| Mon 23 Jul 2007, 17:15 | | HDC - Hudaco - The Introduction Of Black Economic |
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HDC
HDC
HDC - Hudaco - The Introduction Of Black Economic Empowerment Shareholders
HUDACO INDUSTRIES LIMITED
(Registration number 1985/004617/06)
(Incorporated in the Republic of South Africa)
(JSE Share Code: HDC)
(ISIN Code: ZAE000003273)
("Hudaco")
THE INTRODUCTION OF BLACK ECONOMIC EMPOWERMENT SHAREHOLDERS
Further to the cautionary announcement dated 14 June 2007, shareholders are
advised of:
* the restructuring of Hudaco`s wholly owned businesses in South Africa
into Hudaco Industrial Holdings Limited ("Newco") ("the restructuring")
in order to facilitate the introduction of black ownership into those
businesses; and
* the subsequent specific issue of 15% of the ordinary shares in Newco,
(being 3 000 shares at par of 10 cents each - R300), to the following
Black Economic Empowerment ("BEE") shareholders:
- The Hudaco Trading BEE Staff Education Trust;
- The Hudaco Broad-Based BEE Foundation; and
- A consortium of black entrepreneurs called the Ulwazi Consortium, which
includes Ms N Molefi, a non-executive director of Hudaco ("the BEE
transaction").
1. History and nature of business of the Hudaco group
The Hudaco group is a South African group of companies specialising in the
importation and value added distribution of selected high quality industrial
and security products in the southern African region. The replacement market
is a particular focus and the group is active in three main areas:
* Bearings and Power Transmission products;
* Powered products; and
* Security equipment.
2. Rationale
The board of Hudaco views BEE as a strategic imperative and has committed
itself to establishing a credible empowerment base for the group which will
make a contribution to the transformation and development of the South African
economy and society in general.
The specific rationale for the BEE transaction is to empower the group`s
wholly owned South African businesses in a sustainable manner aligned with the
objectives of the Broad Based Codes of Good Practice on BEE ("the Codes"), as
published by the Department of Trade and Industry.
3. Salient features of the restructuring and BEE transaction
* Restructuring - the Hudaco group will be restructured on 1 August
2007 to facilitate the introduction of black shareholders.
- consolidation into Newco - the restructuring will consolidate the
wholly owned South African businesses of Hudaco (which excludes DD
Power (Proprietary) Limited) into Newco, an existing wholly-owned
dormant subsidiary of Hudaco.
- funding - the consolidation will be effected at the market value of
the businesses (R2,2 billion) as at 29 June 2007 and will be funded
entirely by the issue of a 10 year debenture by Newco to Serec
Investments South Africa (Proprietary) Limited, bearing interest
fixed at 10.71% nacq. Barbara Road Investments (Proprietary) Limited
("Barbara Road"), a subsidiary of Hudaco Trading Limited ("Hudaco
Trading"), will underwrite the debenture. Hudaco Trading currently
holds many of the principal operating entities and subsidiaries of
the group.
- investment of sale proceeds - the sale proceeds of R2,2 billion will
be invested by Barbara Road in preference shares, yielding a fixed
dividend of 9.21% nacq, administered and managed by Cadiz
Specialised Asset Management.
- BEE facilitation - Newco will hold all of the group`s wholly owned
South African businesses and since the purchase will be funded
entirely by the debenture, Newco will retain a nominal net asset
value. This will enable the BEE shareholders to buy into Newco at a
nominal cost, thus increasing the sustainability of their
participation in the group.
* BEE investment - in terms of the BEE transaction, 3 000 ordinary
shares in Newco will be issued to the BEE shareholders in August
2007 at par of 10 cents each, providing them with an aggregate 15%
shareholding in Newco at 15% of Newco`s then net asset value. The
BEE shareholders will therefore immediately acquire full ownership
of the shares at a minimal cost, without the need for their own
funding and any associated encumbrances. After recognising
"Mandated Investments" provided for in the Codes, Newco`s BEE
shareholding will then be deemed to be 25%.
* Shareholder approval - The BEE transaction is subject to approval by
75% of Hudaco shareholders in general meeting.
* Listing - Hudaco will remain listed on the JSE and after
implementation of the proposed BEE transaction will hold 85% of the
equity in Newco and will retain 70% of DD Power (Proprietary)
Limited. It will also retain 100% of the equity in Hudaco Trading,
which owns 100% of the equity in Barbara Road, the holder of the
preference shares referred to above.
4. Pro forma financial effects of the restructuring and the BEE transaction
The unaudited pro forma financial effects of the restructuring and the BEE
transaction on the earnings, headline earnings, net asset value and net
tangible asset value per Hudaco share, before and after the restructuring and
the BEE transaction, are set out below. The unaudited pro forma financial
information provided is the responsibility of the directors.
The pro forma financial information is to provide investors with information
about the impact of the BEE transaction by illustrating how the restructuring
and the BEE transaction might affect the reported financial information, had
the transaction been undertaken at 1 December 2006 or in the case of the pro
forma balance sheet, on 31 May 2007.
The unaudited pro forma financial information has been prepared for
illustrative purposes only and because of its nature, may not fairly reflect
the financial position, changes in equity, results of operations or cash flows
of Hudaco after the transaction.
Notes Before After the Change After Change
(cents) restructuring (%) the BEE (%)
(cents) transa-
ction
(cents)
Basic earnings 1 255.1 324.2 +27% 178.0 -30%
per share
Diluted basic 1 248.6 315.9 +27% 173.5 -30%
earnings per
share
Headline earnings 1 255.1 324.2 +27% 178.0 -30%
per share
Headline earnings 1 255.1 313.8 +23% 313.8 +23%
per share
excluding non-
continuing
adjustments
Diluted headline 1 248.6 315.9 +27% 173.5 -30%
earnings per
share
Net asset value 2 2 552 2545 -1% 2545 -1%
per share
Net tangible 2 2 362 2355 -1% 2355 -1%
asset value per
share
Notes:
1. The earnings and headline earnings per Hudaco share
a. in the "Before" column, are those reported in the unaudited interim
group results of Hudaco for the six months ended 31 May 2007.
b. in the "After the restructuring" column, represent the headline
earnings and earnings that would have accrued per Hudaco share for
the six months ended 31 May 2007, based on the assumption that the
group restructure was completed on 1 December 2006.
c. in the "After the BEE transaction" column, represent the headline
earnings and earnings that would have accrued per Hudaco share for
the six months ended 31 May 2007, based on the following key
assumptions:
a. The group restructure was completed on 1 December 2006; and
b. The BEE transaction was effective 1 December 2006 which will give
rise to a one-off IFRS 2 (share based payment) expense of R44
million recognised in this period.
2. The net asset value per share and net tangible asset value per share
a. in the "Before" column, are those reported in the unaudited interim
group results of Hudaco for the six months ended 31 May 2007.
b. in the "After the restructuring" column, represent the net asset
value per share and tangible net asset value per share based on the
assumption that the restructuring was effective 31 May 2007.
c. in the "After the BEE transaction" column, represent the net asset
value per share and tangible net asset value per share based on the
assumption that the BEE transaction was effective 31 May 2007 and
transaction costs of R3 million have been taken into account.
5. Opinions and recommendations
5.1 The Board of directors of Hudaco, having evaluated the rationale for and
the terms and conditions of the BEE transaction, is of the opinion that
the BEE transaction will enhance shareholder value in the long term and
recommends that Hudaco shareholders vote in favour of the ordinary
resolutions necessary to approve the BEE transaction, which resolutions
will be proposed at the general meeting to be held in August 2007.
5.2 Those directors of Hudaco who are shareholders intend to vote in favour
of the ordinary resolutions necessary to approve the BEE transaction,
which resolutions will be proposed at the aforementioned general meeting.
6. Circular to shareholders
A circular, containing details of the restructuring and BEE transaction and
including a notice of general meeting for Hudaco shareholders, will be posted
to Hudaco shareholders in due course.
7. Withdrawal of cautionary announcement
The cautionary announcement which appeared on SENS on 14 June 2007 and in the
press on 15 June 2007 is hereby withdrawn.
Johannesburg
23 July 2007
Bravura - Corporate Adviser
Edward Nathan Sonnenbergs Inc. - Attorneys to Hudaco
Deloitte & Touche Sponsor Services (Pty) Limited- Transactional Sponsor
Morgan Stanley - Broker-Dealer
Grant Thornton - Reporting Accountants
Prinsloo, Tindle & Andropoulos Inc. - Attorneys to Serec
Ceres Corporation - Debenture subscriber
Cadiz - Corporate Adviser to Cadiz Specialised Asset Management
Date: 23/07/2007 17:15:01 Produced by the JSE SENS Department.
