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Divestment of ICI'S Chlor-Chemicals, KLEA and Crosfield OperationsICI has agreed terms with Ineos, a major global producer of Acrylics, Ethylene Oxide and derivatives, for the sale of its Chlor-Chemicals, Klea and Crosfield businesses. The consideration payable to ICI places a value on these businesses of about £325m in aggregate. Subject to certain conditions and regulatory approvals, completion is expected in January 2001 and net cash proceeds will be used to reduce Group indebtedness.In the year to December 31, 1999 the Chlor-Chemicals, Klea and Crosfield businesses generated combined sales of £722m, operating profits of £3m and an operating cash outflow of £53m. The businesses had total assets less current liabilities of £387m as at December 31, 1999 including ICI's investment in EVC. On a pro-forma basis, had they occurred at the beginning of 2000, these transactions in aggregate would have enhanced ICI's earnings by 8%. Commenting on the agreement, ICI Chief Executive Brendan O'Neill said: "The transformation of ICI is essentially complete - a colossal undertaking over the last 3 years. Following the divestments announced today, significant earnings and cash flow volatility will be taken out of our results. The ICI management can now focus on converting the abundance of inherent opportunities we have into profitable growth." ICI was advised in these transactions by Goldman Sachs International. Klea and CrosfieldKlea is one of the leading providers of fluorine-based products that are used most commonly to replace CFCs and HCFCs across a wide range of applications. Klea is a global business with a significant market share and customer base, and has a total of 390 employees. Crosfield is one of the leading global manufacturers of products derived from silica and alumina, with significant global businesses in silicates, zeolites and silicas. Crosfield's products have applications as ingredients or process aids in detergents, paper, civil engineering, beverages, personal care, surface coatings and plastics, and the company has leading positions in a number of key markets and technologies. Crosfield has a total of 1,100 employees worldwide. Ineos has agreed to acquire ICI's Klea and Crosfield businesses for a consideration of £300m, £250m of which will be paid in cash on completion with a further £50m cash expected no later than March 31, 2001, subject to usual working capital and other adjustments. In order to fulfil its obligations under the agreement, ICI has agreed to procure certain third party interests and will discharge certain related liabilities. This will result in ICI's net debt increasing by around £70m. Overall, the divestment is expected to result in a reduction of net debt in 2001 of about £150m. Legacy payments with a net present value of about £20m are expected in the longer term. Chlor-ChemicalsChlor-Chemicals is one of the major chlor-alkali producers in Europe and a global leader in chlorine derivatives. The business is serviced by production sites in the UK, France, Germany and Thailand and has a total of 2,300 employees worldwide. ICI will take a 15% shareholding in a new company established to purchase the Chlor-Chemicals business ("Ineos Chlor"). The ICI shareholding, which ICI expects to hold for at least 5 years, will be subject to put and call options in certain circumstances. The balance of the consideration will comprise loan notes ("the Notes") with a face value of £50m which accrue interest at 8% per annum. ICI will lend to Ineos Chlor an initial amount of about £40m and provide an additional facility of up to £60m once Ineos Chlor has fully drawn down an additional external working capital facility. The ICI facilities will be available, at market related rates, for 5 years and may, if necessary, be extended for a further 2 years. The ICI facilities together with Ineos Chlor's obligation to assume various Chlor-Chemicals contracts will be secured in favour of ICI. While any of these liabilities remain outstanding, ICI has certain rights under a shareholders' agreement including, in the event of an Ineos Chlor default the right, for no consideration, to take control of Ineos Chlor if ICI judges that it is in its best interests to do so. The Notes are to be redeemed over the period to 2010 out of available cash flow, although in certain circumstances the Notes can be redeemed on an accelerated discounted basis for a minimum of £25m. Any outstanding balance owing on the Notes in 2010 will convert prorata into warrants representing up to an additional 34% of Ineos Chlor's share capital if no repayment under the Notes had been made. ICI currently assesses the value of the Notes at £25m. The divestment will result in legacy and other payments of about £130m by end 2001. Further legacy and other payments with a net present value of about £100m are expected in later years, offset in part by any cash received from the redemption of the Notes. These figures exclude borrowings by Ineos Chlor from ICI under the facilities described above. December 5, 2000ICI is one of the world's largest producers of specialty products and paints. It is a global leader in creating, developing, making and marketing ingredients for foods and personal care, specialty polymers, electronic materials, fragrances and flavours. Together with its traditional strengths in paints, ICI is a major player in the worldwide development of sensory products. ICI has a range of more than 50,000 products, 45,000 employees worldwide, and had sales in 1999 of $13.7 billion. Further information can be found on ICI's website - www.ici.com Goldman Sachs International, which is regulated in the UK by the Securities and Futures Authority Limited, is advising ICI in connection with the transactions and no-one else and will not be responsible to anyone other than ICI for providing the protections afforded to customers of Goldman Sachs International nor for providing advice in relation to the transactions
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