| Tue 4 Dec 2007, 9:00 | | ELI - Ellies - Acquisition of the business conducted by Megatron federal (Pty) |
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ELI
ELI
ELI - Ellies - Acquisition of the business conducted by Megatron federal (Pty)
Ltd
Ellies Holdings Limited
(formerly Everlight Investments (Pty) Ltd)
(Incorporated in the Republic of South Africa)
(Registration number: 2007/007084/06)
JSE code: ELI ISIN: ZAE000103081
("Ellies" or "the group")
ACQUISITION OF THE BUSINESS CONDUCTED BY MEGATRON FEDERAL (PTY) LTD ("Megatron
Federal")("THE MEGATRON BUSINESS")
Further to the announcement on 14 November 2007 shareholders of Ellies are
advised that Ellies has concluded an agreement to acquire, through its wholly
owned subsidiary Ellies (Proprietary) Limited, the Megatron business("the
acquisition").
THE MEGATRON BUSINESS
The Megatron business operates from 5 production facilities in Chloorkop,
Gauteng comprising 10 000m2 and employs approximately 200 employees.
The Megatron business specialises in the fields of power generation,
transmission and distribution. Key products (either imported or manufactured by
the Megatron business for local distribution and export) include diesel
generator sets, transformer substations, medium voltage fixed pattern
switchgear, low voltage components, sheet metal products, power transformers and
overhead line hardware.
Key services offered by the Megatron business include turn key electrical
project solutions, engineering and design solutions for low, medium and high
voltage electrical systems and installation and commissioning of low, medium and
high voltage equipment.
In addition the Megatron business provides on site-maintenance, repairs and
facilities management.
The Megatron business`s customers include City Power, City of Tshwane
Metropolitan Municipality, Anglo Platinum, Teal Mining and Ethekweni
Municipality.
RATIONALE FOR THE ACQUISITION
Ellies currently distributes smaller generators to the domestic market. Ellies
has experienced demand by its retail customers for larger industrial generators
which the Megatron business assembles and distributes locally. The acquisition
affords Ellies the opportunity to satisfy this demand.
In addition, Ellies established rentals division will offer rental and
maintenance options on generators to Ellies domestic customer base as well as
the Megatron business`s industrial customer base thus rendering the Megatron
business`s high end product affordable to a broader customer base.
Ellies currently supplies the market with its own range of domestic electrical
product being extension leads, adaptors, plugs, surge and other related
products. The Megatron business supplies the market with industrial electrical
equipment which ranges from power transformers to transformer substations. The
acquisition will afford Ellies the advantage of introducing industrial
electrical equipment to complement its existing domestic electrical product
offering.
The Megatron business will benefit from access to Ellies` existing customer base
and comprehensive distribution channels, which will result in increased revenue
streams for several of its product lines.
Ellies will benefit from access to the Megatron business`s electrical utility,
industrial and mining customer base.
The Megatron business will contribute significantly to the existing Ellies
research and development program covering electronic products for supply to the
generator industry.
TERMS OF THE ACQUISITION
Megatron Federal has sold to Ellies with effect from 1 March 2008 ("effective
date") the Megatron business comprising all the assets used in connection with
the Megatron business on the effective date and certain stipulated liabilities.
The acquisition is conditional upon the fulfilment of certain conditions,
including, inter alia,
- the satisfactory outcome of a due diligence investigation to be conducted
by Ellies;
- the receipt of any approvals for the conclusion or implementation of the
acquisition required in terms of any applicable law, statute or regulation
(including in terms of the Competition Act No 89 of 1998 and the JSE
Listings Requirements);
- written approval of the Ellies board.
Subject to the achievement, or not, of certain profit warranties, set out below:
- the maximum purchase consideration is R180 188 796, which shall be settled
by the issue to Megatron Federal of a maximum of 37 281 898 ordinary shares
in Ellies and the payment in cash to Megatron Federal of a maximum of R105
625 000;
- the minimum purchase consideration payable is R48 750 000, which shall be
settled by the issue to Megatron Federal of 12 187 500 ordinary shares in
Ellies and the payment in cash to Megatron Federal of R24 375 000.
Profit warranties and adjustment to the purchase price
R131 438 796 of the purchase consideration has been deferred (the "deferred
portion") and is subject to the achievement by the Megatron business of a
stipulated net profit after tax for the 12 months from the effective date,
failing which the deferred portion will be reduced.
FINANCIAL EFFECTS AND RENEWAL OF CAUTIONARY
The financial effects of the acquisition will be published in due course.
Ellies shareholders are advised to continue to exercise caution when trading in
Ellies shares until the publication of a further announcement.
Johannesburg
4 December 2007
Corporate advisor, legal advisor and designated advisor
Java Capital (Proprietary) Limited
Date: 04/12/2007 09:00:01 Produced by the JSE SENS Department.
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