AECI has acquired European contract manufacturer of agrochemicals and fine chemicals company Schirm for €110.5m, as part of its international expansion strategy.

The buyout is the explosives and chemicals group’s first big acquisition in Europe. AECI already has well-established businesses in Africa, Australia, Southeast Asia and the US and sees good synergies in the deal, which is subject to conditions.

Schirm, which was bought from Imperial Chemical Logistics, a wholly owned subsidiary of SA-based transport group Imperial Holdings, has four sites in Germany and one in the US.

It is also the second major purchase by AECI in as many weeks. In one of its largest transactions yet, AECI bought Much Asphalt — based in Cape Town — in late October for R2.3bn cash. The firm is southern Africa’s largest supplier of hot and cold asphalt products. AECI said the outlook for road infrastructure in SA was extremely positive.

AECI CEO Mark Dytor said on Wednesday there was a compelling case to buy Schirm.

"It has an important role to play in terms of developing the group’s manufacturing excellence capability, enhancing its geographic footprint and growing the diversity of its product portfolios in plant and animal health particularly — and chemicals generally," he said.

He said AECI’s increasing globalisation meant it could flatten the peaks and troughs of seasonal demand cycles in the agrochemicals business. The deal also provides currency diversification for the group.

In the year to June 2017, Schirm’s revenue was €115.6m, with earnings before interest, tax, depreciation and amortisation of €13.8m. About 80% of Schirm’s revenue comes from Europe, mainly Germany, and the balance from the US.

Similarly, about 80% of its revenue is earned from agrochemicals — such as fungicides, herbicides and insecticides — while 20% is made up of fine chemicals used in making adhesives, home and personal care brands and rubber.

"We believe that the Schirm deal is a positive acquisition for AECI. The deal allows [the group] to diversify its chemicals business and should provide a platform for growth into new areas and geographies," Aslam Dalvi, associate portfolio manager at Kagiso Asset Management, said.

"The growth outlook for Schirm is reasonable in the context of the markets it operates in. There remains significant upside potential for growth if AECI is able to execute and successfully deliver on its plans to maximise synergies and plant utilisation [currently very low] at Schirm," Dalvi said.

Under CEO Mark Lamberti, Imperial Holdings has been selling assets to simplify the group into two distinct units: Imperial Logistics and Motus, a vehicle import, distribution, dealership, rental, after-market parts and related financial services entity.

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