Tan­gled yarn

US firm puts SANS Fi­bres on the spot

Finweek English Edition - - Companies & markets - GUGU­LAKHE MASANGO

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

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