| Tue 19 Jun 2007, 11:06 | | CMG - Cenmag Holdings Limited - Announcement |
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CMG
CMG
CMG - Cenmag Holdings Limited - Announcement
Cenmag Holdings Limited
(Registration number 1987/004281/06)
Share code: CMG ISIN: ZAE000001533
("Cenmag" or "the company")
ANNOUNCEMENT REGARDING A RELATED PARTY DISPOSAL, THE ACQUISITION OF TELEPASSPORT
(PROPRIETARY) LIMITED, AN INCREASE IN AUTHORISED SHARE CAPITAL, A CHANGE IN
CONTROL, A SPECIFIC ISSUE OF SHARES FOR CASH AND THE RENEWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
Shareholders of Cenmag are referred to the cautionary announcement dated 7 May
2007, and are advised that agreements have been signed between the company and
Blaf Investments cc, and between Cenmag and TelePassport (Proprietary) Limited.
Accordingly, subject to the conditions precedent set out in paragraph 4 below,
Cenmag shall dispose of its entire business as a going concern to Blaf
Investments cc ("Blaf") ("the Blaf disposal"), and acquire 100% of the shares in
and loan account claims against TelePassport (Proprietary) Limited
("TelePassport") ("the TelePassport acquisition").
2. THE BLAF DISPOSAL
In terms of an agreement signed on 5 June 2007, Cenmag shall, with effect form 1
March 2007, dispose of its entire business as a going concern to Blaf for a
disposal consideration of R1 361 000, to be settled in cash.
Cenmag has been, since the date of its incorporation in 1987, an investment
holding company whose subsidiaries are involved primarily in the manufacture of
electromagnets, the rewinding of motors and the wholesale of electrical and
related equipment.
The Blaf disposal constitutes a related party transaction, as two shareholders
of Cenmag, namely Viktor Farkas and Elaine Greenblatt, are also the sole members
of Blaf. Accordingly, Moores Rowland have been appointed to advise shareholders
as to whether the Blaf disposal is fair and reasonable. Their opinion shall be
contained in the circular to be posted to shareholders in due course. In
addition, the JSE has ruled that Blaf shall be excluded from voting on any of
the transactions discussed in this announcement and to be proposed at the
general meeting of shareholders to be called in due course.
The proceeds from the Blaf disposal shall be utilised to offset the costs
relating to the proposed acquisition of TelePassport and the specific issue of
shares for cash.
3. RATIONALE FOR THE BLAF DISPOSAL
Since 1995, the financial performance of Cenmag has not warranted the costs of
being listed on the JSE Limited ("JSE"), and the majority shareholders were
faced with the situation of having to fund the company should it continue as
before. An acquisition offer has been received from Pacific Breeze Trading 417
(Proprietary) Limited ("PBT") in terms of which PBT has offered to acquire the
majority shareholders` stake, being 6 822 795 ordinary shares in Cenmag, or
71.05% of the issued share capital of the company, at an offer price of 20 cents
per share.
4. CONDITIONS PRECEDENT - BLAF DISPOSAL
The Blaf disposal is subject to the approval of the disposal by shareholders,
other than the related parties, in general meeting. Cenmag has received
irrevocable undertakings from 80.99% of shareholders entitled to vote, to vote
in favour of the disposal.
5. CHANGE IN CONTROL
The acquisition offer from PBT results in an effective change in control of the
company. In terms of Rule 8.7 of the Securities Regulation Panel ("SRP") Code on
Take-overs and Mergers an offer may be waived by the majority of independent
shareholders in general meeting.
6. THE TELEPASSPORT ACQUISITION
In terms of an agreement signed on 30 May 2007, Cenmag shall, subsequent to the
Blaf disposal and an increase in its authorised share capital, with effect from
1 March 2007, acquire 100% of the shares in and loan claims against TelePassport
for an acquisition consideration of R126 300 000.
7. INCREASE IN AUTHORISED SHARE CAPITAL
In order to enable the Company to acquire the new assets detailed above or raise
additional capital in the future, it is proposed that the current authorised
share capital be increased from 20 000 000 ordinary shares of 1 cent each, to
300 000 000 ordinary shares of 1 cent each, by the creation of 280 000 000 new
ordinary shares of 1 cent each which will rank pari passu in all respects with
the existing ordinary shares in the equity share capital of the company.
8. NATURE OF BUSINESS OF TELEPASSPORT
Established in 1993, TelePassport is the longest established least cost routing
(LCR) provider in South Africa, and provides management of mainstream voice
between the different carriers, selecting appropriate routes and managing tariff
alternatives in order to ensure that clients get the least-cost-for-route and
highest quality telecommunication service. TelePassport is ISO9001:2000
certified and operates from offices in all the major centres in South Africa,
and has an associated company in Namibia.
9. RATIONALE FOR THE ACQUISITION
Should shareholders vote in favour of the Blaf disposal, Cenmag shall be in the
position to acquire assets on favourable terms, and the company will provide a
suitable vehicle for bringing quality assets to market, in order to unlock value
for shareholders of the company. TelePassport is positioned to become a leader
in its field, and is thus ideally suited to being injected into Cenmag
subsequent to the Blaf disposal.
10. CONSIDERATION PAYABLE FOR THE TELEPASSPORT ACQUISITION
In terms of the TelePassport acquisition agreement, the consideration payable is
R126 300 000, to be satisfied by the issue of 40 046 601 Cenmag ordinary shares
of 1 cent each to the vendors at 187.41 cents per share, and by the further
issue of 20 499 320 vendor placement shares at an issue price of 250 cents per
share. Cenmag has received irrevocable undertakings from third parties to
subscribe for 20 499 320 ordinary shares, subject to the approval of Cenmag
shareholders in general meeting.
The vendor placement shall comply with section 5.62 of the JSE Listings
Requirements with regard to vendor consideration placings.
11. CONDITIONS PRECEDENT - TELEPASSPORT ACQUISITION
The TelePassport acquisition is subject to the approval of shareholders in
general meeting, and the approval of the Competitions Commission.
12. RECONSTITUTION OF THE BOARD OF DIRECTORS OF CENMAG
It is proposed that, upon conclusion of the Blaf disposal and the TelePassport
acquisition, the board of directors of Cenmag be reconstituted.
13. SPECIFIC ISSUE OF SHARES FOR CASH
In order to fund future potential acquisitions, it is the intention of the
company to seek an authority from shareholders to issue 29 500 680 ordinary
shares of 1 cent each to public shareholders at an issue price of 250 cents per
share. Cenmag has received irrevocable undertakings from third parties to
subscribe for 29 500 680 ordinary shares, subject to the approval of Cenmag
shareholders in general meeting.
14. PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects of the transactions detailed above,
are provided for illustrative purposes only, and, are the responsibility of the
directors of Cenmag. Because of their nature, they may not truly reflect the
financial position and results of operations.
The pro forma financial effects have been in terms of IFRS. TelePassport and
Cenmag have the same year end, and the audited results of both companies for the
comparative periods ended 28 February have been used in the preparation of the
pro forma financial effects.
Before After After the After
the the related the
related related party related
party party % Blaf % party %
Blaf Blaf Change disposal Change Blaf Change
disposal disposal and the disposa
Tele- l, the
Passport Tele-
acqui- Passpor
sition t
acquisi
tion
and the
specifi
c issue
of
shares
for
cash
Earnings 4.31 (57.19) NA 6.28 NA 8.63 37%
per share
(cents)
Headline 4.64 0.00 -100% 14.16 NA 14.17 0.07%
earnings
per share
(cents)
Net asset 76.04 14.17 -81% 181.99 1184% 201.32 11%
value per
share
(cents)
Net 76.04 14.17 -81% 35.40 150% 98.13 172%
tangible
asset
value per
share
(cents)
Shares in 9 600 9 600 0.00% 70 146 631% 99 647 42%
issue at
year end
(`000)
Weighted 9 600 9 600 0.00% 70 146 631% 99 647 42%
average
number of
shares in
issue
(`000)
Notes:
1. The net asset value per share and net tangible asset value per share have
been calculated on the assumption that:
(a) The net asset value and tangible net asset value per share, as set out in
the "Before the related party Blaf disposal" column of the table, is based upon
the published audited consolidated balance sheet of Cenmag at 28 February 2007;
(b) The related party Blaf disposal agreement was effective from 28 February
2007;
(c) The net asset value and tangible net asset value per share, as set out in
the "After the related party Blaf disposal" column of the table, is based upon
the proceeds on disposal of the business and subsidiaries of Cenmag;
(d) The net asset value and tangible net asset value per share, as set out in
the "After the related Party Blaf disposal and the TelePassport acquisition"
column, is based upon the proceeds received from the capital disposal of the
Cenmag business and subsidiaries to which the audited balance sheet of
TelePassport at 28 February 2007 is added;
(e) The TelePassport acquisition agreement was effective from 28 February 2007;
(f) 40 046 601 new ordinary shares were issued to the vendors of TelePassport
at 187.41 cents per share equating to R75 051 701 (comprising share capital of
R0.4 million and share premium of R74.651 million);
(g) 20 499 320 new ordinary shares were issued to the vendors of TelePassport
at 250 cents per share equating to R51 248 299 (comprising share capital of
R0.205 million and share premium of R51.043 million), in the form of
renounceable letters of allotment which the vendors will renounce in favour of
third parties nominated by Cenmag;
(h) The net asset value and tangible net asset value per share, as set out in
the "After the related party Blaf disposal, the TelePassport acquisition and the
specific issue of shares for cash" column of the table, is based upon the upon
the proceeds received from the disposal of the Cenmag business and subsidiaries
to which the audited balance sheet of TelePassport at 28 February 2007 and the
proceeds raised from the specific issue of shares is added;
(i) The costs of the proposed transactions, being the Blaf disposal, the
TelePassport acquisition and the specific issue of shares for cash, of R0.803
million were written off against share premium; and
2. The earnings per share and headline earnings per share have been calculated
on the assumption that:
(a) The earnings and headline earnings per share, as set out in the "Before the
related party disposal" column of the table, is based on the published audited
consolidated income statement of Cenmag for the year ended 28 February 2007;
(b) The related party Blaf disposal agreement was effective from 1 March 2006;
(c) The earnings and headline earnings per share, as set out in the "After the
related party Blaf disposal" column of the table, is based the capital loss on
disposal of the business and subsidiaries of Cenmag;
(d) The earnings and headline earnings per share, as set out in the "After the
related party Blaf disposal and the TelePassport acquisition" column of the
table, is based on the capital loss on disposal of the business and subsidiaries
of Cenmag to which the audited income statement of TelePassport for the year
ended 28 February 2007 is added;
(e) The TelePassport acquisition agreement was effective from 1 March 2006;
(f) The earnings and headline earnings per share, as set out in the "After the
related party Blaf disposal, the TelePassport acquisition and the specific issue
of shares for cash" column is based upon the capital loss on disposal of the
business and subsidiaries of Cenmag to which the audited income statement of
TelePassport for the year ended 28 February 2007 and the interest on the
proceeds raised from the specific issue of shares is added;
(g) The issue of shares for cash was effective from 1 March 2006;
(h) Interest attributable to the capital raised of R73.752 million, and the
cash received in terms of the disposal consideration of R1.361 million, less the
transaction costs of R0.803 million, has been provided for at a pre-tax rate of
8% with taxation at 29% being provided thereon;
(i) The effective tax rate is 29%;
15. CIRCULAR TO SHAREHOLDERS
A circular to shareholders incorporating a notice of general meeting is being
prepared and will, subject to JSE and SRP approval, be posted to Cenmag
shareholders within 28 days of the date of this announcement. In terms of
section 9.25 of the Listings Requirements, Cenmag is compelled to warn
shareholders that the JSE may not allow the listing of the company to continue
after the TelePassport acquisition.
16. RENEWAL OF CAUTIONARY
Shareholders are referred to the cautionary announcement dated 7 May 2007, and
are advised that although agreements have been finalised and signed with regard
to the transactions detailed above, further negotiations have commenced with
certain other third parties and shareholders are thus advised to continue to
exercise caution when dealing in their Cenmag shares .
Isando
19 June 2007
Sponsor:
Sansara Independent Sponsor Services (Pty) Ltd
Date: 19/06/2007 11:06:29 Produced by the JSE SENS Department.
