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BRT BRN
BRT
BRT/ BRN - Brimstone - Disposal of an effective 25.01% interest in Lenco
Brimstone Investment Corporation Limited
(Registration number 1995/010442/06)
(Incorporated in the Republic of South Africa)
ISIN Number: ZAE000015277 Share Code: BRT
ISIN Number: ZAE000015285 Share Code: BRN
("Brimstone" or the "Company")
DISPOSAL OF AN EFFECTIVE 25.01% INTEREST IN LENCO HOLDINGS (PROPRIETARY)
LIMITED ("LENCO")
Introduction
Holders of ordinary shares and "N" ordinary shares in Brimstone ("Brimstone
shareholders") are advised that Brimstone has entered into agreements, dated 20
March and 27 March 2007, to dispose of its effective 25.01% equity interest in
Lenco to Mondi Packaging South Africa (Proprietary) Limited ("Mondi") with
effect from 1 January 2007 ("the disposal").
Nature of business of Lenco
Lenco is a significant plastic packaging company in South Africa, specialising
in the manufacturing of rigid plastics. It is the chosen strategic partner to
South Africa`s greatest brands and a leader in the rigid plastic packaging
industry with innovation through design, technology and service excellence.
Lenco`s business includes the manufacture and sale of packaging such as blow
moulded plastic containers, injection moulded closures, foamed styrene trays,
tubs and stretch film.
Rationale for the disposal
CDC Group plc, Brimstone and the management of Lenco (collectively "Lenco
shareholders") implemented a leveraged buy out ("LBO") of the business of Lenco
in 2003 with the intention of growing Lenco`s market share in the packaging
industry. The LBO proved to be very successful - within three years Lenco has
significantly reduced the level of debt raised for the implementation of the
LBO and provided its shareholders with the economic returns initially targeted
in 2003. Lenco is now very well positioned in the market having secured
significant contracts to solidify its growth prospects and accordingly, Lenco
shareholders believe that the timing to exit their investment is now opportune.
Consideration
The total cash consideration payable to Brimstone for the disposal is R202 903
463 ("the cash proceeds") of which R50 873 225 pertains to the repayment to
Brimstone of its shareholder loan. The cash proceeds will accrue interest at
the Johannesburg Interbank Acceptance Rate ("JIBAR") from the effective date to
the closing date being the third business day succeeding the date on which all
the suspensive conditions, referred to in paragraph 6 below, have been
fulfilled or waived. Should the closing date be after 30 June 2007, the
interest will increase to JIBAR plus 2% thereafter. The cash proceeds together
with the aforementioned interest will be used to reduce Brimstone`s borrowings
and pursue other opportunities.
Pro forma financial effects
Based on the published consolidated reviewed results of Brimstone for the 12
months ended 31 December 2006, the pro forma financial effects of the disposal
on Brimstone`s net asset value ("NAV") and tangible NAV per share are set out
below. The pro forma financial information has been prepared for illustrative
purposes only and because of its nature may not give a true picture of
Brimstone`s financial position and is the responsibility of Brimstone`s
directors.
Per Brimstone ordinary Before the After the Percentage
share and "N" ordinary disposal(1) disposal(2) Change
share (cents)
NAV and tangible NAV 674.5 712.6 (3) & (4) 5.6%
per share
Notes:
Based on the published consolidated reviewed results of Brimstone for the 12
months ended 31 December 2006.
Based on the assumption that the disposal was effected on 31 December 2006 for
balance sheet purposes.
After taking into account the profit on sale of Lenco of R109.5 million, based
on a carrying value of the Lenco investment of R93.4 million.
On the basis that no intangible assets are separately recognised, in accordance
with International Financial Reporting Standards.
The pro forma financial effects of the disposal on Brimstone`s earnings and
headline earnings have not been disclosed as these are not significant.
Suspensive conditions
The disposal is subject to certain suspensive conditions including, inter alia,
approval by the competition authorities.
Categorisation
The disposal is a Category 3 transaction in terms of the JSE Limited Listings
Requirements.
Cape Town
28 March 2007
Investment bank and sponsor to Brimstone
Nedbank Capital
Legal adviser to Lenco
Prinsloo, Tindle & Adropoulos Inc
Adviser to Lenco
Investec Corporate Finance
Date: 28/03/2007 13:05:51 Produced by the JSE SENS Department.
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