23 October 2001
23 October 2001
ELEMENTIS ANNOUNCES SALE
OF HARCROS CHEMICALS
Elementis plc announces today that it has sold Harcros Chemicals (Harcros), the
Group's US chemical distribution business, for approximately £23.0 million.
The purchaser is HCI Acquisitions Inc (HCIA), a newly established company in
which the current senior management of Harcros have a partial interest.
Harcros is headquartered in Kansas City, Kansas, US. It has strong coverage in
the Midwest and employs around 440 people. The book value of assets to be sold
on a debt free/cash free basis is estimated at £17.3 million. The sale will
result in an exceptional pre-tax profit of approximately £1.4 million after
expenses, additional environmental provisions and the write back of £0.7
million of goodwill previously written off direct to reserves. No tax is
expected to be payable as a result of the sale.
The sale price of approximately £23.0 million comprises approximately £20.2
million in cash (of which £17.8 million has been received, the balance being
payable on the determination of the actual net asset amount at the date of
sale), £1.1 million satisfied by HCIA agreeing to discharge and indemnify
Harcros Chemicals Inc, the seller, for certain costs and £1.7 million in the
form of non-voting redeemable preferred stock in HCIA which will be retained.
Over the next ten years, Harcros Chemicals Inc, the seller, has agreed to pay
50 per cent of environmental clean up costs relating to its period of ownership
on sites to be acquired by HCIA, up to a maximum of £6.9 million. Non-
operating sites are excluded from the sale; Harcros Chemicals Inc will remain
responsible for environmental clean up costs at these locations. In addition,
Harcros Chemicals Inc has agreed to indemnify HCIA for environmental clean
costs recoverable from a prior owner of the business and for any toxic tort
If Harcros Chemicals is resold within the next three years for a price greater
than the original purchase price, the seller is entitled to additional
consideration, equating to half of all gains above a set return for HCIA, this
return being based on a formula which takes into account the capital invested,
the period of investment and the quantum of the resale price. This is subject
to an overall cap of £31.2 million.
In 2000, the Group's chemical distribution division, comprising Harcros, made
an operating profit of £6.0 million on £160.0 million of sales. Operating
profit in the six months to 30 June 2001 was £1.9 million on sales of £87.3
million. Proceeds from the proposed sale will initially be used to reduce
borrowings and the non voting redeemable preferred stock in HCIA will be
Commenting on the proposed sale, Jonathan Fry, Chairman of Elementis said, 'The
Board believe that by selling Harcros, Elementis will be able to focus more
clearly on its core specialty chemicals businesses making the Company more
attractive to investors.'
- Ends -
Elementis plc 020 7398 1400
Geoff Gaywood Group Chief Executive
George Fairweather Group Finance Director
Anna Passey Head of Corporate Communications
Brunswick 020 7404 5959