| Thu 3 Apr 2008, 11:31 | | ACT - Afrocentric Investment Corporation - Proposed Acquisition And Renewal Of |
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ACT ACTP
ACT
ACT - Afrocentric Investment Corporation - Proposed Acquisition And Renewal Of
Cautionary Announcement
AFROCENTRIC INVESTMENT CORPORATION LIMITED
(Formerly WB Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1988/000570/06)
JSE Codes: ACT, ACTP
ISIN numbers: ZAE000078416, ZAE000082269
("AfroCentric" or "the Company")
PROPOSED ACQUISITION OF A 34.9% INTEREST IN JASCO ELECTRONICS HOLDINGS LIMITED
("JASCO"), THE PROPOSED SUBSCRIPTION FOR 40 000 CUMULATIVE REDEEMABLE PREFERENCE
SHARES IN ININGI INVESTMENTS 180 (PROPRIETARY) LIMITED ("ININGI") AND RENEWAL OF
CAUTIONARY ANNOUNCEMENT
1. Introduction
Holders of ordinary shares and preference shares in AfroCentric
("AfroCentric shareholders") are advised that AfroCentric has entered into
an agreement ("the AfroCentric agreement"), dated 31 March 2008, with
Community Investment Holdings (Proprietary) Limited ("CIH"), The Inkonkoni
Trust (henceforth collectively referred to as "the Vendors"), Malesela
Holdings No. 1 (Proprietary) Limited ("Malesela") and Jasco to acquire
34.9% of the ordinary shares in Jasco ("the Acquisition") subsequent to
the redemption of convertible preference shares held in Jasco by CIH ("the
Conversion"). The Acquisition will be effective from the first day of the
month following the month in which the closing date falls, which is 9
(nine) business days after all conditions precedent, as set out in
paragraph 6 below, have been fulfilled, and expected to be before 31 May
2008.
Further to the Acquisition, AfroCentric has entered into an agreement ("the
Subscription agreement"), dated 31 March 2008, with Jasco and Iningi, a
wholly owned subsidiary of Jasco, to subscribe for 40 000 cumulative
redeemable preference shares in the capital of Iningi ("the Iningi
preference shares") for an aggregate subscription price of R100 million
("the Subscription"), being an issue price of R2 500 per Iningi preference
share. The Subscription will be implemented before 31 May 2008.
For the purposes of this announcement, the Acquisition and Subscription will be
referred to collectively as "the Transactions".
2. The proposed acquisition of shares in Malesela Taihan Electric Cable
(Proprietary) Limited ("MTec") by Iningi
Jasco, through Iningi, has entered into an agreement with Malesela ("the
Malesela agreement") to acquire an effective 34% economic interest in MTec
through the acquisition of:
- a 49% interest in the ordinary shares of MTec, for a maximum consideration
of R99,1 million, ("the MTec ordinary shares acquisition"), and
- a call option ("the MTec option") to acquire 51.1% of MTec convertible
preference shares (being 23 000 out of 45 000 MTec convertible preference
shares and representing a 23% economic interest in MTec) ("the MTec
preference shares") from the other shareholder in MTec, Taihan Electric
Wire Company Limited ("Taihan Electric") of Seoul, Korea , for a total
consideration of R115 million, ("the MTec option acquisition"). Iningi will
exercise the MTec option and acquire the MTec preference shares immediately
after the MTec ordinary shares acquisition becomes unconditional.
It is envisaged that the MTec ordinary shares acquisition and the MTec
option acquisition (collectively "the MTec acquisition") will be
implemented before 31 May 2008. Further details of the MTec acquisition are
set out in the Jasco announcement dated 3 April 2008.
In addition Malesela has granted Jasco the option to acquire a further 2%
of the ordinary shares in MTec for a consideration of one cent per ordinary
share. Jasco has undertaken that, subject to obtaining the relevant
regulatory approvals, it will exercise this option once the Malesela
agreement has become unconditional. This option and the MTec ordinary
shares acquisition collectively represent an economic interest of
approximately 11% in MTec.
The purchase price of R99,1 million for the MTec ordinary shares
acquisition will be discharged through Iningi paying an amount of R10
million in cash and procuring the delivery of fully paid renounceable
letters of allocation in respect of 27 415 385 Jasco ordinary shares to
Malesela at an issue price of R3.25 per Jasco ordinary share.
The consideration payable for the MTec option acquisition, being R115
million, will be settled in cash. Iningi will finance R100 million of the
total R115 million cash consideration through the issue of Iningi
preference shares to AfroCentric as described in paragraph 1 above. The
balance of R15 million will be financed by means of a loan from Jasco.
Subsequent to the Transactions, CIH will be entitled to representation on
the board of directors of AfroCentric, and AfroCentric will likewise be
represented on the board of directors of Jasco.
3. The final Acquisition consideration
The Acquistion consideration will be R3.25 per Jasco ordinary share which
will be settled by the issue of new AfroCentric ordinary shares at a price
of R2.60 per new AfroCentric ordinary share ("AfroCentric Consideration
Shares"). The final number of AfroCentric Consideration Shares to be issued
to the Vendors is dependent on the Conversion. The Conversion is to be
determined on the achievement by Jasco of previously agreed upon
performance targets for the 5-year period ended 29 February 2008 and will
be determined only after the audit of the Jasco results for the year ended
29 February 2008 has been finalised.
Insofar as the issuance of Jasco ordinary shares has a dilutive impact on
AfroCentric`s 34.9% interest to be acquired in Jasco pursuant to the
Acquisition, AfroCentric will be able to exercise a call option ("the Call
Option") against CIH in the first instance and Malesela if required, at a
price of R3.25 per Jasco ordinary share to maintain AfroCentric`s interest
in Jasco at 34.9%. The purchase price for the Jasco ordinary shares
acquired as a result of the exercise of the call option will be discharged
through AfroCentric issuing such number of ordinary shares at an issue
price of R2.60 per ordinary share as is necessary to settle the purchase
price in full. A reciprocal put option ("the Put Option") on the same terms
has been granted by AfroCentric to CIH and Malesela, fixed at a price of
R2.60 per AfroCentric ordinary share and R3,25 per Jasco ordinary share
The actual number of AfroCentric Consideration Shares will therefore only
be determined following the Conversion, the issue of new Jasco shares
pursuant to the MTec acquisition and the exercise of the Put or Call
Option, if any. Based on the trading update published by Jasco on 31 March
2008, the Acquisition consideration, prior to the exercise of the Put or
Call Option, will be between R98,4 million and R99,0 million to be settled
by the issue to Vendors of between 37,8 million and 38,1 million
AfroCentric Consideration Shares.
4. Nature of business of Jasco and MTec
Jasco, established in 1976, is an investment holding company with a core
focus on the electronics and telecommunications industry. Jasco listed on
the JSE Limited on 2 October 1987.
Jasco`s business model ensures a diversified portfolio of three divisions
operating in the growth sectors of Telecommunications, Domestic Products
and Security. Jasco`s portfolio of businesses distribute, assemble and/or
design and manufacture electronic and electrical products and solutions. In
addition, as a further means of diversification, the group balances its
income stream between local sales and services and international exports to
Europe, USA and the African continent..
MTec is a cable manufacturer based in Vereeniging, employing more than 450
people. MTec pioneered the manufacturing of non-ferrous products in South
Africa and is one of the country`s leaders in the production and supply of
power cables, fibre optic cables, aluminium overhead conductors, bare
copper wire, strip products and non-ferrous products.
MTec started out as the Union Steel Corporation of S.A. Limited (USKO)
before Malesela acquired the business in the late 1990`s. Malesela
partnered with Taihan Electric about 8 years ago and further developed the
business to where it is today, including the recent commissioning of an
ultra-modern fibre optic plant on the premises.
MTec was recently awarded a 5-year R2,5 billion contract from Eskom to
supply power cables.
MTec had net tangible assets of R238,5 million as at 30 June 2007 and
generated a net turnover of R1,042 billion with profit after tax of
R71 million for the financial year ended 30 June 2007.
Malesela currently owns 51% of the ordinary share capital and the MTec
option. The remaining 49% of ordinary shares and all the preference shares
currently outstanding in MTec are owned by Taihan Electric, a company
incorporated in South Korea which is a world recognised fibre optic cable
manufacturer and one of the world`s leading power and telecommunications
cable manufacturers.
Taihan Electric also holds R20 million worth of convertible debentures
(comprising 33 431 debentures at price of R598,25 per debenture) in MTec
which may be converted (at the option of Taihan Electric) to fully paid
ordinary shares prior to 31 August 2010 or when the company is listed on
any stock exchange. Following the MTec acquisition Taihan Electric will
effectively own 66% of the economic interest in MTec.
5. Rationale for the Transactions
AfroCentric recognises that infrastructural development is a catalyst for
South Africa`s future growth and progress. Both government and the private
sector have committed to this fundamental imperative and have promoted
significant infrastructural projects through the national budget, joint
financing models, delivery concessions and other institutional innovations.
Given the government`s repeated appropriations, these infrastructural
projects are likely to continue for several years.
Taihan Electric is a significant player in global infrastructural
development projects and their corporate entity in South Africa (MTec) has
made excellent progress in positioning itself in South Africa as a
significant investor, employer and provider to South Africa`s
infrastructural undertakings and endeavours.
Given AfroCentric`s interest in this enterprise and Jasco`s opportunity to
expand the scope of its business through the acquisition of a significant
minority interest in MTec, it made eminent commercial sense to facilitate
the MTec acquisition for Jasco, at the same time being able to participate
in Jasco`s complementary and profitable electronics and telecommunications
businesses, where AfroCentric is capable of adding substantial value.
MTec has also established Taihan Electric`s strategic platform for
infrastructural business supply opportunities in countries north of South
Africa and on the African continent.
The Transactions also fall in line with AfroCentric`s strategy to operate
as a broad-based, black empowered diversified investment holding company
that will enable the Company to actively participate in the economic
transformation presently occurring in South Africa. AfroCentric will
continue to seek diverse investment opportunities that align with its
strategy.
6. Conditions precedent of the Transactions
The Acquisition is subject to the following conditions precedent:
- the approval of the Acquisition by the AfroCentric ordinary shareholders in
general meeting and the directors of AfroCentric;
- the obtaining of the relevant regulatory approvals, including those from --
the JSE Limited and the Securities Regulation Panel, to the extent
required;
- the Malesela agreement becoming unconditional;
- insofar as is necessary, the approval of the three person committee
appointed in terms of the Jasco black economic empowerment transaction with
CIH in May 2003 to protect the rights of Jasco minority shareholders
(referred to as "the Protectors");and
- the Subscription agreement becoming unconditional.
The Subscription is subject to the following conditions precedent:
- the Acquisition becoming unconditional in accordance with its provisions;
- the passing of the required special resolutions and ordinary resolutions by
the members and directors of Iningi and the registration of such special
resolutions by the Registrar of Companies; and
- confirmation that no put option exercise event in relation to the Iningi
preference shares has occurred, which entitles AfroCentric to sell the
Iningi preference shares to Jasco.
The MTec acquisition is subject to the following conditions precedent:
- the approval of ordinary and special resolutions as are required for the
implementation of the MTec Transactions by the Jasco shareholders in
general meeting;
- the special resolutions being registered by the Registrar of Companies;
- insofar as is necessary, the approval of the Protectors;
- the obtaining of the relevant regulatory approvals, to the extent required;
- the AfroCentric agreement becoming unconditional; and
- the Subscription agreement becoming unconditional.
7. Financial effects of the Transactions and cautionary announcement
The AfroCentric Board has partly been guided by Board Investment Committee
due diligence and analysis inter alia, on Jasco and MTec earnings already
in the public domain. Based on these fundamental measures, the Transactions
described herein present attractive prospects of enhanced earnings to
AfroCentric shareholders.
The pro forma financial effects of the Transactions, setting out the impact
of the Transactions on AfroCentric`s earnings and net asset value, prepared
in terms of the JSE Limited Listings Requirements, will be provided in a
further announcement. Shareholders are referred to the cautionary
announcement dated 27 March 2008 and accordingly, are advised to continue
exercising caution when dealing in AfroCentric`s securities until the
further announcement has been made.
8. Categorisation of the Transactions and circular
The Transactions are a Category 1 transaction in terms of the JSE Limited
Listings Requirements. A circular setting out details of the Transactions
and incorporating Revised Listing Particulars and a notice of general
meeting to convene a general meeting in order that the requisite ordinary
shareholder approval for the Transactions can be obtained will be posted to
AfroCentric ordinary shareholders in due course.
Johannesburg
3 April 2008
Investment bank and
transactional sponsor
Nedbank Capital
Legal advisers to AfroCentric
HR Levin Attorneys, Notaries and Conveyancers
Sponsor
Sasfin
Legal advisers to CIH / Malesela
Rothbart Inc.
Corporate Advisers to CIH/Malesela
Sinergi Corporate Advisors
Legal advisers to Jasco
Rossouws Attorneys
AfroCentric Auditors
SizweNtsaluba VSP
Date: 03/04/2008 11:31:01 Produced by the JSE SENS Department.
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