Alloy Steel International Inc. Announces Acquisition of Core Intellectual Property

26 March 2020

Alloy Steel International, Inc. announced the acquisition of core intellectual property utilized by AYSI in its production of key products.

AYSI Board Chairman, Alan Scott, stated that over recent years, the AYSI Board has pursued within its group of companies complementary strategies of business expansion and consolidating all of the assets and activities that it considered to be core holdings or functions.

While AYSI's work to expand the product types and product specifications it offers continues and is supported by its internal R&D efforts, ownership of the core intellectual property for its primary Arcoplate product has resided with the Kostecki family from the time of AYSI's formation (the "Arcoplate IP").

For some years the Board has considered the acquisition of the Arcoplate IP if it would prove potentially beneficial to shareholder value moving forward.  AYSI has accumulated cash for several years with this objective in mind.

Recently, the Board established an Independent Select Committee ("ISC") that is not affiliated with the Kostecki family or the entity that owns the Arcoplate IP ("Seller").  Thereafter, the ISC commissioned an estimate of the range of fair market value of the Arcoplate IP and recently negotiated a purchase price of AUD$17.8m with the Seller.  The terms of payment include a cash element of AUD$10.4m due upon the signing of the definitive purchase agreement and AUD$7.4m due in instalments pursuant to a promissory note.  The note will be repaid in monthly payments of principal plus accrued interest over 5 years.  The notes carry an interest rate of 400 basis points over cash rate of interest announced from time to time by the Reserve Bank of Australia.  The price and terms fell within the advised fair market value range.

The acquisition of the Arcoplate IP effectively completes AYSI's core asset consolidation strategy allowing it to focus even more strongly on new product development activities and further supply rationalisation activities.

About Alloy Steel

Alloy Steel manufactures and distributes Arcoplate, a technically superior and market leading 'alloy overlay' wear plate, servicing the global marketplace from its modern manufacturing facilities in Perth, Australia.  Arcoplate is used throughout the mining and materials processing industries, from opportunistic one-off specialty applications in small companies to large relationship based repeat business applications with leading international companies.

Arcoplate provides users with superior wear protection due to its premium alloy mix, its high ratio of carbide rich alloy and its unique manner of manufacture. The product's technical superiority combined with its unbeatable 'whole-of-life' cost has resulted in Arcoplate's wide acceptance in the mining and mineral processing industries to reduce wear in a host of fixed plant and mobile equipment applications.

In mining and materials processing industries, where premature equipment wear is the primary cause of downtime, to undertake repairs or refurbishment, Arcoplate can provide users with significant profit improvement. Arcoplate can substantially lower equipment downtime, resulting in higher production, whilst also lowering the overall cost of wear protection.

Furthermore, in applications where material 'hang-up' or 'carry-back' are also a significant cause of lost production, such as sticky materials that do not discharge freely from truck trays, buckets and chutes, Arcoplate's unique characteristic of polishing to a very low friction factor has the potential to virtually eliminate these problems, whilst simultaneously providing enhanced equipment wear life.

Thushara Sam Dahanayake
Company Secretary
[email protected]
+61-8-9248 3188