RHI Magnesita proposes merger of Indian subsidiaries

The Boards of Directors of Orient Refractories Ltd, RHI India Private Ltd and RHI Clasil Private Ltd, at their respective meetings held on Tuesday this week, approved the proposal to merge RHI India and RHI Clasil with Orient Refractories, pursuant to a composite scheme of amalgamation. 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.

Orient Refractories manufactures and supplies 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 and manufactures and supplies mainly Alumina based refractories for steel and cement.

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 programme aims to reach 300 million t of steel production by 2030, triple the output of 2016.

The proposed merger is intended 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 millon (€154 million) (on a FY18 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.
• Realise business efficiencies by bundling product offerings, leveraging sales/ distribution networks and optimising the utilisation 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:
- 7044 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 1000 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.

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 organisation 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.”

Read the article online at: https://www.worldcement.com/indian-subcontinent/02082018/rhi-magnesita-proposes-merger-of-indian-subsidiaries/