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ADW
ADW
ADW - African Dawn - Acquisition of Elite and renewal of cautionary announcement
AFRICAN DAWN CAPITAL LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 2003/005353/06)
(JSE code: ADW & ISIN: ZAE000060703)
("African Dawn" or "the company")
- ACQUISITION OF ELITE GROUP (PTY) LIMITED
- RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the cautionary announcement dated 4 July 2007.
African Dawn has purchased all the issued shares in and claims against
Elite Group (Pty) Limited ("Elite") ("the Elite acquisition") from Mr CW
Human, , Mr DJC Beukes, Mr LM Brits, Ms CJL Breytenbach , Mr DD Breedt, Mr
JC van Deventer, Mr JF Boshoff, Mr S Grundlingh, Mr J Nortjie and Golden
Falls Trading 460 (Pty) Limited (collectively "minority vendors"), Dr GE
Stoop ("Stoop acquisition"), Human Family Trust , Corrie Human Investments
(Pty) Limited (collectively the "Human agreements"), Kudu Trust ("the Kudu
agreement") and Dog Trust ("the Dog agreement") ("collectively referred to
the vendors").
As an integral part of the Elite acquisition, Elite has agreed to purchase
all issued shares in and claims against Money Rocket (Pty) Limited ("Money
Rocket") from Dr GE Stoop ("the Money Rocket acquisition") (collectively
known as "the acquisitions").
The above acquisitions are unconditional. The Elite shares have been
transferred to African Dawn and the initial payments made.
In terms of the Listings Requirements of the JSE Limited ("JSE") the
acquisitions are classified as category 3 transaction.
2. THE ACQUISITIONS
2.1 RATIONALE FOR THE ACQUISITIONS
African Dawn plans to expand its home improvement financing book as a
result of the acquisition of Elite. Elite has a large client base made up
of approximately 10 000 active clients. Elite has state of the art systems
and call centre capabilities which will enhance efficiencies within the
African Dawn Group. African Dawn plans to cross sell cell phone banking and
financial literacy products to existing clients of Elite.
2.2 DESCRIPTION OF THE BUSINESS`S
Elite provides home improvement loans as well as tax and financial
educational advice to LSM 2 to 7 individuals and operates a debt collection
service. Elite operates 21 branches country wide.
Money Rocket conducts the business of a call centre, re-claiming PAYE on
behalf of clients, micro loans to clients and has a facility of R15 million
with the National Housing Finance Corporation ("NHFC") for utilisation in
home improvement loans.
2.3 TERMS AND CONDITIONS
2.3.1 On 22 August 2007 African Dawn entered into an agreement to purchase
Elite, with effect from 1 August 2007, all the issued share capital in
and claims against Elite. The purchase consideration of R23.9 million
is made up and payable as follows:
2.3.1.1 Stoop acquisition
The purchase consideration is R2.8 million payable in cash on the date
of transfer of shares. As part of the acquisition agreement with Dr GE
Stoop African Dawn may elect to exercise a put option, to sell the 10%
shareholding in Elite back to Dr GE Stoop, if Elite`s February 2008
PAT is less than 80% of the warranted February 2008 PAT of R12.7
million.
2.3.1.2 Minority agreements
The purchase consideration is R325 128.60 payable in cash on the date
of transfer of shares.
2.3.1.3 Kudu agreement
The purchase consideration is the lesser of:
R4 million; or in the event of Elite`s February 2008 profit after tax
being less than the warranted profit after tax of R12.7 million, the
pro-rata difference between the audited warranted after tax profit for
the period ended February 2008 and R12.7 million.
The purchase price is payable as follows:
R2 million payable in cash on the date of transfer of shares;
The balance will be payable in cash after the February 2008 PAT has
been certified by the auditors.
2.3.1.4 Dog agreement
The purchase consideration is the lesser of:
R1, 775,000 or the pro-rata difference between the audited warranted
after tax profit for the period ended 28 February 2008 and R12.7
million.
The purchase price is payable as follows:
R887, 500 will be payable in cash on the effective date;
The balance payable in cash after the February 2008 PAT has been
certified by the auditors.
2.3.1.5 Human acquisitions
The purchase consideration is R15 million payable in cash on the date
of transfer of shares.
2.3.2 As part of the Elite acquisition, African Dawn will advance R7 million
on loan account to Elite to enable Elite to purchase 100% of the
issued shares and loan accounts in Money Rocket from Dr GE Stoop.
The purchase price payable by Elite for Money Rocket is the lesser of:
R7 million or the pro-rata difference between the audited combined
warranted after tax profit for the period ended 28 February 2008 and
2009 and R25.3 million.
The purchase price is payable as follows:
R3.5 million will be payable in cash on the effective date;
The balance payable in cash after the February 2009 PAT has been
certified by the auditors.
As part of the Elite acquisition, African Dawn will purchase the
entire shareholding of Golden Falls in Elite for an amount of R1
536.38 payable in cash on the date of transfer of shares.
2.3.4 African Dawn has completed a due diligence investigation on all
acquisitions to its satisfaction.
2.3.5 Dr GE Stoop, LM Brits, DJC Beukes and B Olivier have signed restraint
undertakings in favour of Elite.
3. UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITIONS
The unaudited pro forma financial effects set out below are provided to
illustrate how the acquisitions may have impacted on African Dawn`s results
and financial position, should the acquisition have taken place during the
2007 financial year. The pro forma financial effects have been prepared in
accordance with International Financial Reporting Standards. 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 financial information of African Dawn for the year ended 28
February 2007. The directors of African Dawn are responsible for the
preparation of the unaudited pro forma financial effects.
Before the Pro forma Change %
acquisitions After the
reviewed 28 acquisitions
February 2007 unaudited
28 February
2007
Earnings per share 21.2
(cents) 24.97 17.80%
Headline earnings per 21.2 24.97
share (cents) 17.80%
Net asset value per 70.34 74.37 5.73%
share (cents)
Net tangible asset 62.87 54.25 (13.71)%
value per share (cents)
Weighted average shares 129,806,410 129,806,410
in issue
Shares in issue at 145,997,815 145,997,815
period end
Notes:
(1) The unaudited pro forma financial effects on the results were prepared
on the basis that the acquisitions were completed on 1 March 2006.
(2) The "Before the acquisitions" column has been extracted without
adjustment, from the reviewed results of African Dawn for the year
ended 28 February 2007.
(3) The "After the acquisitions" earnings and headline earnings per share
have been based on 100% of Elite`s consolidated results for the year
ending 28 February 2007 and 100% of Money Rocket`s management accounts
for the year ending 28 February 2007.
(4) The "After the acquisitions" net asset value and net tangible asset
value per share have been adjusted to include the results of the
acquisitions and the estimated transaction costs have been written off
against share premium.
(5) Goodwill of approximately R18, 5 million will arise on the
acquisitions.
8. RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 4 July 2007
and are advised that African Dawn is still involved in 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.
Johannesburg
30 August 2007
Designated adviser Exchange Sponsors
Attorneys Mageza Le Roux Vivier & Associates
Attorneys Van Dyk & Associates
Date: 30/08/2007 15:46:01 Produced by the JSE SENS Department.
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