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TFX
TFX
TFX - Top Fix - Joint Venture Agreement and Withdrawal Of Cautionary
Top Fix Holdings Limited
(formerly Nutcreek Investments (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2006/011359/06)
JSE code: TFX ISIN: ZAE000088423
("Top Fix" or "the company")
ESTABLISHMENT OF SCAFFOLDING JOINT VENTURE AND WITHDRAWAL OF CAUTIONARY
Introduction:
The Board of Top Fix are pleased to advise that, with effect from 13 June 2007,
Top Fix has entered into a Joint Venture ("JV") agreement with Robor (Pty)
Limited ("Robor") regarding the formation of a scaffolding leasing business.
Robor manufactures various specifications of steel tubing, which is the
principal material used in the manufacture of scaffolding, but has limited
scaffolding exposure.
To facilitate the formation of the JV, five agreements have been entered into
namely:
- Shareholders agreement;
- Option agreement;
- Steel Supply agreement;
- Fittings Supply agreement; and
- Scaffolding Supply agreement.
Collectively referred to as JV agreements.
Purpose of agreements:
Given the recent exceptional growth in the Southern African construction
industry, both Top Fix and Robor believe that the demand for scaffolding
products will be sustained at high levels and accordingly both companies wish to
pursue a mutually beneficial partnership as more fully described in the JV
agreements and as summarised later herein.
Top Fix has entered into each of these agreements for the following reasons:
- The local market demand for scaffolding has grown and continues
to grow substantially;
- Top Fix cannot independently produce sufficient quantities of
scaffolding to meet this demand;
- Top Fix does not desire to become a manufacturer of scaffolding
but rather sees its role as the provider of scaffolding for
large capital project tenders (such as Eskom`s planned power
station upgrades and Sasol`s expansion etc (both of which are
Top Fix`s current clients)); and
- Top Fix wishes to expand its current business offering to
include "form work" type scaffolding. Top Fix currently only
provides access scaffolding.
Terms of the agreements:
A) Shareholder and Option agreements:
The shareholder and option agreements provide for the
following:
- Formation of a Joint Venture vehicle called TFR
Scaffolding (Proprietary) Limited ("TFRS");
- Robor will be responsible for the operational management
of TFRS and Top Fix the marketing development;
- It is the intention of the JV participants to capitalise
TFRS to the extent of R20 million. This will be done via
shareholders loans of R8 million each from Top Fix and
Robor. In addition Wellmax (Pty) Limited ("Wellmax") will
subscribe for and be allotted and issued with R4 million
of convertible preference shares. Wellmax is a metals
pressing business with strong toolmaking experience and
expertise. Loan finance will be raised for any further
working capital requirements of TFRS;
- Top Fix and Robor will share the financial security
requirements on the debt funding equally;
- TFRS will operate from the premises previously occupied by
Top Fix Scaffolding (who will be moving to larger premises
in close proximity);
- TFRS will manufacture the scaffolding;
- TFRS will acquire steel from Robor and fittings from
Wellmax at competitive rates;
- TFRS will sell and hire out the scaffolding to the general
market, on the basis that, Top Fix will get preference on
its scaffolding requirements;
- Top Fix will purchase the bulk of its new scaffolding
requirements from the JV and will rent any of its surplus
(or excess market demand) requirements from the JV;
- The TFRS board of directors will comprise an equal number
of Robor and Top Fix representatives;
- All major decisions need to be agreed upon by both
shareholders;
- Since Robor is the operational partner, Top Fix will be
consulted over the appointment of a Managing Director and
Financial Director to TFRS;
- TFRS will draw services from Robor for information
technology, operations, accounting, etc at negotiated and
market related rates;
- The market linked preference shares issued to Wellmax are
convertible after a period of five years to a 20% interest
(ordinary shareholding) in TFRS with Robor and Top Fix
diluting their respective shareholdings in TFRS to 40%
each;
- If Wellmax opts to convert its holding, it must assume its
pro rata (20%) portion of the financial guarantee
commitments of TFRS and it will be entitled to a seat on
the TFRS Board;
- Robor and Top Fix have an option to buy Wellmax`s ordinary
shares (post conversion) in TFRS at a price based on the
profit after tax of the JV for the twelve months
immediately preceding the exercise of the option
multiplied by a 5 times multiple;
- Should Robor and Top Fix exercise their options as
detailed above, Robor will then have the additional option
of increasing its stake in TFRS to 55%, and should either
Robor or Top Fix not exercise their option then Wellmax
will be entitled to sell its shares on the open market;
- No party may sell any of its interests in the JV to a
competitor of the business.
B) The two Supply agreements:
These agreements outline the supply of:
- Steel by Robor; and
- Fittings by Wellmax
In terms of these agreements the prices on steel or fittings
will be at most advantageous market prices.
C) Scaffolding Supply agreement:
This agreement covers the rental and purchase contractual
terms covering the manner in which:
- Top Fix will buy scaffolding from TFRS; and
- TFRS will rent scaffolding to Top Fix.
TFRS will rent or sell scaffolding to other companies
provided the pricing thereof reflects appropriate volume off-
take/s. Prices to Top Fix will be at the most competitive and
market related rates. TFRS is precluded from entering the
scaffold erection markets and will confine itself to rental
and sale.
Conditions precedent:
- Confirmation of funding by the joint venture participants.
Pro-forma financial effects:
TFRS has not yet commenced with commercial operations and as such no pro-forma
financial effects have been prepared as there is no contractual information on
which to base such forecasts.
Withdrawal of cautionary:
Shareholders are referred to the cautionary announcements dated 8 February 2007,
23 March 2007 and 3 May 2007, and are advised that as the negotiations referred
to therein have now been finalised, and that since no financial effects will be
prepared, caution is no longer required to be exercised by shareholders when
dealing in their securities.
Johannesburg
14 June 2007
Designated advisor:
Ernst & Young Sponsors (Pty) Ltd
(Registration Number 2000/031843/07)
Date: 14/06/2007 09:04:26 Produced by the JSE SENS Department.
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