US firm puts SANS Fibres on the spot
SANS FIBRES, a division of South African chemicals and explosives group AECI, has been thrust into talks with New York Stock Exchange-listed Unifi to buy the stake it doesn’t own in a US-based joint venture called UNIFI-SANS Technical Fibres (USTF).
Unifi has decided to exercise its put option against SANS Fibres in the joint venture. It seems as if the deal isn’t terribly convenient for loss-making SANS Fibres. However, judgement on the merits of the deal should perhaps be reserved until the price of the deal has been finalised.
Another potential hitch is that once SANS Fibres clinches the deal the company may be burdened with having to seek another partner in the US. “We have no option but to buy the 50% interest in the joint venture,” says Brad Page, newly appointed MD of SANS Fibres.
C u r r e n t ly, SANS Fibres owns 50% of USTF, which Page describes as “a profitable joint venture”. He says SANS Fibres/AECI is in talks with Unifi to negotiate the price of the 50% stake in USTF.
The joint venture was established five years ago to produce low-shrinkage, high tenacity nylon light denier industrial yarn. Initial shareholder agreement granted Unifi the right to sell its 50% stake in USTF and exit the business in first quarter 2008.
Unifi – the leading North American producer and processor of multi-filament polyester and nylon yarns – is pulling out of the USTF joint venture to focus on its core business. Unifi’s textured yarns are used in home furnishings, automotives, sewing thread and upholstery. SANS Fibres is a nylon and polyester yarn manufacturer.
The joint venture has provided SANS Fibres with an increased global manufacturing presence and an opportunity to earn US dollars. As a dollar-driven manufacturer it also produces polyethylene terephthalate (PET) polymer for the bottle/packaging end users in SA.
In the year to 31 December 2006, SANS Fibres reported an R6m operating loss off revenue of R1,7bn. In November 2006, the group also lost its well respected CE Thys Loubser, who joined KWV Ltd after being at the helm of SANS Fibres for more than seven years.
No option but
to buy. Brad Page