| Mon 23 Apr 2007, 11:08 | | Aveng Limited - Terms Announcement In Respect Of T |
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AEG
AEG
Aveng Limited - Terms Announcement In Respect Of The Proposed Disposal and
Withdrawal of Cautionary
Aveng Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
ISIN: ZAE000018081
Share Code: AEG
("Aveng" or "the Company")
TERMS ANNOUNCEMENT IN RESPECT OF THE PROPOSED DISPOSAL OF AVENG`S INDIRECT
45.65% SHAREHOLDING IN HOLCIM (SOUTH AFRICA) (PROPRIETARY) LIMITED AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the cautionary announcement dated 24 August 2006, 3 October 2006, 14
November 2006, 22 December 2006, 2 February 2007, 9 March 2007 and 16 April
2007, the board of directors wish to advise shareholders that Aveng has entered
into an agreement, dated 20 April 2007 which, subject to the fulfillment of the
conditions precedent set out in 4.6 below, will result in Aveng disposing of its
indirect 45.65% interest in Holcim South Africa ("Holcim SA"), at an implied
enterprise valuation for 100% of the business of R16.4 billion ("the Disposal").
2. Rationale
Aveng has a long established relationship with Holcim SA through its original
investment in Holcim SA more than six decades ago. However, Aveng`s strategy is
to achieve operational control over or have a controlling interest in all of its
major investments. The Aveng board has considered various alternatives with
respect to the Holcim SA investment and believes that the Disposal at an implied
enterprise value of R16.4 billion represents an attractive exit opportunity for
the Company from its minority stake in Holcim SA. In addition an important
consideration for the Board, which has been a strong supporter of transformation
in its sector, is that Aveng would be facilitating a landmark empowerment
transaction which would result in control of a major cement producer passing to
a BEE consortium. This is the second major empowerment transaction that Aveng
has been party to and follows the July 2004 sale of 25% of its South African
operations to a BEE Group.
Aveng has therefore engaged with Holcim Limited (`Holcim") to negotiate an exit
from Holcim SA by way of a series of inter-conditional transactions which will
result in AfriSam Limited ("AfriSam"), a vehicle which will be 85% owned by BEE
parties, owning 100% of Altur Investments (Proprietary) Limited ("Altur
Investments"), which in turn owns 100% of Holcim SA.
3. Details relating to Holcim SA and the BEE transaction
3.1 Description of the business of Holcim SA
Holcim SA is a wholly owned indirect subsidiary of Altur Investments which, in
turn, is a subsidiary of Holcim Limited (Switzerland) ("Holcim"), one of the
largest global players in the cement, readymix concrete and aggregate markets
with operations in over 70 countries.
Holcim SA owns and operates three cement factories (Dudfield, Ulco and Tanga),
two cement/slagment milling facilities, eleven cement/Silica Fume depots or
terminals, 16 quarries and aggregate operations and 36 readymixed concrete
plants and employs approximately 2000 people. Holcim SA has an estimated one-
third share of the local cement market and a total cementitious capacity of 4.1
million tons per annum.
With investments in Slagment (Proprietary) Limited and a 62,5% interest in the
listed Tanzanian cement operation, Tanga Cement, Holcim SA is one of the largest
suppliers of construction related materials in Southern Africa.
Through Altur Investments, Holcim formed a strategic partnership with Aveng more
than six decades ago whereby Holcim has provided the cement manufacturing
expertise and Aveng local market knowledge.
3.2 The BEE transaction
Holcim SA is a wholly-owned subsidiary of Altur Investments and represents the
only asset held by Altur Investments.
The present shareholding structure of Holcim SA is set out below:
Aveng Holcim*
45.65% | |
| | 100%
| |
|_ _ _ |
| AfriSam
|_ _ _ _ _ _ _ _ _ _ _ | 54.35%
|
Altur Investments
|
| 100%
|
Holcim SA
*Held indirectly through an intermediate holding company.
On 24 August 2006 Holcim announced that it had entered into a BEE transaction
("the BEE transaction") in terms of which Holcim will dispose of 85% of its
54.35% interest in Altur Investments to the BEE consortium AfriSam Consortium
(Proprietary) Limited ("AfriSam Consortium") as follows:
- In anticipation of the BEE transaction, Holcim transferred its indirect
shareholding in Altur Investments to a wholly-owned subsidiary of Holcim,
AfriSam (Pty) Limited; and
- Holcim will, upon implementation of the BEE transaction, dispose of 85% of
AfriSam to the AfriSam Consortium.
As a consequence of the implementation of the aforementioned BEE transaction, in
combination with the Disposal, AfriSam will own 100% of Altur Investments. The
following diagram provides an illustration of the transaction after the
Disposal.
AfriSam Consortium Holcim*
85% | | 15%
|_ _ _ _ _ _ _ _ _ _ _ _ _ _ _|
|
|
AfriSam
|
| 100%
|
Altur Investments
|
| 100%
|
Holcim SA
*Held indirectly through an intermediate holding company.
4. Terms of the Disposal
4.1 Mechanism
Aveng will, subject to shareholder approval, dispose of the 1 000 181 issued
"B1" ordinary shares and 4 909 645 ordinary "B2" ordinary shares it holds in
Altur Investments ("sale shares") to Altur Investments. The Disposal will be
effected by way of a repurchase of the sale shares by Altur Investments ("the
Repurchase").
The Repurchase by Altur Investments will be effected in terms of Section 85 of
the Companies Act 61 of 1973, as amended ("the Act") and will be undertaken from
the share capital account, the share premium account and the accumulated
distributable reserves in Altur Investments.
4.2 Disposal value
Aveng will dispose of its interest in Altur Investments for an aggregate
disposal value, based on an enterprise value of R16.4bn and net debt of R146m at
the effective date, of R7.4 billion of which R6.8 billion will be payable in
cash ("cash proceeds"). A further amount of R641 million in STC credits will be
available to be offset against future STC liabilities to be incurred in respect
of future payments to shareholders. The benefit of the STC credit is not taken
into account in the calculation of the financial effects of the Disposal as set
out in paragraph 4.5 below. The cash proceeds equate to an after tax profit of
R6.45bn for Aveng`s indirect interest in Holcim SA.
4.3 Application of proceeds
The application of the proceeds will be determined, after having consulted, to
the extent necessary, with Aveng`s debt providers, the existing bondholders and
after having taken into account the performance bonding requirements of the
construction division as well as the funding requirements for organic growth
opportunities. The Board however anticipates that at least 50% of the cash
proceeds will be returned to shareholders. Aveng will communicate further
details on the proposed mechanism and the extent of such return of capital to
shareholders as soon as practicable.
4.4 Prospects for Aveng
Aveng strives to be a globally competitive construction related Group focussed
principally on the developing world. It is the holding company for a number of
large and relatively autonomous subsidiaries which operate in 29 countries and
are organised in three strategic clusters namely `Engineering, Construction &
Contract Mining`, `Steel & Allied` and `Cement`.
Although historically, Holcim SA has represented a significant proportion of the
South African business operations, the other divisions within Aveng are
performing increasingly well and the residual Group, post the Holcim disposal,
is well placed to take advantage of the anticipated buoyant conditions in all of
the countries in which it operates. For the half year ended 31 December 2006
Aveng `s turnover excluding Holcim SA was R10.6 bn on which it generated an
operating profit of R463m.
The Aveng business model of balancing risk between its construction and non-
construction operations on the one hand and, within construction, between its
central time zone (Grinaker-LTA ) and its eastern time zone (McConnell Dowell
Corporation) businesses remains unchanged and is seen as a major strength.
The directors are confident that the additional capacity currently being added
in most operations will enhance Aveng`s service offering and enable the Group to
continue to meet rapidly growing demand over the medium term.
4.5 Effective date
The effective date of the Disposal, subject to the all conditions precedent
being met, will be 1 January 2007.
4.6 Conditions precedent
The Disposal is subject the following principal conditions precedent being
fulfilled by no later than 31 May 2007:
- the passing by the shareholders of Altur Investments of special
resolutions:
amending the articles of association of Altur Investments in order to authorise
the Repurchase by Altur Investments of its shares in terms of Section 85 of the
Act; and
- Approving, as a specific approval in terms of Section 85 of the Act, the
Repurchase by Altur Investments of its shares;
- the registration of the abovementioned special resolutions by the Registrar
of Companies;
- Aveng shareholders in general meeting passing the necessary resolutions to
implement the Disposal;
- obtaining the requisite regulatory approvals; and
- the successful conclusion of the financing arrangements by AfriSam
Consortium and Holcim such that Altur Investments may settle the cash disposal
consideration in respect of the transactions outlined in paragraph 4.2 above.
4.7 Financial effects of the Disposal
The table below sets out the pro forma financial effects of the Disposal on
Aveng`s unaudited EPS, diluted EPS, headline EPS, diluted headline EPS, NAV per
share and NTAV per share, based on the unaudited results of Aveng for the six
months ended 31 December 2006. The unaudited pro forma financial effects are the
responsibility of the Aveng directors and have been prepared for illustrative
purposes only to provide an indication of how the Disposal may have affected the
financial position of the Aveng on the relevant reporting date. These pro forma
financial effects have been prepared for illustrative purposes only and, because
of their nature, may not give a true reflection of the actual financial effects
of the Disposal on Aveng.
31 December 2006 Before the After the Disposal %
Disposal (cents) change
(cents)
Earnings per share 115.9 1,773.3 1430%
(cents)
Headline earnings 115.9 115.9 0%
per share (cents)
Fully diluted 105.3 1,524.1 1347%
earnings per
ordinary share
(cents)
Fully diluted 105.3 105.3 0%
headline earnings
per share (cents)
Net asset value per 984.5 2,613.0 165%
share(cents)
Net tangible asset 792.6 2,421.1 205%
value per share
(cents)
Notes:
1. The figures in the column "Before the Disposal" have been extracted from
Aveng`s unaudited financial results for the six months ended 31 December 2006,
which were published on SENS on 5 March 2007 and in the press on 6 March 2007.
2 The "After the Disposal " column is calculated on the following basis:
- the 45.65% shareholding in Altur Investments was sold with effect from
1 July 2006;
- the cash proceeds from the Disposal were received on 1 July 2006;
- interest was earned on the net cash proceeds received at an after tax rate
of 6.4% % per annum for the period 1 July 2006 to 31 December 2006; and
- the after tax profit on the Disposal of the sale shares of R6.45 billion
(calculated based on the carrying value of Altur Investments at 30 June 2006 and
after deducting transaction costs) has been excluded in the calculation of
headline earnings per ordinary share and fully diluted headline earnings per
share.
3. The benefit of the STC credit has not been taken into account in
determining the financial effects.
5. Posting of the circular
A circular providing further information on the Disposal and containing a notice
of general meeting and a form of proxy will be posted to shareholders on or
about 11 May 2007.
6. Withdrawal of cautionary
The cautionary announcement is hereby withdrawn and accordingly caution is no
longer required to be exercised by shareholders when dealing in their Aveng
shares.
Sandton
23 April 2007
Merchant bank and transaction sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Sponsor
JP Morgan Equities Limited
Date: 23/04/2007 11:08:35 Produced by the JSE SENS Department.
