AECI’s wholly-owned subsidiary AECI Mauritius has reached agreement to acquire Imperial Chemical Logistics’ (ICL’s) wholly-owned contract agrochemical and fine chemical manufacturing subsidiary Schirm for €110.5-million, or R1.8-billion.

The deal forms part of AECI’s international expansion strategy, while ICL, a wholly-owned subsidiary of Imperial Holdings, has exited its noncore businesses.

As part of the transaction, Schirm, which has four sites in Germany and one in the US, will acquire the contract manufacturing service business of ICL and a property in Wolfenbüttel, in Germany.

ICL will retain the customer warehousing, transportation and distribution services on the site that Schirm operates and will continue providing these services to Schirm post the transaction.

In addition, Schirm will, for one year, retain an option to acquire four warehouses at the Schirm plant in Schönebeck from ICL for €9-million, or R147.3-million.

Schirm also entered into a separate 25-year lease agreement with ICL for warehouse and factory space at the Wolfenbüttel site to meet its own operational and raw material storage requirements, for which AECI will make a prepayment of €3.5-million.

The acquisition is in line with AECI’s focus on expansion outside South Africa in its chosen strategic areas of mining solutions, water and process, plant and animal health, food and beverage and chemicals, said AECI CEO Mark Dytor.

Schirm will operate as a standalone entity within AECI’s plant and animal health pillar.

“There are potential synergies associated with the extension of Schirm’s manufacturing expertise to AECI, as well as expansion and supply chain opportunities for the group’s existing plant and animal health pillar,” the company said in a statement on Wednesday.

In addition, AECI could realise the opportunity to replace some of the raw materials it currently imports from third parties.

Imperial, which will reinvest the proceeds from the transaction into the ongoing expansion of the group’s core businesses in due course, as well as reduce short-term debt, attributed the exit of the business to a misalignment of the specialisation and capital requirements of chemical contract manufacturing with Imperial Logistics’ capabilities and stated objective of reducing capital intensity.

Further, the business held limited operational or financial synergies between chemical contract manufacturing and Imperial Logistics’ other operations.

The deal remains subject to certain conditions, including approval from the relevant authorities.

This is AECI’s second acquisition in two months. It announced in October that it would buy South African asphalt producer Much Asphalt for R2.27-billion.