| Fri 7 Dec 2007, 12:50 | | SKY - Sea Kay - Acquisition by Sea Kay and withdrawal of cautionary announcement |
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SKY
SKY
SKY - Sea Kay - Acquisition by Sea Kay and withdrawal of cautionary announcement
SEA KAY HOLDINGS LIMITED
(formerly Pilvest CO 1 (Proprietary) Limited)
(Registration number 2006/004967/06)
JSE code: SKY
ISIN: ZAE000102380
("Sea Kay")
ACQUISITION BY SEA KAY OF A 60% SHAREHOLDING IN COVEWAY TRADE & INVEST 28
(PROPRIETARY) LIMITED (TO BE RENAMED LONEROCK CONSTRUCTION HOLDINGS
(PROPRIETARY) LIMITED ("LONEROCK") AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcements dated 7 and 17 September 2007, 29
October 2007 and 5 November 2007, shareholders are advised that Sea Kay has
entered into a Sale of Shares Agreement ("the Agreement"), in terms of which Sea
Kay will acquire a 60% shareholding in Lonerock ("the transaction") from Messrs.
F Poggenpoel and J van der Walt, Lonerock Construction (Pty) Limited and Pride
Trading Limited (collectively "the vendors").
Simultaneous with the signing of the Agreement, a shareholders` agreement
between Mr. J Poggenpoel ("JP"), Lonerock Exco (Pty) Limited ("Exco"), Lonerock
BEE Company (Pty) Limited ("BEE Co")("the remaining shareholders"), Lone Rock
and Sea Kay ("the shareholders` agreement") has been entered into in terms of
which, inter alia, Sea Kay has been granted put and call options relative to the
remaining shareholding in Lonerock, as follows:
Call option:
JP, Exco and BEE Co have granted a call option to Sea Kay to acquire their
shares in Lonerock (40% shareholding in total) during the call option period, as
defined in the shareholders` agreement. The following terms apply to the call
option:
* it is irrevocable;
* it may be exercised at any time during the call option period and will *
lapse if not exercised during that period; and
* it shall be capable of being exercised independently of each remaining
shareholder.
The effective date will be the date on which the call option is exercised and
the purchase price will be the aggregate of the fair market value as determined
by Lonerock`s auditors in terms of a formula set out in the shareholders`
agreement (using a price:earnings multiple of 8) and the face value of any loan
accounts.
Put option:
Sea Kay has granted a put option to Exco in respect of the whole of the shares
(10%) and loan accounts held by it during the put option period, as defined in
the shareholders` agreement, upon the exercise of which Sea Kay shall be obliged
to purchase Exco`s shares and loan account. The effective date and the terms of
the put option will essentially be the same as those for the call option save
that, in determining the purchase price, a price:earnings multiple of 6 will be
applied.
Other than as set out in paragraph 4 below, the Agreement does not contain any
warranties that are not usual in respect of transactions of this nature.
2. BACKGROUND INFORMATION
Sea Kay listed on the JSE Limited ("JSE`) on 16 August 2007. Sea Kay focuses on
the development and construction of subsidised, affordable and bonded mass
housing schemes for Government, financial instructions, mines and private
clients.
Lonerock is a niche construction and plant hire business, specialising in bulk
earthworks, road and infrastructure which business is carried on by Lonerock and
its subsidiary, Lonerock Plant (Pty) Limited.
3. RATIONALE FOR THE TRANSACTION
Lone Rock has a solid track record and its reputation in its field of activity
as well as its potential to grow with Sea Kay in order to deliver integrated
sustainable human settlements will enhance Sea Kay`s future prospects. Sea Kay
is currently engaged in construction activities, together with Lone Rock, on the
Olievenhoutbosch project in Centurion on behalf of ABSA Devco where Lone Rock is
providing civil engineering services whilst Sea Kay is constructing 3 000
affordable housing units.
The transaction will present Sea Kay with the capability to provide a "one-stop"
service to Government and the major financial institutions in the production of
turn-key developments of integrated human settlements. By controlling both the
civil engineering services and the top-structure pricing, Sea Kay will have a
definite advantage over competitors who deliver only fragmented development
segments.
4. PURCHASE CONSIDERATION
The aggregate maximum purchase price payable by Sea Kay in respect of the
transaction is R104.4 million to be settled as follows:
1 R83.5 million (ie 80%) on the closing date as defined in the
Agreement, as follows:
* in cash, R56.5 million; and
* by the issue of 10 800 000 Sea Kay ordinary shares at R2.50 per *
share (ie R27 million), and
2 The remaining R20.9 million in cash within 10 days after the
determination of the consolidated net profit after tax for the year
ending 31 December 2008, after certain agreed adjustments ("2008
PAT"). The remaining R20.9 million of the purchase price will be
adjusted downwards at the rate of R8 for every R1 shortfall of the
warranted 2008 PAT of R29.2 million (to a nil value), in terms of
which an audit certificate is required by 31 March 2009. Interest
will accrue on this payment from the date specified for payment until
the date of actual payment.
5. EFFECTIVE DATE
The effective date of the transaction as per the Agreement is 1 January 2008,
subject to the successful fulfilment and/or waiver of the conditions precedent
set out in paragraph 6 below.
6. CONDITIONS PRECEDENT
The transaction is conditional, inter alia, upon:
* a satisfactory due diligence being completed by Sea Kay by no later than 31
January 2008;
* Sea Kay raising the relevant funds to finance the transaction by no later
than 31 January 2008;
* compliance with all regulatory obligations to the extent necessary to
effect the transaction and, in particular, obtaining the relevant
Competition Commission approval by no later than 28 February 2008; and
* certain of the vendors (namely Messrs F Poggenpoel and J van der Walt)
entering into employment and restraint agreements.
The parties to the Agreement are entitled to extend the time for fulfilment of
the conditions precedent and/or to waive the fulfilment of any component of the
conditions precedent.
7. FINANCIAL EFFECTS
The unaudited pro forma financial effects set out below have been prepared for
illustrative purposes only to assist the shareholders of Sea Kay to assess the
impact of the transaction on the earnings per share ("EPS"), headline earnings
per share ("HEPS"), net asset value per share ("NAVPS") and tangible net asset
value per share ("TNAVPS") of Sea Kay. These unaudited pro forma financial
effects have been disclosed in terms of the JSE Limited ("JSE") Listings
Requirements and because of their nature may not fairly present Sea Kay`s
financial position, changes in equity, results of operations or cash flows. The
unaudited pro forma financial effects are the responsibility of the directors of
Sea Kay.
Before % change
Notes After
EPS and HEPS (cents) 1&2 17.71 18.30 3.3
NAVPS (cents) 3&4 30.33 38.59 27.3
TNAVPS (cents) 3&4 14.08 6.45 (54.2)
Weighted average number of 471 531 482 331
shares in issue (000)
Shares in issue at year end 477 531 488 331
(000)
Notes:
1 The EPS and HEPS, as set out in the "Before" column of the table, are based
on Sea Kay`s profit forecast for the year ending 30 June 2008 as released
on SENS on 5 November 2007.
2 EPS and HEPS effects are based on the following assumptions and
information:
A the transaction was effective 1 July 2007;
B the entire purchase price of R104.4 million was paid on 1 July 2007 by way
of an issue of 10 800 000 Sea Kay ordinary shares at R2.50 per share and
the remaining portion of R77.4 million was financed through borrowings
incurring interest at 13% per annum (pre tax);
C transaction costs of R300 000 have been expensed;
D the total profit attributable to the 60% interest in the Lonerock group D D
acquired by Sea Kay is R12.1 million based on the audited financial
statements of Lonerock Construction (Pty) Ltd for the year ended 31 March
2007, the annual financial statements of Lonerock Plant CC for the year
ended 28 February 2007 and the management accounts of Lefika Road
Construction (Pty) Ltd.
3 The NAVPS and TNAVPS, as set out in the "Before" column of the table, are
based on the audited balance sheet of Sea Kay at 30 June 2007.
4 NAVPS and TNAVPS effects are based on the following assumptions and
information:
A the transaction was effective 30 June 2007;
B the entire purchase price of R104.4 million was paid on 30 June 2007 by way
of an issue of 10 800 000 Sea Kay ordinary shares at R2.50 per share and
the remaining portion of R77.4 million was financed through borrowings;
C the net assets attributable to the 60% interest in the Lonerock group
acquired by Sea Kay is R25.0 million based on the year end balance sheets
contained in the audited financial statements of Lonerock Construction
(Pty) Ltd for the year ended 31 March 2007, the annual financial statements
of Lonerock Plant CC for the year ended 28 February 2007 and the management
accounts of Lefika Road Construction (Pty) Ltd.
8. CLASSIFICATION OF THE TRANSACTION
The transaction is classified as a Category 2 transaction in terms of the
Listings Requirements of the JSE.
9. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are advised that caution is longer required to be exercised by them
when dealing in their securities.
Johannesburg
7 December 2007
Sponsor
Ernst & Young Sponsors (Pty) Limited
Attorney
TW Ferguson
Date: 07/12/2007 12:50:01 Produced by the JSE SENS Department.
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