| Mon 19 May 2008, 8:30 | | WEA - Wearne - Acquisition Of The Portland Group A |
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WEA
WEA
WEA - Wearne - Acquisition Of The Portland Group And Further Cautionary
Announcement
W G Wearne Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1994/005983/06)
(JSE code: WEA & ISIN: ZAE000078002)
("Wearne" or "the company")
ACQUISITION OF THE PORTLAND GROUP AND FURTHER CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the renewal of the cautionary announcement dated 23
April 2008 and are advised that Wearne has entered into an agreement to acquire:
1.1 the entire issued share capital and cession of claims in Portland
Holdings (Pty) Limited ("Portland Holdings") and its subsidiaries, as
well as the minority interests ("minority shareholders") in certain
subsidiaries, of Portland Holdings (collectively "the Portland Group")
in terms of the Portland agreement ("the Portland Agreement") for a
purchase consideration of R122 615 660 as detailed in paragraph 4
("Portland acquisition") from Portland Readymix Trust, Anco Besigheids
Trust, Willchrest Besigheids Trust ("the vendors"); and
1.2 portion 8 of Farm 1098 Hooggekraal, as a going concern, in terms of
the Visserhok agreement ("the Visserhok Agreement") from Visserhok
Investments (Pty) Limited ("Visserhok") for a purchase consideration
of R40 500 000 as detailed in paragraph 4 ("the Visserhok
acquisition").
1.3 An additional amount which shall not exceed R60 000 000 will be paid
in terms of 4.1.3 to the vendors for Portland Hollowcare Slabs (Pty)
Limited ("Portland Hollowcare Slabs"), a new company recently
established, after the 31 August 2010 profit after tax has been
finally agreed.
1.4 The Portland acquisition and the Visserhok acquisition are
collectively defined as ("the transaction").
2. BACKGROUND INFORMATION
2.1 The Portland Group was established 20 years ago, in the Durbanville
area, in the Western Cape and is a supplier of ready mixed concrete
and aggregate (sand and stone used in the making of concrete) as well
as road building material to the construction industry.
2.2 The Portland Group offers the following products and services to the
construction industry:
- high quality ready mixed concrete;
- aggregates and related products. The Portland Group utilises its
own fleet and subcontractors to deliver aggregates to its
clients;
- Precast hollowcore products to the concrete slab market with its
latest state of the art plant and equipment; and
- concrete pump services.
2.3 The subsidiaries of Portland Holdings (including the percentage
holding by Portland Holdings) are as follows:
- Portland Aggregates Sales (Pty) Limited ("Portland Aggregates
Sales") - 60%;
- Portland Readymix (Pty) Limited ("Portland Readymix") - 100%;
- Portland Quarry (Pty) Limited ("Portland Quarry") - 85%;
- Portland Sand Mines (Pty) Limited - 70%;
- Portland Concrete Pumps (Pty) Limited ("Portland Pumps") - 75%;
and
- Portland Hollowcore Slabs - 100%.
3. RATIONALE FOR THE TRANSACTION
Wearne is a ready mixed concrete and aggregate supplier operating mainly in
Gauteng, the Free State, North West, Limpopo Provinces and KwaZulu-Natal.
The Portland Group provides a strategic geographical expansion opportunity
to Wearne into the lucrative Western Cape market. Furthermore:
- the transaction will expand Wearne`s product and services offering in
market, diversify revenue streams and add critical mass to Wearne;
- the Portland Group is an established profitable operation with a
presence and track record and can operate as a stand-alone and self-
sufficient business unit;
- the Portland Group`s operating margins are significantly higher than
Wearne`s margins; and
- the Portland Group has experienced management with a track record who
will become Wearne shareholders and board members.
4. PURCHASE CONSIDERATION AND PAYMENT
4. Purchase price
Subject to the provisions set out below, the purchase price payable by
Wearne for the Portland acquisition is the aggregate of:
4.1.1 R122 615 660 (in the event that the aggregate net profit after
tax of the Portland Group for the year ended 29 February 2008
("the February 2008 PAT") is less than R20 218 000, then the
purchase price shall be reduced by an amount equal to the
aggregate of the sum of R8.06 for every R1.00 by which the
February 2008 PAT is less than that amount) in terms of the
Portland acquisition; and
4.1.2 R40 500 000 in terms of the Visserhok acquisition; and
4.1.3 an amount equal to five times the average annual audited profit
after tax of Portland Hollowcore Slabs for the two 12 month
periods ending 31 August 2009 and 31 August 2010 ("the Portland
2009/2010 PAT"), up to a maximum payment of R60 000 000.
Portland Hollowcore Slabs is a new venture which is only expected
to generate profit from May 2008.
4.2 Discharge of the purchase price
The purchase price will be discharged as follows:
4.2.1 R108 879 294 of the purchase price referred to in 4.1.1 will
be discharged on the effective date by the issue and
allotment by Wearne to the vendors of 31 108 370 Wearne
ordinary shares at an issue price of R3.50 per share;
4.2.2 R4 736 364.50 of the purchase price referred to in 4.1.1
will be discharged on the effective date by the issue and
allotment by Wearne to the minority shareholders of 1 353
247 Wearne ordinary shares at an issue price of R3.50 per
share;
4.2.3 R9 000 001.50 of the purchase price referred to in 4.1.1
will be discharged in terms of 4.5 by the issue and
allotment by Wearne to the minority shareholders of 2 571
429 Wearne ordinary shares at an issue price of R3.50 per
share;
4.2.4 R40 500 000 of the purchase price referred to in 4.1.2
payable in cash to Visserhok against registration of
transfer of Portion 8 of Farm 1098 Hooggekraal into the name
of Wearne;
4.2.5 The portion of the purchase price referred to in 4.1.3 will
be discharged on the third business day after the Portland
2009/2010 PAT has been finally agreed by the auditors by the
issue and allotment of Wearne ordinary shares to the vendors
at an issue price equal to the greater of:
a. R3.50 per Wearne ordinary share; or
b. the 30 day volume weighted average price per Wearne
ordinary share at that date.
A maximum of 17 142 857 Wearne ordinary shares will be
issued in this regard.
4.3 Restrictions
None of the vendors shall be entitled to sell:
- any of the Wearne ordinary shares issued to them prior to the
first anniversary from the effective date;
- more than 50% of the Wearne ordinary shares issued to them prior
to the second anniversary from the effective date.
4.4 Pre-emptive rights in favour of Wearne
Subject to the Restrictions in 4.3 and the JSE Limited ("JSE")
Listings Requirements, any of the vendors wishing to sell Wearne
ordinary shares issued to them within five years from the effective
date, are obliged to offer such shares to Wearne.
4.5 Call and put options
4.5.1 Phatutshelo has granted an irrevocable non-transferrable
call option to Wearne to purchase its 15% interest of the
issued share capital and all of the claims on loan account
against Portland Quarry (so as to constitute Wearne as the
sole shareholder of Portland Quarry) ("the Call Equity").
The call option may be exercised at any time from the
effective date until 31 August 2010. The purchase
consideration for the Call Equity is R9 000 001.50 and will
be discharged by the issue of 2 571 429 Wearne ordinary
shares at an issue price of R3.50 each, which are subject to
the restrictions as per paragraph 4.3, if relevant.
4.5.2 Provided Wearne has not exercised the call option, Wearne
has granted an irrevocable put option to Phatutshelo to sell
to it the Call Equity on the same terms as per above except
for the fact that the put option may be exercised only
between 1 September 2010 and 15 September 2010.
5. EFFECTIVE DATE
The Portland acquisition will become effective on the first day of the
month following the month in which all of the conditions precedent (as set
out in 6) shall have become fulfilled or waived.
6. CONDITIONS PRECEDENT AND RESOLUTIVE CONDITION
6.1 Conditions precedent relating to the Portland Agreement:
The Portland Agreement is conditional, inter alia, upon:
6.1.1 the satisfactory outcome of a due diligence of the Portland
Group by Wearne of the February 2008 Accounts ("February
2008 Accounts");
6.2.1 service, confidentiality and restraint agreements for Mr N
Heyns, Mr HWP Scholtz, Mr PJ Naude and Mr C Ramukhubathi
("the key employees") and confidentiality and restraint
agreements for the vendors;
6.1.3 the auditors of the Portland Group expressing an unqualified
audit opinion on the Portland Group February 2008 Accounts;
6.1.4 the execution of a shareholders` agreement between Wearne
and the Portland Sand Mines minority shareholders and
Phatutshelo (a company in which the entire issued share
capital is held by C Ramukhubathi) governing their
relationship as shareholders of Portland Sand Mines and
Portland Quarry;
6.1.5 the relevant unconditional written consent being obtained
from the relevant authorities to the transfer of shares in
terms of the Portland acquisition in relation to licences,
permits, consents, mineral leases and mining rights; and
6.1.6 compliance with all regulatory obligations to the extent
necessary to effect the Portland acquisition, including
approval thereof in terms of the Competition Act 89 of 1998.
6.2 Resolutive condition relating to the Portland Agreement:
The Portland Agreement is subject to the resolutive condition that
within a period of 90 days after the effective date, the registration
of transfer of the property acquired in terms of the Visserhok
Agreement into Wearne`s name is affected. If this resolutive condition
is not fulfilled, the Portland Agreement shall become of no force and
effect. The period for the fulfilment of this resolutive condition may
be extended by mutual agreement in writing.
6.3 Conditions precedent relating to the Visserhok Agreement:
The Visserhok Agreement is conditional, inter alia, upon the written
consent of the trustees for the time being of the Pluto Trust to the
cession, assignment and delegation by Visserhok to Wearne of all of
its rights and obligations in terms of the notarial mineral lease or
agreement being reached between Visserhok and the trustees for the
time being of the Pluto Trust regarding the termination of the
notarial mineral lease.
6.4 Warranties and indemnities as are normal in transactions of this
nature have been provided in both the Portland Agreement and the
Visserhok Agreement.
7. APPOINTMENTS TO THE WEARNE BOARD
Once the transaction becomes unconditional, the Wearne Board of Directors
will be strengthened with the appointment of Mr N Heyns (as an executive
director) and Mr HWP Scholtz (as a non-executive director) to the Wearne
Board.
8. FINANCIAL EFFECTS
The financial effects of the transaction will be released once the Portland
Group February 2008 Accounts have been completed.
9. CLASSIFICATION OF THE TRANSACTION
The transaction is classified as a Category 2 transaction in terms of the
Listings Requirements of the JSE.
10. FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue exercising caution in dealing in the
Company`s securities on the JSE until such time as the financial effects of
the transaction are published.
Johannesburg
19 May 2008
Corporate and Designated Adviser
Vunani Corporate Finance
Attorneys
Fluxmans Inc
Date: 19/05/2008 08:30:06 Produced by the JSE SENS Department.
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