Photo by: Bloomberg
JSE-listed aluminium supplier and exporter Hulamin says all conditions have been fulfilled around the transaction between its subsidiary Hulamin Operations (Hulamin Opco) and Bingelela Capital to acquire the rolling slab business from Isizinda Aluminium company.
The Isizinda company owns the Bayside casthouse, which has a rolling slab casting operation, in Richards Bay.
Hulamin had 38.74% ownership of Isizinda, while 58.74% was held by Bingelela and 2.53% was held by the Isizinda Employee Share Incentive Scheme Trust.
Isizinda was originally created as a partnership between Hulamin Opco and Bingelela in 2014 to buy the Bayside casthouse from Billiton Aluminium in 2015.
The casthouse provides rolling slab on an exclusive basis to Hulamin and the purchase of the casthouse was necessary to ensure the continuity of rolling slab supply to Hulamin Opco.
Bingelela has started production of other aluminium value-added products at the Bayside casthouse.
It has decided to pursue the production of other aluminium products at the Bayside site, particularly aluminium rim alloy and extrusion billet, outside the Isizinda structure.
To free up funding for these ventures, the partners in Isizinda agreed on the disposal of the assets of Isizinda, partly to Hulamin Opco and partly to others.
In May last year, Hulamin Opco agreed a term sheet with Isizinda, Bingelela, the employees’ trust, Bingelela Alloys and Bingelela Extrusion Billets.
The term sheet subsequently evolved to a definitive agreement, whereby Hulamin Opco would buy the slab business from Isizinda for R68.5-million.
Hulamin Opco advanced an initial R50-million of the purchase price to Isizinda, which it used to declare and pay a dividend of R35-million to Bingelela in August last year, with a further dividend of R15-million to be paid upon Hulamin Opco concluding a long-term liquid metal supply agreement with Hillside Aluminium.
An evergreen lease agreement between Hulamin Opco and Isizinda had been set for the lease of the portion of the property on which the slab business is situated. Isizinda will supply utilities and services, including energy and water, to Hulamin Opco on site.
“At the conclusion of the transaction, Hulamin Opco will have gained full ownership and control of the production of rolling slab at Bayside, at a cost that is well below replacement value, and will have realised significant productivity gains from the integration of the Pietermaritzburg and Bayside casthouses,” Hulamin says.