| Tue 20 Nov 2007, 14:35 | | ARH - ARB Holdings Limited - Abridged Prospectus |
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ARBB
ARH - ARB Holdings Limited - Abridged Prospectus
ARB HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1986/002975/06)
Share code: ARH ISIN: ZAE000109435
("ARB" or "the company" or "the group")
Abridged Prospectus
Relating to a private placement of shares by way of:
- an offer for subscription of a maximum of 35 000 000 new ordinary shares in
the share capital of ARB at a subscription price of between 480 cents and
530 cents per share;
- an offer for sale by certain existing shareholders of ARB of a maximum of
35 000 000 ordinary shares in the share capital of ARB at a purchase price
of between 480 cents and 530 cents per share; and
- the subsequent listing of the shares of ARB on the JSE Main Board under the
sub-section, "Electronic and Electrical Equipment".
This abridged prospectus is not an invitation to the general public to
subscribe for or purchase shares in ARB. The private placement is made to
invited institutional and retail investors and selected private clients
only.
1. INTRODUCTION
The JSE Limited ("JSE") has formally approved the listing of a maximum of
235 000 000 shares, with a par value of 0.01 cent each, in the share
capital of ARB on the JSE with effect from commencement of business on
Tuesday, 20 November 2007 in the "Electronic and Electrical Equipment"
sector, subject to the achievement of the required spread of public
shareholders. The shares will trade under the abbreviated name "ARB", with
the share code"ARH" and ISIN ZAE000109435.
A total amount of between R336.0 million and R371.0 million, before
expenses, will be raised through the private placement to qualifying
investors. The proceeds of the private placement will first be applied to
the offer for subscription (R168.0 million to R185.5 million) which will
allow the company to expunge certain of its debts and grow its market share
through funding organic growth, facilitate the working capital requirements
of the existing business as well as facilitate potential acquisition
opportunities. Thereafter, the proceeds of the private placement will be
applied to the offer for sale (R168.0 million to R185.5 million), which
will allow existing shareholders to partially realise approximately 17.5%
of their current investment in the company and similarly to facilitate the
shareholder spread required by the Listings Requirements of the JSE
("Listings Requirements").
2. INCORPORATION AND HISTORY
In 1980, Alan R Burke, the current non-executive chairman, commenced
trading as a sole proprietor under the name ARB Industrial Supply Co.
During 1987, Alan R Burke acquired a controlling stake in Coastal
Switchgear (Pty) Ltd. Coastal Switchgear (Pty) Ltd then acquired the
operations of ARB Industrial Supply Co, and on 24 March 1987 changed its
name to ARB Industrial Supply Co. (Pty) Ltd. On 23 September 1993, ARB
Industrial Supply Co. (Pty) Ltd changed its name to ARB Electrical
Wholesalers (Pty) Ltd.
In 2004, to facilitate the introduction of a strategic BEE shareholder, ARB
Electrical Wholesalers (Pty) Ltd sold its operations to a subsidiary Goldex
522 (Pty) Ltd and changed its name to ARB Holdings (Pty) Ltd. The
subsidiary was renamed ARB Electrical Wholesalers (Pty) Limited. The
commencement date of trading of the subsidiary was 1 July 2004.
3. NATURE OF BUSINESS
3.1 Nature of business
ARB is now South Africa`s fastest growing independent black empowered
distributor of cable, overhead line transmission and electrical products.
With branches in Durban, Johannesburg, Cape Town, East London,
Pietermaritzburg and Richards Bay, ARB has a presence in most of the
country`s major industrial centres.
ARB attributes its success to customer loyalty, which has been earned by
encouraging sound business ethics, a strong business reputation achieved
from unsurpassed service levels and maintenance of a highly competitive
pricing structure.
3.2 Products and brands
ARB offers a comprehensive range of internationally recognised products
including:
- a complete range of power and instrumentation cables;
- aluminium overhead line conductors and aerial bundled conductors;
- overhead line hardware, insulators and transformers (including mini- subs);
and
- general electrical contracting materials.
3.3 Customers
ARB has over 3 000 customers throughout South Africa and services four
strategic business sectors:
- Large and Heavy Industry: where customers include Engen, Illovo, Mondi,
Richards Bay Coal, Richards Bay Minerals, Sappi, Tongaat-Hulett and Toyota;
- Parastatals: where customers include Eskom, Transnet, the National Ports
Authority (NPA), Telkom, municipalities, water boards and hospitals;
- Construction Industry: where customers include Murray & Roberts, Group 5,
WBHO and PPC; and Electrical Contractors: where customers include a broad
spectrum of electrical contractors including those contracted to
Government`s national overhead electrification programme.
4. PROSPECTS
As a leading black empowered electrical wholesaler, ARB is well-positioned
to take advantage of the infrastructure spend by Eskom and the local
municipalities. Furthermore projects creating expansion in the industrial
sector, where ARB has traditionally operated and the continued creation of
new residential developments provide exceptional opportunities for ARB`s
future growth.
ARB intends to continue penetrating the mining industry, a new focus for
the group which is currently in its infancy. This will further the group`s
intention to expand into sub-Saharan Africa by targeting the new mines
currently in the pipeline in Zambia, Angola, the DRC, Mozambique,
Madagascar and Botswana. In addition, ARB intends to expand geographically
in South Africa with the roll-out of new branches, both organically and
through acquisitions.
5. DIRECTORS` DETAILS
The full names, nationalities, ages, business addresses and functions of the
directors are set out below:
Full name and age Business address Function
Executive directors
Craig Charles Robertson 10 Mack Road Chief Executive
(39) Prospecton Officer
Durban
William (Billy) Roy Neasham 10 Mack Road Financial Director
(50) Prospecton and
Durban Company Secretary
Full name and age Business address Function
Non-executive directors
Alan Ronald Burke 10 Mack Road Non -Executive
(53) Prospecton Chairman
Durban
Jacob Rasethlake Modise 1st Floor
(41) North Downs Office Park Non -Executive
17 Georgian Crescent Director
Bryanston
Dumisani Francis Muhlwa 1st Floor Non-Executive
(35) North Downs Office Park Director
17 Georgian Crescent
Bryanston
Independent non-executive director
Simon Trouncer Downes 1290 South Coast Road Independent
(49) Durban Non -Executive
Director
All of the directors are South African citizens.
6. SHARE CAPITAL
Authorised and issued share capital
The authorised and issued share capital of ARB, before and after the private
placement, are set out below:
R
Authorised
1 000 000 000 shares of 0.01 cent each 100 000
Issued, before the private placement
200 000 000 shares of 0.01 cent each 20 000
Share premium -
Issued, after the private placement (assuming full
subscription at a private placement price of 530
cents per share)
235 000 000 shares of 0.01 cent each 23 500
Share premium 178 296 500
All the authorised and issued shares are of the same class and rank pari
passu in every respect. Subject to the shareholder spread requirements of
the Listings Requirements being achieved, the entire share capital of ARB
will be listed on the JSE with commencement of trade on Tuesday, 20
November 2007. The shares will be issued in dematerialised form.
7. DIVIDENDS
The company`s dividend policy will be to distribute annually, a final
dividend, up to a maximum of one-third of net profit after tax, taking into
account distributable reserves and cash available for distribution.
8. FINANCIAL INFORMATION
A summary of the historical and forecast income statements of ARB for the
years ended 30 June 2005, 2006 and 2007 and the year ending 30 June 2008,
the preparation of which is the responsibility of the directors, is set out
below. The forecast has been examined by the reporting accountants and
should be read in conjunction with their report thereon.
Reviewed Audited Audited Forecast
June 2005 June 2006 June 2007 June 2008
R`000 R`000 R`000 R`000
Gross revenue 417 916 607 955 1 047 642 1 315 293
Cost of sales (336 334) (472 973) (808 871) (1 032 887)
Gross profit 81 582 134 982 238 771 282 406
Other operating income 41 5 209 25 805 -
Operating expenses (38 661) (54 410) (71 492) (86 819)
Operating profit 42 962 85 781 193 084 195 587
Interest received 1 369 1 002 1 416 1 203
Interest paid (5 909) (7 701) (13 595) (5 424)
Profit before taxation 38 422 79 082 180 905 191 366
Taxation (14 872) (23 386) (53 275) (57 529)
Profit after taxation 23 550 55 696 127 630 133 837
Minority interest (8 713) (8 218) (26 027) (32 397)
Profit attributable
to ordinary
shareholders 14 837 47 478 101 603 101 440
Headline earnings
adjustments - (4 451) (24 521) -
Tax on adjustments - 1 291 7 111 -
Headline earnings
attributable
to ordinary
shareholders 14 837 44 318 84 193 101 440
Pro forma weighted
average
number of shares
in issue (`000) 200 000 200 000 200 000 221 325
Pro forma earnings
per share (cents) 7.42 23.74 50.80 45.83
Pro forma headline
earnings
per share (cents) 7.42 22.16 42.10 45.83
Notes:
- Estimated revenues were based on historical results and these results were
applied to the forecast period.
- Estimated costs were forecast on a line-by-line basis and reflect the
current budgeted expenditure.
- Interest received does not take into account interest earned on cash raised
through the private placement.
- Interest paid takes into account the settlement of borrowings amounting to
R110.5 million utilising a portion of the cash raised through the private
placement.
- Taxation was calculated based on what is estimated through the application
of the Income Tax Act, 1962, for the forecast period.
- The headline earnings adjustments relate to the revaluation of land and
buildings to their fair values. In 2005, the carrying value of the land and
buildings approximated the fair value and therefore no adjustment was
required. No adjustment has been made to the 2008 forecast as it is
considered impracticable to do so.
- The pro forma weighted average number of shares for year ending 30 June
2008 is based on the increase in the number of ordinary shares in issue
assuming the issue of 35 000 000 new ordinary shares on 20 November 2007 in
terms of the offer for subscription.
- The accounting policies applied in compiling the forecast are consistent
with those applied by the company during the past financial year.
9. THE PRIVATE PLACEMENT
A total amount of between R336.0 million and R371.0 million, before
expenses, will be raised through the private placement to qualifying
investors. The proceeds of the private placement will first be applied to
the offer for subscription (R168.0 million to R185.5 million) which will
allow the company to expunge certain of its debts and grow its market share
through funding organic growth, facilitate the working capital requirements
of the existing business as well as facilitate potential acquisition
opportunities. Thereafter, the proceeds of the private placement will be
applied to the offer for sale (R168.0 million to R185.5 million), which
will allow existing shareholders to partially realise approximately 17.5%
of their current investment in the company and similarly to facilitate the
shareholder spread required by the Listings Requirements.
The purpose of the private placement and listing is to:
- expand ARB`s geographic footprint;
- fund organic growth by expanding the national branch network;
- fund expansion into new target industries;
- raise capital and have the flexibility of listed shares for acquisitions
and other growth opportunities;
- create value for shareholders by leveraging ARB`s established presence in
the market;
- facilitate further empowerment initiatives; and
- attract and retain intellectual capital through the incentive of meaningful
equity participation.
10. SALIENT DATES AND TIMES
The offer opens at 09:00 on Monday, 5 November 2007 and is expected to
close at 12:00 on Wednesday, 7 November 2007. Indications of interest for
the purposes of the bookbuilding process will be received up until 12:00 on
Wednesday, 7 November 2007.
2007
Abridged prospectus released on SENS on Friday, 2 November
Prospectus available on Monday, 5 November
Opening date of the private placement at 09:00 on Monday, 5 November
Last date for indications of interest for the
Purposes of the bookbuild by 12:00 on Wednesday, 7 November
Expected closing date of the private placement at
12:00 on Wednesday, 7 November
Private placement price released on SENS on Thursday, 8 November
Final allocation of the private placement shares on Friday, 9 November
Settlement and anticipated listing date of ARB on
the JSE at 09:00 on Tuesday, 20 November
Note:
The above dates and times are subject to change. Any such change will be
released on SENS and published in the press.
11. COPIES OF THE PROSPECTUS
This abridged prospectus is a summary of the full prospectus and has been
prepared and issued in relation to the private placement and the listing of
ARB. It contains the salient features of the prospectus dated 5 November
2007, which should be read in its entirety for a full appreciation thereof.
Copies of the full prospectus may be obtained during office hours at the
registered office of the company: 10 Mack Road, Prospecton, Durban, 4110
and the office of the bookrunner, corporate advisor and sponsor of ARB,
Bridge Capital Advisors (Pty) Limited, 2nd Floor, 27 Fricker Road, Illovo
Boulevard, Illovo, 2196.
Johannesburg
2 November 2007
Bookrunner, corporate advisor
and sponsor
BRIDGE CAPITAL
Reporting accountants
and auditors
PKF Accountants and corporate relations
Attorneys
GARLICKE & BOUSFIELD
Investor and corporate relations
ENVISAGE
INVESTOR & CORPORATE RELATIONS
Date: 02/11/2007 09:36:00 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
