CSR releases explanatory booklet for shareholders on demerger proposal

CSR Limited (CSR) today lodged the explanatorybooklet on its demerger proposal with the Australian Stock Exchange.

The booklet is expected to be distributed to CSR’s 112,000shareholders after printing, in approximately two weeks. Shareholders will beasked to vote on the demerger at a meeting to be held in Sydney on 25 March.

The demerger is in line with the CSR strategy over the past fiveyears and involves spinning off the group’s heavy building materials assets(primarily aggregates,remix concrete,cement and concrete pipe & products) from the other CSR group businesses.

The demerger would result in two separate Australian companies,both listed on the Australian Stock Exchange:

Rinker Group Limited (RGL) - a focused, heavy building materials group, comprising RinkerMaterials Corporation in the US and the Readymix and Humes businesses inAustralia and Asia.RGL is expected tobe one of the top 10 heavy building materials stocks in the world, based on anumber of measures, including cash flow. It is expected to continue its growthstrategy of building strong regional market positions for its key products. Asa separately listed company, with a strong financial position, substantial cashflows and expected investment grade credit ratings, RGL should be betterpositioned to participate in the ongoing consolidation of the internationalheavy building materials industry. With around 85% of earnings* from RinkerMaterials in the US, it is expected that over time, investors will value RGLmore in line with its US peers.

CSR Limited, after the demerger, will be a diversified,Australian company, holding some of the best known household brands in thecountry. The group will comprise three businesses – CSR Building Products,Aluminium and CSR Sugar. Combined, CSR’s three businesses have a stableearnings history, generating returns well above their cost of capital. CSR is expectedto focus more effectively on the respective strengths of these businesses andto pursue value-adding, low risk growth options, which have previously rankedas a lesser priority for the current CSR group.CSR is expected to retain investment grade credit ratings,reflecting its strong financial position and significant cash flows. CSR, afterthe demerger, is expected to distribute 60-70% of available operating profit asdividends. A high level of franking is generally expected.

Based on historical performance, the businesses within both theRGL and CSR groups generate substantial cash flows. RGL and CSR are expected tobe included in the ASX Top 50 and Top 100 stocks respectively.

Credit ratings agencies Standard & Poors, Moody’s and Fitchhave each provided indicative credit ratings for CSR and RGL, all confirmingCSR’s expectation of investment grade credit ratings for both stocks. All threeratings agencies have the current CSR group on review as a result of thedemerger proposal.

The indicative credit ratings, while lower than those currentlyassigned to the CSR group, are investment grade ratings which should allowsufficient access to domestic and international debt funding, as required.


If the demerger is approved by shareholders:

Eligible CSR shareholders will receive one RGLshare for each CSR share they hold

The demerger will be achieved by way of CSRdeclaring a special dividend (69 cents per ordinary share), and undertaking acapital reduction (84 cents per share). CSR shareholders will not receivethese amounts in cash. Instead, the amounts will be compulsorily used aspayment for the RGL shares to be issued to eligible CSR shareholders. TheAustralian Tax Office has indicated that it will grant demerger tax relief tothis process.

Shareholders will vote on the demerger proposal and the capitalreduction and related matters at consecutive meetings on 25 March, commencingat 10am in the Sydney Convention Centre, Darling Harbour, Sydney.

Once the demerger is approved by shareholders, it will be subjectto final approval from the Federal Court, expected to be 28 March. RGL sharesare expected to commence trading on the ASX on a deferred settlement basis on31 March. Simultaneously, CSR shares would begin trading ex-entitlement to RGLshares. RGL shares are expected to be issued to eligible shareholders on 11April. RGL and CSR will prepare separate accounts on a demerged basis from 1April 2003.

CSR Chief Executive Officer and Managing Director Peter Kirby saidthe demerger was the best way to add further value to shareholders over time.

“Directors unanimously support this proposal and are confidentthat it is in the best interests of our shareholders.

“A demerger will facilitate choice for the different types of shareholders– those who prefer RGL’s growth focus and those who prefer CSR’s higher,franked yields. We have spoken to many investors since we first announced ourplans in November last year, and indications are that both companies will bewell-regarded and prove attractive to these respective shareholders.

“We do not expect the additional value to emerge overnight, but weexpect to see it over time,” said Mr Kirby.

“Since 1998 we have worked hard to generate significantshareholder value, investing A$2.8 billion in 25 acquisitions in the US heavybuilding materials sector – whilst simultaneously separating the other assets,via 22 divestments generating around A$1.5 billion.

“This demerger will continue that process, enabling both the RGLand CSR groups to focus more effectively on their respective strengths, andfurther improve their performance against their peers. The delivery ofshareholder value, through the cycle, will remain the number one objective ofboth companies.”