| Wed 16 Apr 2008, 16:43 | | AET - Alert Steel Holdings - Acquisition By A Subs |
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AET
AET
AET - Alert Steel Holdings - Acquisition By A Subsidiary Of Alert And
Withdrawal Of Cautionary Announcement
ALERT STEEL HOLDINGS LIMITED
(previously known as Alert Steel Built It (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2003/005144/06)
JSE code: AET
ISIN: ZAE000092847
("Alert" or "the company")
ACQUISITION BY A SUBSIDIARY OF ALERT OF THE BUSINESS OF GENERAL STEEL
(PROPRIETARY) LIMITED ("GENERAL STEEL") AND THE PROPERTY OWNED BY SOVEREIGN
PARK BENROSE (PROPRIETARY) LIMITED ("SOVEREIGN PARK") AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcements, dated 14 February 2008 and 19
March 2008, shareholders are advised that Alert Steel (Proprietary)
Limited has entered into a Sale of Business Agreement dated 16 April
2008 ("the agreement"), in terms of which the Seller, General Steel and
Sovereign Park collectively, will sell the business and sale assets of
General Steel, as a going concern ("the business") and the property
owned by Sovereign Park ("the property") (collectively, "the
transaction") to Alert Steel.
2. BACKGROUND INFORMATION
Alert, through its operating subsidiaries, conducts business as
retailers of prime steel, building materials, plumbing and hardware
products, operating 16 retail branches and 2 rebar (steel reinforcing
bars used in concrete structures) manufacturing plants in Polokwane and
Pretoria.
General Steel is a supplier and distributor of steel and steel products.
Sovereign Park owns the property, situated on Erf 6 Elcedes Township,
measuring 5474 square metres, currently occupied by General Steel. The
property was valued at (R4 400 000 on 14 September 2007 by RA Rogers),
an independent valuer registered as a Professional Associated Valuer
(membership number 1287) in terms of the Property Valuers Profession
Act, No. 47 of 2000.
3. RATIONALE FOR THE TRANSACTION
Alert has acquired the business and sale assets as a going concern, plus
the assumed liabilities, and the property subject to certain profit
warranties. The transaction is in line with Alert`s strategy to grow
its footprint and to acquire businesses with strong management in place.
Goodwill of R4 850 000 was raised as a consequence of the transaction.
4. PURCHASE CONSIDERATION
The cash purchase price payable by Alert is the aggregate of:
- the sum of R14 650 000 being R3 200 000 in respect of the property
and R11 450 000 in respect of the business, plus
- the amount of any liabilities applicable to the property and taken
over by Alert Steel, being R1 600 000; and
- the amount by which the net tangible asset value ("NTAV") at the
effective date exceeds an amount of R6 600 000, being the NTAV
guaranteed by the Seller limited to R1 500 000.
If the profit after tax in respect of the financial statements for the
year ended 29 February 2008 is less than R3 800 000, a downward pro rata
adjustment will be made to the purchase consideration.
The agreement contains warranties which are normal in respect of
transactions of this nature.
5. EFFECTIVE DATE
The transaction will become effective on 1 May 2008 subject to the
successful fulfilment of the conditions precedent set out in paragraph 6
below.
6. CONDITIONS PRECEDENT
The transaction is conditional, inter alia, upon:
- all material contracts being ceded, assigned or delegated to Alert
by 30 April 2008;
- a certificate in respect of the profit after tax being provided by
the Seller`s auditors by 30 April 2008;
- Alert completing a due diligence on the effective date accounts by
no later than 15 May 2008; and
- compliance with all regulatory obligations to the extent necessary
to effect the transaction, including obtaining Competition
Commission approval by 31 May 2008.
The parties to the agreement are entitled by notice in writing to extend
the date by which any of the conditions precedent are to be fulfilled
provided that the aggregate of such extensions do not extend beyond 30
June 2008.
7. FINANCIAL EFFECTS
The unaudited pro forma financial effects, for which the directors are
responsible , are provided for illustrative purposes only to show the
effect of the transaction on earnings and headline earnings as if the
transaction had taken effect on 1 July 2007 and on net asset value and
net tangible asset value per share as if the transaction had taken
effect on 31 December 2007. Because of their nature, the unaudited pro
forma financial effects may not give a fair presentation of the Group`s
financial position and performance. The unaudited pro forma financial
effects have been compiled from the financial results for the six months
ended 31 December 2007 and are presented in a manner consistent with the
format and accounting policies adopted by Alert and have been adjusted
as described in the notes below.
Movement
Notes Unudited Un- (cents) (%)
Before audited
the After the
trans- trans-
action action
Earnings per share 1,2,3 6.1 6.9 0.8 13.00
(cents)
Headline earnings
per share (cents) 1,2,3 6.1 6.8 0.7 11.47
Fully diluted
earnings per share 1,2,3 6.0 6.7 0.7 11.60
(cents)
Fully diluted
headline earnings 1,2,3 5.8 6.6 0.8 13.80
per share (cents)
Net asset value
per share (cents) 1,2,4 62.5 62.3 (0.2) (0.3)
Net tangible asset 42.1 39.9 (2.2) (5.12)
value per share 1,2,4
(cents)
Weighted average 245 000 245 000
number of shares
in issue (000`s)
Fully diluted 252 600 252 600
weighted average
number of shares
in issue (000`s)
Actual number of 245 000 245 000
shares in issue at
period end (000`s)
Notes:
1 The "Unaudited Before the transaction" column reflects Alert`s results
for the six months ended 31 December 2007.
2. The "Unaudited After the transaction" column reflects the unaudited
results of General Steel for the six months ended 31 December 2007
extracted from the management accounts of General Steel for that period.
Management of Alert are comfortable that the aforementioned management
accounts provide a fair reflection of the business of General Steel for
that period.
3. Earnings and headline earnings per share and fully diluted earnings and
fully diluted headline earnings per share effects are based on the
following assumptions and information:
- the transaction was effective on 1 July 2007;
- the purchase price of R14 650 000 was settled from borrowings;
- the total after tax profit attributable to the transaction is R1
981 000 for the six months ended 31 December 2007 based on
management accounts for that period.
4. Net asset value and tangible net asset value per share effects are based
on the following assumptions and information:
- the transaction was effective on 31 December 2007;
- the purchase price of R14 650 000 was paid on 31 December 2007 in
the manner described in note 3;
- estimated transaction costs of R500 000 have been accounted for
against share premium; and
- the revaluations and allocations that may arise from the
application of IFRS 3 (Business Combinations) have not been made as
this will only be finalised in due course. The pro forma financial
information has thus been prepared on the basis that the excess of
the purchase price over the net asset value of the transaction will
comprise goodwill of R4 850 000, which goodwill is not amortised.
8. DETAILS RELATING TO THE SELLER
The Seller is General Steel and Sovereign Park. The Seller has
undertaken that for a period of 10 years from the effective date it
shall not directly or indirectly conduct any business in the Republic of
South Africa which will compete with the business.
9. CLASSIFICATION OF THE TRANSACTION
The transaction is classified as a Category 2 transaction in terms or
paragraph 21.10 of the Listing Requirements of the JSE Limited.
10. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The cautionary announcement is hereby withdrawn.
Johannesburg
16 April 2008
Designated Adviser
Vunani Corporate Finance
Date: 16/04/2008 16:43:01 Produced by the JSE SENS Department.
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