Jan 7 2010
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.
Source: http://www.khdhumboldt.com/phoenix.zhtml?c=92949&p=irol-irhome