on the Bombay Stock
Exchange (stock code: 534076) and National Stock Exchange of India (symbol:
RHIM NS) with ISIN INE743M01012. For more information please visit:
www.rhimagnesitaindia.com

 

About Dalmia Bharat Refractories Limited

Established in 1954, Dalmia Bharat Refractories Limited (previously Shri
Nataraj Ceramics and Chemical Industries Ltd.) is a leading India-based
producer of high alumina refractory bricks for the Indian cement industry.
DBRL provides a complete line of services including refractory design and
layout for greenfield projects, refractory application and maintenance. DBRL
offers end-to-end refractory products, solutions and services to customers in
over 40 countries and is one of the oldest and leading suppliers of
refractories to cement plants in India and the Middle East and North Africa
region.

 

Definitions

 "₹" and "€"                                      Indian Rupee and Euro. All currency conversions in this announcement have been
                                                  made at an exchange rate of 82
 "Acquisition"                                    The acquisition by RHI Magnesita India Limited of the refractory business of
                                                  Dalmia Bharat Refractories Limited via a Share Swap Agreement with DOCL, in
                                                  exchange for 27 million shares in RHI Magnesita India Limited
 "Business Transfer Agreement"                    Agreement dated 19 November 2022 between DBRL and DOCL for the transfer of the
                                                  Indian refractory business of DBRL into DOCL
 "CAGR"                                           Compound annual growth rate
 "Consideration Shares"                           27,000,000 new shares in RHI Magnesita India Limited to be issued to Dalmia
                                                  Bharat Group pursuant to the Share Swap Agreement
 "Dalmia Bharat Refractories" or "DBRL"           Dalmia Bharat Refractories Limited, a refractory business based in India which
                                                  is a 75% owned subsidiary of the Dalmia Bharat Group
 "DOCL"                                           Dalmia OCL Limited, a limited company incorporated in India. The Indian
                                                  refractory business of DBRL will be transferred into DOCL under the terms of
                                                  the Business Transfer Agreement, prior to the acquisition of DOCL by RHI
                                                  Magnesita India Limited
 "ktpa"                                           Kilotonnes per annum
 "RHI Magnesita" or "the Company" or "the Group"  RHI Magnesita N.V. and its subsidiary companies
 "Share Swap Agreement"                           Agreement dated 19 November 2022 between RHI Magnesita India Limited and DOCL
                                                  for the acquisition by RHI Magnesita India Limited of all outstanding shares
                                                  in DOCL in exchange for the Consideration Shares

Forward looking statements

This announcement contains (or may contain) certain forward-looking statements
with respect to certain of the Company's current expectations and projections
about future events. These statements, which sometimes use words such as
"aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and
words of similar meaning, reflect the directors' beliefs and expectations and
involve a number of risks, uncertainties and assumptions which could cause
actual results and performance to differ materially from any expected future
results or performance expressed or implied by the forward-looking statement.
Statements contained in this announcement regarding past trends or activities
should not be taken as a representation that such trends or activities will
continue in the future. The information contained in this announcement is
subject to change without notice and, except as required by applicable law,
the Company does not assume any responsibility or obligation to update
publicly or review any of the forward-looking statements contained in it and
nor does it intend to. You should not place undue reliance on forward looking
statements, which apply only as of the date of this announcement. No statement
in this announcement is or is intended to be a profit forecast or profit
estimate or to imply that the earnings of the Company for the current or
future financial years will necessarily match or exceed the historical or
published earnings of the Company. As a result of these risks, uncertainties
and assumptions, the recipient should not place undue reliance on these
forward-looking statements as a prediction of actual results or otherwise. The
Company has no obligation or undertaking to update or revise the
forward-looking statements contained in this announcement to reflect any
change in its expectations or any change in events, conditions, or
circumstances on which such statements are based unless required to do so by
applicable regulations.

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