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FLS Industries sells FLS Aerospace

After lengthy and complicated negotiations with several prospective buyers, FLS Industries has signed an agreement with SR Technics, the Swiss provider of aircraft maintenance solutions whose principal shareholder is 3i - the leading European Private Equity investor - and Star Capital, to sell FLS Aerospace free from debt for a lump sum equivalent to approximately 350 million Danish kroner. Under the agreement the buyer shall take over the company's pension commitments, which amounted to DKK 611m at the end of 2002. The buyer shall also take over all liabilities deriving from the restructuring which in the longer term will amount to a million DKK figure. The agreement is subject, inter alia, to the approval of various authorities. The deal is expected to be finalised within one to three months.

Board Chairman Jørgen Worning, FLS Industries, comments the signing of the agreement as follows:
"Considering the present market situation and the fact that the buyer is taking over the company's pension commitments, I regard the outcome of the negotiations as satisfactory. With the sale of FLS Aerospace to SR Technics, FLS Industries has fulfilled the objective in its strategic plan of August 2002 to sell the Group's non-strategic activities. This enables us to focus the Group's resources on the future development of its core activities: F.L.Smidth Group and FLS Building Materials.
Since the strategic plan was published, focusing of the FLS Group has continued with the divestment of major shareholdings in NKT and Secil, the sale of Unicon's US-based operations and the non-ready-mix activities and the disposals of Dansk Træemballage, J.A.Plastindustri, Handelmij Austria B.V., PM Energi, Pfister Waagen and Pedershaab."

After several years of unsatisfactory earnings, FLS Aerospace has in recent years undergone a considerable restructuring process. Management is convinced that under its new ownership FLS Aerospace will be ideally placed in the longer term to continue the development of its business in an industry currently characterised by major restructuring and consolidation. SR Technics is the world's leading independent solutions-provider of comprehensive technical aircraft services with a total turnover in 2002 of CHF 1,080m and a workforce of about 2,800. Both parties to the agreement are convinced that FLS Aerospace's activities will complement SR Technics' present business in the aviation market.

FLS Aerospace was formed in 1988, when the FLS Group integrated the newly acquired British aerospace company Lovaux and a number of minor existing business activities serving the aerospace market into one organisation named FLS Aerospace. In the wake of a number of minor acquisitions, early 1991 saw the acquisition of UK-based Dan Air's major aircraft engineering operation and in November that year another UK company, FFV Aerotech Limited, was acquired. The acquisition of TEAM Aer Lingus, the Irish aircraft maintenance business, in December 1998, made FLS Aerospace Europe's leading independent aircraft maintenance provider with 125,000 square metres of hangar and workshop facilities in five countries. In 2002, FLS Aerospace had a turnover of DKK 2.7bn and employed 3,150 people.

The financial effects of the sale
The sale of FLS Aerospace will reduce the book value of the FLS Industries shareholders' equity as at 30 September 2003 by approximately DKK 1.8bn. The accounting loss amounts to DKK 2.0bn. including foreign exchange adjustments from the previous years and will be carried in the annual accounts for 2003. On completing the sale the balance sheet total of FLS Industries will be further reduced by one billion DKK.

FLS Industries A/S
Corporate Public Relations