TK, Nemak to Discuss Changes in Foundries Sale

Feb. 13, 2007
Nemak would gain Teksid's Alabama lost-foam operation

February 13, 2007 — TK Aluminum Ltd. has disclosed details of changes it is seeking in the terms of its sale of various Teksid metalcasting operations to rival Nemak, an estimated $495.9-million transaction announced in November.TK Aluminum Ltd. is the "indirect parent" of Teksid Aluminum Luxembourg S.a r.l., a holding company for a chain of aluminum foundries producing automotive components.

As first outlined, Nemak would acquire Teksid's foundries in North America, China, Poland, and South America, except for a lost-foam casting operation in Sylacauga, AL. TK was to receive $495.9 million in cash (subject to adjustments) and an equity interest in the Nemak business after closing.

Nemak also agreed to provide some financial assistance to TK Aluminum, including assuming up to $7 million in debt relating to Teksid's ongoing operations, and provide a $25-million loan to TK. And, Nemak's parent Gropo Alfa agreed to provide credit up to $42 million, to replace some existing arrangements under TK's existing senior credit facilities.

Now, however, TK has requested that Nemak allow separate closing dates for the various operations — namely, those operations where the necessary regulatory approvals have been secured, or are anticipated — as a way to accelerate payments to TK.

TK also reported Nemak has outlined its own conditions for considering the proposed changes, which include reducing the total estimated purchase price from $495.9 million to $485 million; including the Sylacauga lost-foam casting operation in the sale; reducing the total debt assumption from $7 million to $2 million; providing a cash escrow of $20 million at the initial closing, and another $5 million at the closing of the Teksid Poland sale; allocating purchase prices and other economic terms according to the relative value of the asset purchase; and no adjustment to the number of shares allocated to TK based on the Nemak's separate purchase of Norsk Aluminium's foundry operations.

No changes to the sale have been agreed to as yet, and any changes to the existing agreement must be approved by boards of both companies. Mexico's antitrust commission has already approved the sale of the Frontera foundry in that country.

TK Aluminum stated it is continuing to work with its major creditors to close the Nemak transaction, and the sale of all of its stakes in subsidiaries in France, Italy, and Germany to affiliates of BAVARIA Industriekapital AG.