EANS-Adhoc: RHI AG / RHI and Magnesita to combine to create a leading refractory company

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Mergers - Acquisitions - Takeovers 05.10.2016

RHI AG ("RHI") and the controlling shareholders of Magnesita Refratários S.A. ("Magnesita"), investment vehicles affiliated with GP Investments ("GP") and Rhône Capital ("Rhône", and together with GP, "Magnesita's Controlling Shareholders") announce that they have reached an agreement to combine the operations of RHI and Magnesita to create a leading refractory company to be named RHI Magnesita.

Accordingly, RHI's Management Board has agreed to sign a share purchase agreement ("SPA") with Magnesita's Controlling Shareholders regarding the acquisition of a controlling stake of at least 46%, but no more than 50% plus one share of the total share capital in Magnesita (the "Transaction"), pending RHI's Supervisory Board approval. The purchase price for the 46% stake will be paid in cash amounting to EUR 118 million and 4.6 million new shares to be issued by RHI Magnesita, a new RHI entity to be established in the Netherlands and listed in London. The exchange ratio applied in the Transaction is 0.19 newly issued RHI Magnesita shares for 1 Magnesita share. Based on RHI's six-month volume weighted average price of EUR 19.52 as of 4 October 2016, the implied value of the 46% stake amounts to EUR 208 million, implying a value for Magnesita's entire share capital of EUR 451 million. (1)

As a result of the Transaction, GP will become a relevant shareholder of RHI Magnesita. The combined company's corporate governance will be constituted on a one-tier board structure while GP will be represented on the board of directors. All RHI Magnesita shares issued as a result of the Transaction and subsequent mandatory tender offer will be subject to a minimum 12-month lock-up period.

The completion of the Transaction is amongst others subject to (i) approvals by the relevant competition authorities, (ii) the migration of RHI to the Netherlands, (iii) the listing of RHI Magnesita's shares in the premium segment of the Official List on the Main Market of the London Stock Exchange and (iv) RHI's shareholders not having exceeded statutory withdrawal rights in an amount of more than EUR 70 million in connection with organizational changes preceding RHI's migration from Austria. The migration and the preceding organizational changes in Austria require qualified approval by RHI's shareholders' meeting. As a consequence of the Transaction, RHI Magnesita will become the ultimate holding company of RHI Group while the shareholders of RHI will cease to hold shares in RHI and instead hold RHI Magnesita shares. Following registration of the corporate restructurings, RHI's shares cease to be listed on the Vienna Stock Exchange. The place of effective management of RHI Magnesita will be Austria. If the Transaction is terminated for reasons not under the control of Magnesita's Controlling Shareholders, an aggregate break fee of up to EUR 20 million is payable by RHI to Magnesita's Controlling Shareholders.

Following completion of the Transaction, which is expected for 2017, a mandatory tender offer will be launched by RHI Magnesita or one of its affiliates for the remaining shares in Magnesita ("Offer"). As part of the Offer, a maximum number of 5.0 to 5.4 million RHI Magnesita shares will be issued, depending on the stake acquired within the Transaction, thereby resulting in an aggregate number of no more than 10.0 million newly issued shares to finance the acquisition. The Offer will include the option to sell shares on the same payment terms as the Transaction as well as a cash-only alternative amounting to EUR 8.19 per Magnesita share (subject to certain adjustments according to the SPA). If some or all of Magnesita's other shareholders elect not to receive RHI Magnesita shares in the Offer, Magnesita's Controlling Shareholders have committed to purchase at least 1.5 to 1.9 million and at most 3.4 million additional new RHI Magnesita shares, thereby increasing their total number of RHI Magnesita shares to a maximum of 8.0 million. RHI Magnesita may decide to combine the Offer with a delisting offer and/or a voluntary offer to exit Magnesita from the "Novo Mercado" listing segment. The Offer will follow applicable Brazilian laws and regulations. Any RHI Magnesita shares that are not taken up in the Offer by Magnesita's shareholders may be either placed into the market or with institutional investors.

The Transaction will be financed by additional debt and the issuance of 4.6 to 5.0 million RHI Magnesita shares to Magnesita's Controlling Shareholders. At the same time, Magnesita will continue to finance itself on a standalone basis without credit support from RHI Group. Before or at completion of the Transaction, Magnesita is expected to adopt RHI's accounting practices, which, according to RHI, could lead to significant, however substantially non-cash adjustments in Magnesita's book equity value.

As result of the Transaction, RHI's mid-term financial targets will surpass RHI's current targets as communicated in RHI's Strategy 2020. RHI expects the combined company to generate fully consolidated revenues of EUR 2.6 billion to EUR 2.8 billion (previously EUR 2.0 billion to EUR 2.2 billion) with an operating EBIT margin of more than 12% (previously more than 10%) by 2020, primarily as a result of planned synergies.

(1) Based on 10 million newly issued RHI Magnesita shares (which implies that all of Magnesita's other shareholders elect to receive RHI Magnesita shares in the Offer), and 52,631,881 million Magnesita ordinary shares.

Disclaimer: This document is for information purposes and shall not be treated as giving any investment advice, financial analysis and/or recommendation whatsoever; it does not constitute an offer or marketing of securities of RHI, nor a prospectus. This document is addressed exclusively to persons legally entitled to receive it and is in particular not addressed to U.S. persons or persons residing in, Australia, Canada, Japan, Ireland or the United Kingdom; it may not be distributed to the USA.

For further information please contact

Investor Relations / Simon Kuchelbacher Tel +43 (0)50213-6676 E-mail: simon.kuchelbacher@rhi-ag.com

Media Relations / Randolf Fochler Tel +43 (0)50213-6120 E-mail: randolf.fochler@rhi-ag.com

end of announcement euro adhoc =-------------------------------------------------------------------------------

(END) Dow Jones Newswires

   October 05, 2016 17:53 ET (21:53 GMT)- - 05 53 PM EDT 10-05-16