KHD Humboldt Wedag International Ltd. to Increase Shareholders' Value by Dividing the Company Into Two Entities
January 06 2010 - 7:30AM
PR Newswire (US)
- A Mineral Royalty Company and an Industrial Plant Technology,
Equipment and Service Company - NEW YORK, Jan. 6
/PRNewswire-FirstCall/ -- Based on a study undertaken to determine
ways to best enhance long term shareholder value, the Board of
Directors of KHD Humboldt Wedag International Ltd. ("KHD" or the
"Company") (NYSE:KHD) today announces that it intends to
restructure the KHD into two distinct legal entities: (1) a mineral
royalty company and (2) an industrial plant technology, equipment
and service company (the "Arrangement"). Subject to receipt of all
necessary approvals, the transactions will take place by way of a
distribution to KHD's shareholders, on a pro rata basis, of all of
KHD's common shares of its subsidiary, KHD Humboldt Wedag
(Deutschland) AG ("KID"), which will own all of KHD's industrial
plant technology, equipment and service assets. Under the proposed
structure, the new mineral royalty company, which would change its
name from KHD to Terra Nova Royalty Corporation ("Terra Nova"),
would continue to receive royalty payments from the Wabush Iron Ore
Mine (the "Wabush") in the province of Newfoundland and Labrador,
Canada under a master lease that terminates in the year 2055.
Wabush has been a producing mine since 1956, and currently has
proven reserves of 75 million tons representing approximately
15-year production based on historical production. Management
intends to institute a dividend policy for Terra Nova shareholders.
Terra Nova intends to focus on: -- acquiring additional existing
mineral royalties; -- providing capital for the exploration,
development and construction of iron ore and other metals mines in
exchange for royalties; -- monetizing metal by-product streams from
either operating mines or projects under development; and --
providing acquisition financing to established operating companies
in return for a royalty on acquired properties. Subject to
obtaining all necessary approvals, Terra Nova intends to maintain
its listing on the New York Stock Exchange (the "NYSE") and will
continue to trade the "regular way". Concurrently all of KHD's
industrial plant technology, equipment and service operations, KID,
will be listed on the regulated market of the Frankfurt Stock
Exchange (the "FSE"). Management will focus on enhancing the
traditional cement business through an expansion of current
activities in the rapidly growing Indian market. This company will
further strengthen its operational and management base in New
Delhi, India, as well as add additional resources in other
fast-growing emerging markets such as Russia. The company's main
engineering centre of excellence in Cologne, Germany will have a
primary focus on developing further the company's leading process
know-how and product engineering capabilities. KID will also forge
strategic alliances with complementary international partners to
offer innovative solutions, including engineering procurement
construction solutions, and develop new, environmentally friendly
technologies for our customer base. A subsequent European public
offering of KID shares is planned to be completed for an additional
ten percent of its capital in order to create greater liquidity in
the European market, and the KID shares will begin trading on the
FSE on a "when-issued" basis. The FSE listing of KID is expected to
be completed in March, 2010. The two companies resulting from the
Arrangement will have the following attributes that will contribute
to maximizing market value and creating additional long-term value
for KHD shareholders. All dollar figures are in U.S. dollars on a
pro form basis: (1) Terra Nova (Mineral Royalty Business) -- Base
for growth through acquisitions of other royalty streams. --
Experienced management. -- Debt free. -- Cash of US$113 million. --
Existing royalty stream now enhanced with a single owner, stated
capital expenditures, expanded workforce, increased production and
a new and enhanced reserve calculation. -- Updated reserves of 75
million tons of iron ore with an estimated mine life of at least 15
years based on historical production. -- Dividend policy. (2) KID
(Industrial Plant Technology, Equipment and Service Business) --
Experienced management team which has completed an internal
restructuring after the recent financial crisis. -- Enhanced
customer care by adding new customer service centers and resources
in the growing emerging markets. -- Primary focus on the fast
developing Indian market. -- Additional management and operational
resources in New Delhi, India. -- The centre of excellence for
process and product engineering in Cologne, Germany will be
strengthened in order to add growth in quality engineering. --
Expanded business model for service and spare parts to capitalize
on KHD's installed base of over 490 cement plants worldwide and to
complement existing operations. -- Strategic alliances with
international partners to develop and market new technologies with
a strong environmental focus. -- Strategic alliances with
international partners to offer EPC solutions to our customers. --
Technology driven, primarily in the environmental, pyro-processing
and grinding areas. -- Adequate bonding lines. The Company
commented, "We have studied various ways to increase value for
KHD's shareholders and we believe that through this transaction,
the sum of the parts has greater value than the whole. What
precipitated us to take this action now were the significant
changes at Wabush. Cliffs Natural Resources Inc. recently announced
that it would acquire a 100 percent stake in the mine from its two
partners, and also updated existing reserves to 75 million tons of
iron ore which implies an estimated mine life of at least 15 years
based on historical production. This changed the way we looked at
the new now more clearly defined segments of KHD." Canadian and
United States shareholders of KHD are urged to consult their tax
advisors with respect to federal, local and foreign tax
consequences. KHD intends to hold investor information meetings
during the third week of February 2010. The proposed Arrangement
requires court approval under the provisions of the British
Columbia Business Corporations Act, as well as approval by the
shareholders of KHD and other statutory requirements customary for
transactions of this type. KHD will apply to the Supreme Court of
British Columbia to obtain an interim order providing, amongst
other things, for the calling and holding of a special meeting of
shareholders of KHD to seek approval for the Arrangement. KHD
expects to hold this special meeting on March 22, 2010. Further
information concerning the Arrangement will be available in the KHD
management information circular to be filed with the Securities and
Exchange Commission at http://www.sec.gov/ and with Canadian
securities regulators on SEDAR at http://www.sedar.com/. About KHD
Humboldt Wedag International Ltd. KHD Humboldt Wedag International
Ltd. owns companies that operate internationally in the industrial
plant technology, equipment and service industry, and specializes
in the cement industry. To obtain further information about KHD,
please visit our website at http://www.khdhumboldt.com/ Disclaimer
for Forward-Looking Information Certain statements in this release
are forward-looking statements, which reflect the expectations of
management regarding KHD's planned restructuring. Forward-looking
statements consist of statements that are not purely historical,
including any statements regarding beliefs, plans, expectations or
intentions regarding the future. No assurance can be given that any
of the events anticipated by the forward-looking statements will
occur or, if they do occur, what benefits the Company will obtain
from them. These forward-looking statements reflect management's
current views and are based on certain assumptions. These
assumptions, which include management's current expectations,
estimates and assumptions about the potential benefits of the
Arrangement, the areas that the resulting legal entities will focus
on, the common shares of KID to be distributed to the shareholders
of KHD, and that the restructuring will increase value for KHD
shareholders, may prove to be incorrect. A number of risks and
uncertainties could cause our actual results to differ materially
from those expressed or implied by the forward-looking statements,
including: (1) the failure to obtain any necessary approvals for
the restructuring, (2) the timing and extent of the restructuring,
(3) potential negative financial impact from regulatory
investigations, claims, lawsuits and other legal proceedings and
challenges related to the restructuring, (4) a decrease in Wabush's
estimated reserves or mine life or in the Wabush royalty, (5) the
uncertainty of government regulation and politics in India and
other markets, (6) the inability to successfully expand in the
Indian market, (7) continuing decreased demand for our products,
including the renegotiation, delay and/or cancellation of projects
by our customers and the reduction in the number of project
opportunities, (8) a decrease in the demand for cement, minerals
and related products, (9) the number of competitors with
competitively priced products and services, (10) product
development or other initiatives by our competitors, (11) shifts in
industry capacity, (12) fluctuations in foreign exchange and
interest rates, (13) fluctuations in availability and cost of raw
materials or energy, (14) delays in the start of projects, (15)
delays in the implementation of projects and disputes regarding the
performance of our services, and (16) other factors beyond our
control. Additional information about these and other assumptions,
risks and uncertainties are set out in the "Risk Factors" section
in our Form 6-K filed with the Securities and Exchange Commission
and the "Risks and Uncertainties" section in our MD&A filed
with Canadian securities regulators. - UNAUDITED PRO FORMA
FINANCIAL TABLE FOLLOWS - KHD HUMBOLDT WEDAG INTERNATIONAL LTD. PRO
FORMA CONSOLIDATED BALANCE SHEETS As of September 30, 2009 (U.S.
Dollars in Thousands) (Unaudited) Royalty Group Industrial Group
------------- ---------------- ASSETS Current Assets Cash and cash
equivalents $112,540 $294,883 Other receivables 7,799 292,698 -----
------- Total current assets 120,339 587,581 Non-current Assets
221,842 7,426 ------- ----- Total Assets $342,181 $595,007 ========
======== LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities
$5,320 $390,270 Long-term liabilities 50,176 83,444 ------ ------
Total liabilities 55,496 473,714 Shareholders' Equity 286,685
121,293 ------- ------- $342,181 $595,007 ======== ======== OTHER
FINANCIAL HIGHLIGHTS Working capital $115,019 $197,311 Book value
per share $9.43 $3.99 Note: This pro forma balance sheet is
prepared giving effect to the restructuring of the Company into a
mineral royalty company (royalty group) and an industrial plant
technology, equipment and service company (industrial group). The
pro forma balance sheet for the mineral royalty company reflects an
upward revaluation of the royalty assets and the mineral royalty
company expects to recognize the revaluation adjustment in its
financial statements when the mineral royalty company adopts
International Financial Reporting Standards on or before January 1,
2011, though it is not recognized in the Canadian accounting. The
royalty assets were revalued because the operator recently updated
existing reserves to 75 million tons of iron ore which implies an
estimated mine life of at least 15 years based on historical
production. As at September 30, 2009, the Company's royalty assets
were presented on its historical balance sheet at $27 million. This
is reconciled to the pro forma value of $200 million by valuing the
royalty interest using a discount cash flow model with forecast
revenues to 2023 at a discount rate of 8% p.a., resulting in an
upward revaluation of $173 million. Contact Information: Allen
& Caron Inc. Rene Randall Joseph Allen(investors) KHD Humboldt
Wedag International Ltd. 1 (212) 691-8087 1 (604) 683-8286 ex 224
or Brian Kennedy (media) 1 (212) 691-8087 DATASOURCE: KHD Humboldt
Wedag International Ltd. CONTACT: investors, Joseph Allen, , or
media, Brian Kennedy, , both of Allen & Caron Inc., for KHD
Humboldt Wedag International Ltd., +1-212-691-8087; or Rene Randall
of KHD Humboldt Wedag International Ltd., +1-604-683-8286, ext.
224, Web Site: http://www.khdhumboldt.com/
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