| Thu 6 Dec 2007, 12:06 | | BDM - Buildmax Limited - Acquisitions reverse tak |
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BDM
BDM
BDM - Buildmax Limited - Acquisitions, reverse take-over and renewal
of cautionary
Buildmax Limited
(Registration No. 1995/012209/06)
Share Code: BDM & ISIN Code: ZAE000011250
("Buildmax")
ACQUISITIONS, REVERSE TAKE-OVER AND RENEWAL OF CAUTIONARY
INTRODUCTION
Further to the announcement on 6 August 2007 shareholders of Buildmax
are advised that Buildmax has concluded agreements to acquire the
companies comprising the Buildco group ("Buildco") ("the
acquisitions"). The acquisitions will establish Buildmax as a leading
diversified construction materials, equipment and services supplier to
the construction and mining industries with revenue in excess of R1
billion.
Buildmax will, after the acquisitions:
- quarry, manufacture and distribute a range of materials to the
construction industry in South Africa;
- provide opencast mining services, rehabilitation services and
equipment hire to the mining industry; and
- be well positioned to capitalise on opportunities created by
infrastructural expansion and high-growth mining activity,
particularly coal-related opencast mining.
BUILDCO
Buildco comprises the following operations:
Aggregates & Quarries
Buildco`s Aggregates & Quarries operations comprise:
- Crushco, the largest river sand quarry in Gauteng;
- Wit Deep Sand and Stone ("Wit Deep") and Benoni Sand and Buildware
("BSB") which are long-established distributors of sand,
aggregates and other building supplies; and
- Alfa Sandworks ("Alfa"), Verlesha Investments ("Verlesha") and
Mystic Blue ("Mystic Blue") which have sand quarries and
prospecting rights in Gauteng.
Bricks & Blocks
The Bricks & Blocks operations of Buildco comprise:
- Columbia DBL ("Columbia"), the largest cement brick, blocks and
related product manufacturer in the Western Cape; and
- Cast Industries ("Cast"), a leading manufacturer of bricks, kerbing
and paving products based in Gauteng.
Equipment & Services
Buildco`s Equipment & Services operations comprise Vukuza Earth Works
("Vukuza"), an opencast mining services, rehabilitation services and
equipment hire business.
RATIONALE FOR THE ACQUISITIONS
Buildmax currently specialises in the manufacture and distribution of
building materials - specifically cement bricks and blocks, gutters
and other galvanised rainwater products and timber.
The acquisitions will position Buildmax for long-term growth by
significantly expanding its existing product range, achieving
economies of scale and creating opportunities to benefit from new
product and market developments. This will enable Buildmax to
capitalise on government`s infrastructure expansion plan and related
private sector expenditure.
Through Vukuza, Buildmax will have the capacity and capability to take
advantage of the opencast mining and rehabilitation opportunities
created as a result of the increasing demand for coal, positioning the
group for significant organic and acquisitive growth in this area.
EXECUTIVE MANAGEMENT
Paul de Klerk and Herman Fourie are currently CEO and CFO of Buildco
and will be appointed to the board of Buildmax in a nonexecutive
capacity. On implementation of the acquisitions they will be appointed
as CEO and CFO of Buildmax respectively.
Paul has more than 15 years` experience in the construction industry
with significant experience in corporatising and integrating owner-
managed businesses into listed companies. Paul formerly served as
Managing Director (and before that Financial Director) of the General
Building Materials Division of Iliad Africa Limited. In his previous
role, Paul managed 3000 employees in 51 outlets, running a division
with turnover in excess of R2,5 billion.
Herman, a Chartered Accountant, brings 15 years` experience in
financial, executive and strategic management and directorship of
listed and unlisted companies. He served most recently as financial
director of a major contract mining group.
Both Paul and Herman have entered into service and restraint
agreements and will control significant interests in Buildmax after
the acquisitions.
The existing management teams of Buildco have entered into service and
restraint of trade agreements and will have significant interests in
Buildmax as a result of the acquisitions.
NEW BUILDMAX GROUP
Post implementation of the acquisitions Buildmax will comprise two
strategic business units:
- Construction Materials; and
- Equipment & Services.
Each business unit will consist of the following divisions:
Construction Materials Equipment & Services
Aggregates & Bricks & Building Opencast Equipment
Quarries Blocks Materials Mining Rental & Sales
Each of the businesses in the new Buildmax group is well regarded as a
market leader with a strong brand, having provided high quality
products and services for periods ranging from 20 to 70 years.
CONSTRUCTION MATERIALS
Buildmax Aggregates & Quarries
Buildmax Aggregates & Quarries comprises the group`s quarrying
activities and distribution operations for sand, aggregate and
building supplies trading through Crushco, BSB, Wit Deep, Alfa and
Verlesha. The division operates a fleet of over 130 trucks.
Crushco, BSB and Wit Deep are located in Ekhuruleni, a major growth
node in Gauteng, while Alfa and Verlesha are located in East Pretoria.
Customers include government, parastatals, major construction
companies, smaller contractors, DIY and BIY enthusiasts, builders
merchants and material resellers.
The businesses will continue to be managed by the former owners Sid
Sidersky, Eric Dorner and Fred Sprenzel, each of whom has more than 25
years` industry experience.
Buildmax Bricks & Blocks
Buildmax Bricks & Blocks comprises Watson, Buildmax`s existing brick
and block manufacturing operation, Cast and Columbia.
Columbia is the largest cement brick, blocks and related product
manufacturer in the Western Cape, while Cast and Watson are
significant cement brick, block, kerb and related cement product
manufacturers in Gauteng. Cast has recently installed one of the
largest and most sophisticated cement brick manufacturing plants in
the country.
Buildmax Bricks & Blocks operates 15 plants with a total output of 60
000 tonnes per month (approximately 20 million Brick Equivalent Units
per month) producing a wide range of cement products including pavers,
masonry blocks and bricks, retaining wall blocks, kerbs and other pre-
cast concrete products.
The division is managed by Gysbert Kappers who has more than 15 years`
experience at Columbia and sits on the board of the Concrete
Manufacturers Association ("CMA"). Cast will continue to be managed by
Garth Gregory (the current president of the CMA) who has more than 30
years` experience.
Buildmax Building Materials
Buildmax Building Materials comprises the existing rainwater goods and
timber operations of Buildmax and will continue to be operated by its
current management.
The rainwater goods operations are conducted through:
- S Burde, South Africa`s leading manufacturer and distributor since
1946 of galvanised rainwater products including gutters, down
pipes, flashing, ridging, water tanks and other accessories. It
services the Gauteng, Mpumulanga, North West, Limpopo and Eastern
Cape markets;
- Kensmark, which produces specialised sheet metal products and
roofing accessories for the same markets as are serviced by S
Burde; and
- Watertite, which has specialised since 1973 in the manufacture,
supply and on-site installation of made-to-measure gutters and
rainwater systems for the domestic market. A mobile fleet enables
the business to service the greater Western and Eastern Cape.
Buildmax`s timber operations are conducted by Ticktin, which since
1935 has manufactured and distributed a wide range of timber and
machine moulded products to timber merchants throughout the Western
Cape.
EQUIPMENT & SERVICES
Buildmax Equipment & Services currently comprises Vukuza which
provides opencast mining services, rehabilitation services and
equipment hire and sale.
Vukuza operates predominantly in Mpumulanga with a fleet of over 120
earthmoving and mining vehicles. Established in 1978 as part of BSB,
Vukuza will continue to be run by founder and former owner Fred
Sprenzel who has managed the business for more than 20 years.
REVERSE TAKEOVER
The implementation of the acquisitions will result in a reverse take-
over of Buildmax for the purposes of the Listings Requirements of the
JSE Limited ("JSE"). In terms of the Listings Requirements the JSE
will only permit Buildmax to retain its listing following the reverse
take-over if the JSE is satisfied that Buildmax still qualifies for
listing.
The Directors are confident that Buildmax will continue to qualify for
listing after the implementation of the acquisitions and the reverse
take over.
TERMS OF THE ACQUISITIONS
In terms of the acquisitions Buildmax has agreed to acquire all of the
shares in and shareholders claims against:
- Black Ginger 372 (Pty) Ltd ("Black Ginger")(which owns 100% of
Crushco, Wit Deep, BSB and Alfa and 86.7% of Verlesha and Mystic
Blue) from Interactive Capital (Pty) Ltd ("Interactive");
Westbrooke Investments (Pty) Ltd ("Westbrooke"); Vuwa Investments
(Pty) Ltd ("Vuwa"); A Sprenzel; E Dorner; K Sidersky; A Sidersky;
Wit Deep Stone Crushers CC and the Paul de Klerk Family Trust;
- Clarewick (Pty) Ltd ("Clarewick")(which owns 100% of Columbia) from
Interactive; Westbrooke; N Lazarus and the October Investment
Trust;
- Burnleigh Investments (Pty) Ltd ("Burnleigh")(which has concluded an
agreement to acquire the business of Cast) from Interactive;
Westbrooke; N Lazarus and the October Investment Trust; and
- Hollyberry Props 41 (Pty) Ltd ("Hollyberry") (which owns 100% of
Vukuza) from Interactive; Westbrooke; Vuwa; A Sprenzel; K
Sidersky; A Sidersky; K Zech; D Bruyns; Wit Deep Stone Crushers CC
and the Paul de Klerk Family Trust.
Subject to the profit warranties set out below, the aggregate purchase
consideration payable in respect of the acquisitions is a maximum of
R960 425 682 which will be settled by the issue to the vendors of a
maximum of 662 362 539 Buildmax shares.
PROFIT WARRANTIES AND ADJUSTMENTS TO THE PURCHASE PRICE
R230 937 561 of the purchase price has been deferred (the "deferred
portion") and is subject to:
- the achievement by Black Ginger, Hollyberry and Clarewick of an
aggregate warranted profit before tax for the 12 months ending 29
February 2008 (the "2008 warranted PBT") or should the 2008
warranted PBT not be achieved, an aggregate profit before tax for
the 12 months ending 28 February 2009 equal to more than 122% of
the 2008 warranted PBT;
- the achievement by Burnleigh of a warranted profit before tax for
the 12 months ending 28 February 2009;
- the acquisitions of 100% of Alfa and 86.75% of Verlesha by Black
Ginger (which are still subject to certain regulatory
requirements) being implemented,
failing which, the deferred portion will be reduced.
CONDITIONS TO THE ACQUISITIONS
The acquisitions are all inter-conditional and subject to:
- the requisite approval of Buildmax shareholders (excluding the
related parties referred to below); and
- the receipt, to the extent required, of all regulatory approvals.
In addition the acquisition of Burnleigh is conditional upon
Burnleigh`s acquisition of the business of Cast becoming unconditional
in accordance with its terms.
RELATED PARTY TRANSACTIONS
Given that the controlling shareholders of the companies comprising
Buildco are material shareholders of Buildmax, the acquisitions are
related party transactions in terms of the JSE Listings Requirements.
The board of Buildmax has in accordance with the JSE Listings
Requirements, appointed Sasfin Capital, a division of Sasfin Bank
Limited ("Sasfin Capital") as independent expert, to provide an
independent opinion on the fairness of the acquisitions to Buildmax
shareholders.
As at the date of this announcement, Sasfin Capital is of the opinion
that the terms of the acquisitions are fair to Buildmax shareholders
(the "opinion")
The opinion, which is subject to change, is based on information
available to Sasfin Capital up to 30 November 2007 and is subject to a
review of, inter alia, market conditions at the time of formalisation
of the opinion for purposes of the circular to Buildmax shareholders,
referred to below (the "cicular"), as well as the limitations and
conditions to be set out in its formal opinion which will be included
in the circular.
FURTHER DOCUMENTATION AND RENEWAL OF CAUTIONARY
The financial effects of the acquisitions on the historical results of
Buildmax are in the process of being finalised and a further
announcement will be published in due course. In addition Buildmax is
involved in discussions in relation to certain further substantial
acquisitions. In the circumstances shareholders are advised to
continue to exercise caution when trading in Buildmax shares until the
publication of a further announcement or announcements in this regard.
A circular and revised listing particulars will be sent to Buildmax
shareholders in due course containing further details of the
acquisitions.
Johannesburg
6 December 2007
Corporate and legal advisors to Interactive Capital, Westbrooke and
Buildco
Java Capital (Proprietary) Limited
Sponsor and independent advisor
Sasfin Capital
a division of Sasfin Bank Limited
Corporate advisor to BSB, Crushco, Vukuza, Wit Deep and Alfa Sands
Ararat Corporate Advisory Services
Investor & corporate relations
Envisage
Date: 06/12/2007 12:06:41 Produced by the JSE SENS Department.
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