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Evraz to Acquire up to 51% of China’s Delong Holdings
02/20/2008 - Evraz Group enters into share purchase agreement to acquire up to approximately 51% of the issued share capital of Delong Holdings Limited over an agreed period of time.
Evraz Group SA has entered into a share purchase agreement with Best Decade Holdings Limited and the Best Decade shareholders to acquire up to approximately 51% of the issued share capital of Delong Holdings Limited over an agreed period of time.
The share purchase agreement includes an initial sale to Evraz of approximately 10.0% of Delong’s issued share capital at S$3.9459 per share (the “Offer Price”).
Best Decade has also granted Evraz a call option to acquire an additional 32.08% of Delong’s issued share capital, conditional on the satisfaction of certain conditions. The call option is exercisable between the date of completion of the initial sale and ending after the date following 6 months immediately after February 18, 2008.
Evraz has granted Best Decade a put option with respect to 32.08 % of Delong’s issued share capital that is exercisable between the date immediately after completion of the initial sale and ending on the date falling six months immediately after February 18, 2008. Both the Call Option and the Put Option have a strike price equal to the Offer Price of S$3.9459.
In addition, the beneficial shareholders of Best Decade have signed an undertaking to sell an additional approximately 8.97% of Delong’s issued share capital to Evraz at the Offer Price when certain restrictions in place (due to existing financing arrangements) are released.
Following completion of these transactions, Evraz will control approximately 51.05% of the issued share capital of Delong. Following this transaction, Best Decade, which has a current interest in approximately 77.08% of Delong’s issued share capital, will retain an interest of approximately 26.03%.
In accordance with the Singapore Code on Takeovers and Mergers, Evraz will make a mandatory cash offer for the remaining Delong shares at the Offer Price, upon the exercise of the Call Option or the Put Option. The maximum consideration payable by Evraz will be approximately US$1,494 million, assuming full acceptance of the mandatory offer, and the exercise of all outstanding warrants.
Evraz expects that Delong will maintain its head office in Beijing and does not envisage any material changes to the management of Delong following completion of the transactions. The management of both companies are excited about the many areas of synergies between Evraz and Delong arising from technology cooperation and joint procurement, as well as cross selling and marketing opportunities.
“This investment by Evraz in the Chinese steel sector, our first in the Asia Pacific region, is a critical strategic move to expand our global footprint,” commented Alexander Frolov, Evraz’s Chairman and CEO. “The Chinese steel market is the largest and fastest growing in the world. Delong has an established position in the Hebei province, an important industrial region of China. Under the leadership of Mr. Ding, Chairman and controlling shareholder of Delong, the company has demonstrated an impressive track record of growth and profitability. Mr. Ding brings exceptional operational expertise and local market insight and will be a valuable partner for Evraz.”
The transaction is subject to anti-trust clearance by the Ministry of Commerce (MOFCOM) and the State Administration of Industry and Commerce (SAIC) of P.R. China.
Merrill Lynch (Singapore) Pte. Ltd is acting as exclusive financial advisor to Evraz. Allen & Gledhill LLP is acting as legal counsel to Evraz.
Delong Holdings Limited is a steel manufacturing group headquartered in Beijing, P.R. China. Its production base is located in proximity to raw material sources and an extensive client base encircled by the Bohai Economic Circle. As a dedicated hot-rolled coil manufacturer, Delong specializes in the supply of steel in such specifications for the infrastructure, pipe-making, cold-rolled coil, machinery and automotive industries in P.R. China. The Group also has interests in other synergistic businesses such as resource investment.
