| Mon 23 Apr 2007, 15:31 | | WEA - Wearne - Acquisition And Withdrawal Of Cauti |
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WEA
WEA
WEA - Wearne - Acquisition And Withdrawal Of Cautionary Announcement
W G WEARNE LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1994/005983/06)
(JSE code: WEA & ISIN: ZAE000078002)
("Wearne" or "the company")
ACQUISITION OF THE BUSINESSES OF TZANEEN QUARRY (PTY) LIMITED AND
WILLOWSFOUNTAIN QUARRY (PTY) LIMITED
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the cautionary announcement dated 12
March 2007.
Wearne has, subject to the conditions precedent set out below,
purchased the business and certain specific assets of Tzaneen
Quarry (Pty) Limited ("the Tzaneen business") from the said
company, the shareholders of which are Ian Wray Laird and Peter
Hammond ("the Tzaneen acquisition"). In addition Wearne has
purchased the business and certain specific assets of
Willowsfountain Quarry (Pty) Limited ("the Willowsfountain
business") from the said company, the shareholders of which are
Ian Wray Laird Family Trust and Peter Hammond Family Trust ("the
Willowsfountain acquisition").
The Tzaneen acquisition and the Willowsfountain acquisition ("the
Acquisitions") are interdependent.
In terms of the Listings Requirements of the JSE Limited ("JSE")
the Acquisitions are classified as a category 3 transaction.
2. THE TZANEEN ACQUISITION
2.1 RATIONALE FOR THE TZANEEN ACQUISITION
Wearne is a major supplier of ready mixed concrete and aggregates
to the building industry. The company provides its products to
customers in the construction, housing and mining industries, as
well as for various government projects. The company`s stone
crushing and ready mixed concrete plants are strategically located
in areas that cover the Free State, Gauteng, North West and
Limpopo provinces.
The Tzaneen acquisition will expand Wearne`s presence in the fast
growing Limpopo province aggregate market.
2.2 DESCRIPTION OF THE TZANEEN BUSINESS
The Tzaneen business is a commercial quarry manufacturing and
supplying road and concrete aggregates to the private and public
sector in Tzaneen and its surrounds.
2.3 TERMS AND CONDITIONS OF THE TZANEEN ACQUISITION
2.3.1 On 11 April 2007 Wearne entered into an agreement, subject to the
fulfilment of the conditions precedent in 2.4 below, to purchase,
with effect from 1 July 2007, the Tzaneen business. The purchase
consideration is a maximum of R 27, 5 million and is subject to
profit warranties.
2.3.2 The purchase price is payable as follows:
2.3.2.1 Initial Payment
An amount of R 10 million becoming payable in cash on the closing
date of the transaction against delivery of the Tzaneen business.
2.3.2.2 Second Payment
The second payment will be the greater of R2.5 million or an
amount equal to 25% of the actual net profit after tax of the
Tzaneen business for the year ending 30 June 2008 multiplied by a
PE ratio of 7.
The second payment will be paid as follows:
- The issue of 500 000 ordinary Wearne shares at an issue price
of 500 cents per share;
- The balance of the purchase price, if any, will be paid in
cash.
2.3.2.3 Third Payment
The third payment will be the greater of R2.5 million or an amount
equal to 25% of the actual net profit after tax of the Tzaneen
business for the year ending 30 June 2009 multiplied by a PE ratio
of 7.
The third payment will be paid as follows:
- The issue of 500 000 ordinary Wearne shares at an issue price
of 500 cents per share;
- The balance of the purchase price, if any, will be paid in
cash.
2.3.3 Peter Hammond and Ian Wray Laird, the Executive Directors of
Tzaneen Quarry (Pty) Ltd have signed restraint undertakings in
favour of the Tzaneen business and Wearne. They have also entered
into a service agreement with Tzaneen until 30 June 2009.
2.4 CONDITIONS PRECEDENT TO THE TZANEEN ACQUISITION
The Tzaneen acquisition is subject to the fulfilment of the
following conditions precedent:
2.4.1 Completion of a due diligence on the Tzaneen business by Wearne to
its satisfaction;
2.4.2 Conclusion of the New Mining Lease;
2.4.3 Conclusion of a New Premises Lease.
3. THE WILLOWSFOUNTAIN ACQUISITION
3.1 RATIONALE FOR THE WILLOWSFOUNTAIN ACQUISITION
Wearne is a major supplier of ready mixed concrete and aggregates
to the building industry. The company provides its products to
customers in the construction, housing and mining industries, as
well as for various government projects. The company`s stone
crushing and ready mixed concrete plants are strategically located
in areas that cover the Free State, Gauteng, North West and
Limpopo provinces.
The Willowsfountain acquisition is in line with Wearne`s strategy
to expand its geographical footprint to include Kwa Zulu Natal.
The Willowsfountain quarry is situated in the Pietermaritzburg
area.
3.2 DESCRIPTION OF THE WILLOWSFOUNTAIN BUSINESS
The Willowsfountain business is a commercial quarry manufacturing
and supplying road and concrete aggregates to the private and
public sector of Pietermaritzburg and its surrounds.
3.3 TERMS AND CONDITIONS OF THE WILLOWSFOUNTAIN ACQUISITION
3.3.1 On 11 April 2007 Wearne entered into an agreement, subject to the
fulfilment of the conditions precedent in 3.4 below, to purchase,
with effect from 1 July 2007, the Willowsfountain business. The
purchase consideration is a maximum of R 27, 5 million and is
subject to profit warranties.
3.3.2 The purchase price is payable as follows:
3.3.2.1 Initial Payment
An amount of R 10 million becoming payable in cash on the closing
date of the transaction against delivery of the Willowsfountain
business.
3.3.2.2 Second Payment
The second payment will be the greater of R2.5 million or an
amount equal to 25% of the actual net profit after tax of the
Willowsfountain business for the year ending 30 June 2008
multiplied by a PE ratio of 7.
The second payment will be paid as follows:
- The issue of 500 000 ordinary Wearne shares at an issue price
of 500 cents per share;
- The balance of the purchase price, if any, will be paid in
cash.
3.3.2.3 Third Payment
The third payment will be greater of R2.5 million or an amount
equal to 25% of the actual net profit after tax of the
Willowsfountain business for the year ending 30 June 2009
multiplied by a PE ratio of 7.
The third payment will be paid as follows:
- The issue of 500 000 ordinary Wearne shares at an issue price
of 500 cents per share;
- The balance of the purchase price, if any, will be paid in
cash.
3.3.3 Peter Hammond and Ian Wray Laird, the Executive Directors of
Willowsfountain Quarry (Pty) Ltd have signed restraint
undertakings in favour of Willowsfountain and Wearne. They have
also entered into a service agreement with Willowsfountain until
30 June 2009.
3.4 CONDITIONS PRECEDENT TO THE WILLOWSFOUNTAIN ACQUISITION
The Willowsfountain acquisition is subject to the fulfilment of
the following conditions precedent:
3.4.1 Completion of a due diligence on the Willowsfountain business by
Wearne to its satisfaction;
3.4.2 Conclusion of the New Mining Lease;
3.4.3 Conclusion of a New Premises Lease.
4. UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITIONS
The unaudited pro forma financial effects set out below are
provided for illustrative purposes only to provide information
about how the Acquisitions may have impacted on Wearne`s results
and financial position. Due to the nature of the unaudited pro
forma financial information, it may not give a fair presentation
of the company`s results and financial position after the
Acquisitions. The unaudited pro forma financial effects are based
on the reviewed interim financial information of Wearne at 31
August 2006. The directors of Wearne are responsible for the
preparation of the unaudited pro forma financial effects.
Before Pro forma Change
the After the
Acquisit Acquisitions
ions unaudited
reviewed 31 August 2006
interim
31
August
2006
Earnings per 10.14 11.83 16.67%
share (cents)
Headline earnings 9.79 11.47 17.16%
per share (cents)
Net asset value 57.60 66.48 15.42%
per share (cents)
Net tangible 55.70 58.95 5.83%
asset value per
share (cents)
Weighted average 130 000 130 000
shares in issue
(`000)
Shares in issue 125 015 125 015
at period end
(`000)
Notes:
(1) The unaudited pro forma financial effects on the results were
prepared on the basis that both the Acquisitions were
completed on 1 March 2006.
(2) The "Before the Acquisitions" column has been extracted
without adjustment, from the reviewed interim results of
Wearne for the six months ended 31 August 2006.
(3) The "After the Acquisitions" earnings and headline earnings
per share have been based on the unaudited management results
of the Tzaneen business and the Willowsfountain business for
the six months ending 31 December 2006. Exchange Sponsors
(Pty) Limited has satisfied itself that the management
accounts are accurate and fairly present the financial
position of the Tzaneen business and the Willowsfountain
business for the six months ended 31 December 2006.
(4) The "After the Acquisitions" net asset value and net tangible
asset value per share have been adjusted to include the
assets of the Tzaneen business and Willowsfountain business
for the year ending 30 June 2006 and the estimated
transaction costs have been written off against share
premium.
(5) The "After the Acquisitions" earnings and headline earnings
per share have been based on the unaudited interim results of
the Tzaneen business and the Willowsfountain business for the
six months ended 31 December 2006.
(6) Goodwill of approximately R7 million will arise on the
Acquisitions.
5. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT AND FURTHER CAUTIONARY
ANNOUNCEMENT
Caution is no longer required to be exercised by shareholders when
dealing in their securities in terms of the cautionary
announcement dated 12 March 2007. However shareholders are advised
that Wearne has entered into negotiations, which are unrelated to
the above Acquisitions, which if successfully concluded, may have
a material effect on the price of the company`s securities.
Accordingly, shareholders are advised to exercise caution when
dealing in the company`s securities until a full announcement is
made.
6. FURTHER ANNOUNCEMENT
Shareholders will be notified once the Acquisitions have become
unconditional.
Johannesburg
23 April 2007
Designated adviser Exchange Sponsors
Attorneys Fluxmans Attorneys
Date: 23/04/2007 15:31:29 Produced by the JSE SENS Department.
