| Wed 10 Oct 2007, 12:06 | | PKH - Protech - Acquisitions by Protech and furthe |
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PKH
PKH
PKH - Protech - Acquisitions by Protech and further cautionary announcement.
Protech Khuthele Holdings Limited
(formerly M&W Prinsloo Management Services (Pty) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2000/024352/06)
JSE code: PKH & ISIN: ZAE000101986
("Protech" or "the Company")
Acquisitions by Protech and further cautionary announcement.
1. Introduction
Protech shareholders are referred to the cautionary announcement released on
Thursday, 6 September 2007. The directors of Protech advise that the Company
has entered into the following agreements:
1.1 Sale of Business agreement dated 4 October 2007 for the acquisition of
Instant Concrete Products (Proprietary) Limited ("the Instant Concrete
business");
1.2 Sale of Business agreement dated 4 October 2007 for the acquisition of the
following businesses: Amadou Investments (Proprietary) Limited, Oudema
Concrete (Proprietary) Limited, Rockcrete Readymix (Proprietary) Limited and
Rockcrete Transport (Proprietary) Limited, ("the Rockcrete business") and
1.3 Agreement of Sale dated 4 October 2007 for the acquisition of the premises
from which a portion of the Instant Concrete business is operated ("the
fixed property"), which property is owned by Mille Investments 189
(Proprietary) Limited) ("Mille").
Collectively referred to as "the acquisitions".
2. Background to the acquisitions
2.1. Overview
The Instant Concrete business was established in the mid 1990`s by Jan Kotze
(Snr) who has managed the business to date. The Rockcrete business was
established in early 2000 by Jan Kotze (Jnr), the late son of Jan Kotze (Snr).
Both businesses are engaged in the readymix concrete sector of the construction
industry and although the two businesses are distinct and separately owned and
operated, there has always been a link and a spirit of mutual co-operation
between them due to the family bond.
The businesses mix and blend readymix concrete which is supplied to the
construction industry and property developers in Gauteng and the North West
Province. The location of the six plants leads to an evenly spread distribution
capability and creates the opportunity to combine the two businesses which will
result in a large footprint and presence within the target market area.
2.2. The Instant Concrete business
The Instant Concrete business consists of one company that owns three
production facilities, in the form of batching plants, which are situated in
Krugersdorp, Laezonia and Brits. Each of the plants represents an independent
production unit and all share a common administrative function. The fixed
property acquired from Mille is situated in Brits and is used to stockpile
aggregate (raw material) used by the Brits plant. The product, readymix
concrete, is prepared and mixed in the batching plants and distributed by way
of trucks equipped with specialised mixer drum units. The company makes use of
transport subcontractors who own their own trucks but the mixer drum units
mounted on the trucks are supplied by the company and are owned by the company.
2.3. The Rockcrete business
The Rockcrete business, similarly, operates three batching plants and each of
these plants is owned and operated through a separate company. The three
operating companies and the location of their operations are:
Amadou Investments (Proprietary) Limited - Muldersdrift,
Oudema Investments (Proprietary) Limited Laezonia and
Rockcrete Readymix (Proprietary) Limited - Rosslyn.
The Rockcrete business includes a transport company, Rockcrete Transport
(Proprietary) Limited, that owns and operates six trucks which form part of the
distribution capability of the business. As is the case with the Instant
Concrete business, the mixer drum units used by the transport sub-contractors
are owned by the Rockcrete operating companies.
2.4. The fixed property
The fixed property consists of Portion 180 (a portion of portion 101) of the
Farm "De Kroon" no. 444 JQ situated at the intersection of the N4 (Rustenburg
Pretoria Highway) and Hendrik Verwoerd Road (Brits Hartebeespoort Dam Road).
The fixed property measures approximately 8.0610 hectares and at present no
rental revenues are generated as it is utilised as the location for strategic
stockpiling of aggregates used in the concrete mixing and blending process.
The property was valued at R 5 million by Mr T van der Linde an independent
valuer registered as a Professional Associated Valuer (membership no 4017/0) in
terms of the Property Valuers Profession Act, No 47 of 2000 on 6 October 2007.
3. Rationale for the acquisitions.
Protech is a broad-based civil engineering company operating in the forefront
of the construction process, being fast track bulk earthworks and ground
preparation. The construction processes that follow invariably include the use
of concrete, and most often readymix concrete, as an essential and integral
ingredient in the construction of not only buildings but also service
installations, roads, parking areas and other civil works. In these processes
the use and supply of resources are of critical importance and if effectively
managed through integration into the existing plant and logistical capabilities
of Protech it can be a major margin enhancer. The supply of readymix concrete to
the construction industry is complementary to Protech`s existing service
offering and will result in an accretive vertical integration in the sector.
Protech`s expertise in the management of plant and vehicle fleets provide
further opportunities for enhanced efficiencies due to the synergies that exist
between its current business and that of the acquisitions. The acquisitions will
also serve to further diversify the spectrum of services offered by Protech and
mitigate risk through diversification.
4. Particulars and effective date of the acquisitions.
4.1. Particulars of the acquisition
The acquisitions are aggregately classified as a Category 3 transaction in
terms of the Listing Requirements of the JSE Limited.
Protech will acquire the Instant Concrete business and the Rockcrete business
as going concerns. Despite the Rockcrete business being housed in four
different companies as set out above, it is effectively a single cash
generating unit. In order to consolidate and rationalise the Instant Concrete
and Rockcrete businesses into a single effective operating unit, a new company,
Riverbend Trade and Invest 95 (Proprietary) Limited, (whose name will be
changed to Protech Readymix (Proprietary) Limited), was formed to hold the
acquisitions. The new company will be a wholly owned subsidiary of Protech. In
addition, Protech will acquire the fixed property.
4.2. Effective date
The effective date of the acquisitions is 1 July 2007 subject to certain
conditions precedent being fulfilled.
4.3. Purchase consideration
4.3.1. The Instant Concrete and Rockrete businesses
The purchase consideration for the Instant Concrete business is R36.4 million
and Rockrete business is R39.6 million. The consideration is based on aggregate
earnings multiples applied to the earnings of the acquired businesses for the
twelve months ended 30 June 2007, and is adjustable pending the results of due
diligence investigations being performed. The purchase consideration will be
settled in cash and will be funded by a combination of debt and existing cash
reserves.
4.3.2. The fixed property
The purchase consideration for the fixed property is R3.4 million and will be
settled in cash, funded by a combination of debt and existing cash reserves.
4.4. Conditions precedent
The acquisitions are subject to and conditional upon the fulfilment of each of
the following key conditions precedent:
4.4.1. The satisfactory completion by Protech of a due diligence investigation;
4.4.2. The board of Protech passing the required resolutions for the approval
of the acquisitions;
4.4.3. Unconditional written approval of the Competition Commission being
obtained for the acquisitions;
4.4.4. Regulatory approvals, to the extent that they may be required,
including that of the Securities Regulation Panel, being received;
4.4.5. The conclusion of service and relevant restraint of trade agreements
with identified key management members of the Instant Concrete and
Rockcrete businesses;
4.4.6. The acquisitions are conditional upon each other and must be concluded
simultaneously.
5. Pro forma financial effects of the acquisitions
The purchase price of the acquisitions is dependant on the results of the due
diligence exercise being conducted. The financial effects of the acquisitions
will therefore be published once the due diligence exercise has been finalised.
6. Further cautionary announcement
Shareholders are advised to continue exercising caution in dealing in Protech`s
securities on the JSE Limited until such time as the due diligence exercise is
completed and the financial effects of the acquisitions are published.
Johannesburg
10 October 2007
SPONSOR:
Ernst & Young Sponsors (Pty) Ltd
(Registration number 2000/031843/07)
Date: 10/10/2007 12:06:06 Produced by the JSE SENS Department.
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