Homeland sells 5% interest in South African subsidiary
2008-04-17 09:09 ET - News Release
Mr. Stephen Coates reports
HOMELAND ENERGY SELLS 5% INTEREST IN ITS SOUTH AFRICAN SUBSIDIARY TO GMR GROUP OF BANGALORE, INDIA
Homeland Energy Group Ltd. has completed the sale of 5 per cent of its South African subsidiary, Homeland Mining and Energy SA (Pty.) Ltd., to GMR Energy Limited (GMR Group) of Bangalore, India, for a cash payment to Homeland of $15-million (U.S.). (All figures are shown in U.S. dollars, unless otherwise specified.) GMR Group maintains options to acquire an additional 5 per cent and 40 per cent of Homeland South Africa valuing the company's subsidiary at $310-million. If all three options are exercised by Sept. 2, 2008, Homeland Energy will receive a total of $155-million for the sale of 50 per cent of Homeland South Africa. Details of the three options are included below. The sale to GMR Group incorporates the projects and properties held within Homeland's South African subsidiary, including the Kendal mine, Eloff coal mining project, the Northfield site reclamation project as well as exploration projects in South Africa. The transaction excludes Homeland Energy's corporate interests in Homeland Uranium, Altona Resources and other projects under consideration in southern Africa and elsewhere.
"This transaction represents a strategic move forward for Homeland Energy Group, as well as an endorsement of the quality of the underlying assets of the company," commented Stephen Coates, president and chief executive officer. "Our board and management team believe that a partnership with an organization of the quality of the GMR Group and the cash resulting from this deal provides the independence to develop the Eloff coal project, as well as other global opportunities that may arise. As these funds will be paid to Homeland's corporate entity, we are not limited to southern Africa for the deployment of the funds."
According to BVN Rao, chairman and managing director of GMR Energy Limited: "The acquisition of sizable coal assets overseas is a very critical part of GMR Group's international energy business strategy. Apart from ensuring fuel security for GMR Group's power projects in India, such a transaction also acts as a catalyst in the development of the energy business group. In our search for such assets we found that Homeland South Africa provided us with a perfect platform to grow the group's thermal energy portfolio. We are very pleased to be associated with Homeland Energy as a strategic partner in coal ventures. Apart from the quality and size of Homeland's South African coal assets, especially the development potential of the Eloff project, we are impressed by the technical expertise, country specific knowledge and, above all, the commitment shown by the Homeland team. We, in turn, are committed to developing Homeland South Africa's assets into a world-class venture."
The GMR-Homeland transaction
The conclusion of this initial sale by Homeland to GMR Group follows the negotiation of a shareholders' agreement and a share purchase agreement (SPA) setting out the terms and conditions upon which Homeland agreed to sell up to a 50-per-cent voting and participating equity interest in Homeland South Africa to GMR Group. Following signing of a memorandum of understanding in December, 2007, Homeland received a payment of $3-million. The additional payment made on April 15, 2008, of $12-million completes the sale of the first 5 per cent of the shares of Homeland South Africa for a total purchase price of $15-million.
GMR Group holds an option -- subject to conditions precedent -- to purchase a further 5 per cent of the shares of Homeland South Africa from Homeland for a purchase price of a further $15-million on or before the date which is the later of May 1, 2008, and the date which is 10 days following receipt of an updated independent technical report on the mineral resource at Homeland's Eloff property.
If the second option is exercised, GMR Group holds a final option to purchase 40 per cent of the shares of Homeland South Africa for either $125-million, if such option is exercised on or before Sept. 2, 2008, or $135-million, if such option is exercised after Sept. 2, 2008, but on or before Dec. 31, 2008.
The SPA provides Homeland with the right to buy back the Homeland South Africa shares sold under the first option if the purchaser does not exercise the second option. The purchase price for the shares subject to this buyback right is payable in cash and is equal to the original price paid plus 10-per-cent interest accruing from the date that the first option was completed. The SPA also provides Homeland with the right to buy back the Homeland South Africa shares sold under the first option and the second option if the purchaser does not exercise the third option. The purchase price for the shares subject to this buyback right is payable in cash and is equal to the original price paid plus 10-per-cent interest accruing as to 50 per cent from the date that the first option was completed and as to 50 per cent from the date that the second option was completed.
GMR Group Limited
GMR Group is a Bangalore-headquartered global infrastructure group with interests in airports, energy, highways and urban infrastructure as well as in the manufacturing sector, spanning the agri-business including sugar and ferro alloys. The company is one of the fastest-growing infrastructure organizations in India. Employing the public private partnership model, the GMR Group has successfully implemented several infrastructure projects in India. With completion of the development of India's newest airport in Hyderabad, and the Delhi International Airport project well under way, GMR Group has established itself as a frontrunner and pioneer in the core infrastructure areas of the country. GMR's subsidiary, GMR Infrastructure Limited (GIL), is a Bombay-listed publicly traded company with a market capitalization in excess of $6-billion.
When the government of India opened the power sector to investments from the private sector, GMR Group took a strategic decision to venture into this sector. Over more than a decade, the group has established its credentials and now has three power plants in Mangalore, Chennai and Andhra Pradesh. The GMR Group is currently developing three more power projects.
An infrastructure holding company, GIL, was formed to finance the capital requirements of the GMR Group's initiatives in the infrastructure sector. GIL is engaged in the development of various infrastructure projects in the power and transportation sectors through several special purpose vehicles.
GMR Group's assets include six power plants, three of which are in production today, six road projects, two of which are in commercial operation and four are under development; and two airport projects, the recently completed Rajiv Gandi International Airport and the modernization and redevelopment of the Delhi International Airport. The GMR Group plays an active role in all stages of development of all projects, including the supervision of construction services, financing and operation.
The GMR Group is also actively engaged in the areas of education, health, hygiene and sanitation, empowerment, and livelihoods and community-based programs under its foundation wing, reaffirming its grassroot presence as change agents of society in the field of corporate social responsibility. A dedicated division, the GMR Varalakshmi Foundation, manned by committed professionals, oversees and manages these projects across India.
