| Mon 19 May 2008, 8:35 | | TWP - TWP Holdings Limited - Acquisition By TWP Of |
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TWP
TWP
TWP - TWP Holdings Limited - Acquisition By TWP Of The Remaining 50% Interest In
TWP Matomo Process Plant (Proprietary) Limited ("TWP Matomo")
TWP Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/025640/06)
Share code: TWP
ISIN: ZAE000110763
("TWP" or "the company")
Acquisition by TWP of the remaining 50% interest in TWP Matomo Process Plant
(Proprietary) Limited ("TWP Matomo")
Pro forma financial effects of the acquisition of TPS Architects (Proprietary)
Limited ("TPS")
Withdrawal of cautionary announcement
1. Introduction
Nedbank Capital, a division of Nedbank Limited, is authorised to announce that
TWP has entered into two separate agreements to indirectly acquire the remaining
50% interest in its joint venture, TWP Matomo ("the transaction"). Matomo
Projects (Proprietary) Limited ("Matomo Projects") holds the other 50% interest
in TWP Matomo. Matomo Projects` shareholders are Pro Plant Engineering Design
(Proprietary) Limited ("Pro Plant") (60%) and Twala & Associates Investments
(Proprietary) Limited ("TAI") (40%).
TWP has entered into an agreement dated 15 May 2008 with Pro Plant, Matomo
Projects and the twelve individuals who hold all the issued shares in Pro Plant
("the Pro Plant vendors"), to acquire the entire issued share capital of, and
shareholders` loans to, Pro Plant ("the Pro Plant acquisition"). The Pro Plant
vendors include Messrs GJ Sneddon, WE Bruggink, GWG Montgomery, T van der Walt,
AP van der Walt, AJ Lathwood, DT Lahee, GC Skelton, FSC Smallwood, AG Walker, PM
Cole and N Birdsey.
TWP has also entered into an agreement dated 15 May 2008 with TAI and Messrs VS
Twala and CA Strover ("the TAI vendors"), to acquire the entire issued share
capital of, and shareholders` loans to, TAI ("the TAI acquisition").
Details of the Pro Plant acquisition and the TAI acquisition are set out below.
2. Nature of business
TWP Matomo is a 50:50 joint venture between TWP and Matomo Projects and was
established to service the hydrometallurgical plant engineering, procurement and
construction management ("EPCM") requirements for a diverse client base.
3. Rationale for the transaction
TWP listed on the Main Board of the JSE Limited ("the JSE") in November 2007
following a successful private placing of shares, raising R200 million equity
capital. The intention of the capital raising was to allow the company to take
advantage of opportunities to consolidate its position in the markets within
which it operates - the transaction represents one such opportunity.
4. Terms and conditions of the Pro Plant acquisition
TWP has acquired, with effect from the effective date, 1 March 2008, all the
issued shares in, and shareholders` loans to, Pro Plant from the Pro Plant
vendors, subject to the suspensive conditions set out below.
4.1 Suspensive conditions
The Pro Plant acquisition is subject to the fulfilment of the following
suspensive conditions:
- the satisfactory conclusion by TWP of a due diligence investigation of Pro
Plant and Matomo Projects on or before 31 July 2008;
- approval by the Competition Authorities on or before 30 June 2008;
- the conclusion of written employment contracts on or before 31 July 2008 with
certain senior managers of Pro Plant for a minimum period of three years;
- approval by TWP`s board of directors, within seven business days after the
completion of the abovementioned due diligence; and
- various other regulatory approvals, including but not limited to the JSE and
the Securities Regulation Panel on Take-overs and Mergers by no later than 31
July 2008.
The agreement contains terms, conditions and warranties which are standard for
an agreement of this nature. Pro Plant and its senior managers, as defined in
the agreement, are restrained from carrying on business which in any way
competes with the business of TWP Matomo within the Republic of South Africa
until 28 February 2011.
4.2 Pro Plant acquisition consideration
The consideration for the Pro Plant acquisition is R113.5 million. The Pro
Plant acquisition consideration will be settled as follows:
- R48.5 million payable in cash to the Pro Plant vendors on the payment date,
being the first business date after the closing date. The closing date is
defined as the day on which the last of the suspensive conditions is fulfilled;
- R5 million payable in cash to the Pro Plant vendors on the first anniversary
of the payment date;
- R5 million payable in cash to the Pro Plant vendors on the second anniversary
of the payment date;
- R6.5 million payable in cash to the Pro Plant vendors on the third anniversary
of the payment date;
- R48.5 million settled by the issue of 1,933,136 new TWP ordinary shares to the
Pro Plant vendors on the payment date. The number of ordinary shares was
calculated based on the volume weighted average price per TWP ordinary share for
the five trading days before and after 29 February 2008 ("Pro Plant
consideration shares").
The Pro Plant consideration shares will be kept as security by TWP in terms of a
separate pledge and cession. The Pro Plant consideration shares will provide
continuing general covering security for the compliance by the Pro Plant vendors
of their obligations contained in the agreement. The Pro Plant vendors will
only be entitled to sell one third of the Pro Plant consideration shares on each
anniversary of the effective date.
5. Terms and conditions of the TAI acquisition
TWP has acquired, with effect from the effective date, 1 March 2008, all the
issued shares in, and shareholders` loans to, TAI from the TAI vendors, subject
to the suspensive conditions set out below.
5.1 Suspensive conditions
The TAI acquisition is subject to the fulfilment of the following suspensive
conditions:
- the satisfactory conclusion by TWP of a due diligence investigation of TAI and
Matomo Projects on or before 31 July 2008;
- approval by TWP`s board of directors, within seven business days after the
completion of the abovementioned due diligence, of the TAI acquisition; and
- various other regulatory approvals, including but not limited to the JSE by no
later than 31 July 2008.
The agreement contains terms, conditions and warranties which are standard for
an agreement of this nature. TAI and its senior managers, as defined in the
agreement, are restrained from carrying on business which in any way competes
with the business of TWP Matomo within the Republic of South Africa until 28
February 2011.
5.2 TAI acquisition consideration
The consideration for the TAI acquisition is R25.9 million. The TAI acquisition
consideration will be settled as follows:
- R15.5 million payable in cash to the TAI vendors on the payment date, being
the first business date after the closing date;
- R10.4 million settled by the issue of 413,004 new TWP ordinary shares to the
TAI vendors on the payment date. The number of ordinary shares was calculated
based on the volume weighted average price per TWP ordinary share for the five
trading days before and after 29 February 2008 ("TAI consideration shares").
The TAI consideration shares will be kept as security by TWP in terms of a
separate pledge and cession. The TAI consideration shares will provide
continuing general covering security for the compliance by the TAI vendors of
their obligations contained in the agreement. The TAI vendors will only be
entitled to sell the TAI consideration shares after the first anniversary of the
payment date.
6. Pro forma financial effects of the transaction
Based on the IFRS reviewed consolidated historical results of TWP for the year
ended 29 February 2008, the unaudited pro forma financial effects of the
transaction on TWP`s EPS, HEPS, NAV and NTAV per share are set out below. This
unaudited pro forma financial information has been prepared for illustrative
purposes only and because of its nature may not fairly present TWP`s financial
position and results of operations, nor the effect and impact of the transaction
going forward, and is the responsibility of TWP`s directors.
Per ordinary share Before the After the Change
transaction(1) transaction(2) (%)
Earnings per share (cents) 102.20 110.75 8.4
Headline earnings per share (cents) 93.82 102.55 9.3
Net asset value per share (cents) 291.28 336.26 15.4
Net tangible asset value per share
(cents) 258.86 204.95 (20.8)
Number of shares in issue (`000) 113,291 115,643 2.1
Weighted average number of shares
in issue (`000) 103,459 105,811 2.3
Notes:
(1) Extracted from the reviewed TWP annual financial statements for the year
ended 29 February 2008.
(2) Based on the assumption that the transaction took place on 1 March 2007 for
income statement purposes and 29 February 2008 for balance sheet purposes.
(2.1) Balance adjustments represent the following:
- The purchase price of R139.4 million is accounted for as follows:
- Cash outflow of R64 million;
- Increase in share capital and share premium of R58.9 million;
- Deferred settlement liability of R12.4 million (being the net present value,
using a discount rate of 15%, of the R16.5 million to be paid over the next 3
years);
- Fair value of the net assets acquired amounting to R22.6 million; and
- Goodwill arising on the transaction amounting to R112.7 million.
(2.2) Income statement adjustments represent the following:
- Additional profit after tax from the acquired businesses for the year ended 29
February 2008 amounting to R19.5 million (extracted from unaudited management
accounts);
- Impact on net interest paid calculated as follows:
- Notional interest charge of R1.9 million relating to the deferred settlement
liability;
- Interest charge of R7 million, before tax at 29%, calculated at a rate of
14.5% per annum on the R64 million cash portion of the acquisition consideration
over the 9 months prior to the group`s private placement; and
- Reduction in interest earned of R1.8 million, before tax at 29%, calculated
at a rate of 11% per annum on the R64 million cash portion of the purchase price
over the 3 months after the group`s private placement.
(2.3) The issue of an additional 2,346,140 new TWP ordinary shares at a price of
R25.09 per share.
7. Related party transaction
In terms of the JSE Listings Requirements, where a listed company enters into a
transaction with a related party, as defined, which exceeds 5% of the company`s
market capitalisation, certain requirements are required to be fulfilled before
completing the transaction, including but not limited to obtaining shareholder
approval and an opinion from an independent professional expert acceptable to
the JSE that the terms of the proposed transaction are fair as far as the
shareholders are concerned.
As two of the Pro Plant vendors, Messrs T van der Walt and N Birdsey, and one of
the TAI vendors, Mr VS Twala, are directors, or were directors within the
previous twelve months, of TWP Matomo, the transaction is regarded as a related
party transaction (representing 5.2% of TWP`s market capitalisation on 15 May
2008). Messrs T van der Walt and N Birdsey together hold 20% of Pro Plant`s
issued share capital and Mr VS Twala holds 65% of TAI`s issued share capital. A
circular containing an opinion from an independent professional expert and a
notice convening a meeting of shareholders to consider and, if deemed fit,
approve the transaction will be posted to shareholders in due course.
8. Pro forma financial effects of the TPS acquisition and withdrawal of
cautionary announcement
Shareholders are referred the announcement dated 29 February 2008 regarding the
acquisition by TWP of TPS ("the TPS acquisition"). Set out below are the pro
forma financial effects of the TPS acquisition and as these have now been
published, the cautionary announcement is withdrawn.
Based on the IFRS reviewed consolidated historical results of TWP for the year
ended 29 February 2008, the unaudited pro forma financial effects of the TPS
acquisition on TWP`s EPS, HEPS, NAV and NTAV per share are set out below. This
unaudited pro forma financial information has been prepared for illustrative
purposes only and because of its nature may not fairly present TWP`s financial
position and results of operations, nor the effect and impact of the TPS
acquisition going forward, and is the responsibility of TWP`s directors.
Per ordinary share Before the TPS After the TPS Change
acquisition(1) acquisition(2) (%)
Earnings per share (cents) 102.20 113.11 10.7
Headline earnings per share (cents) 93.82 104.96 11.9
Net asset value per share (cents) 291.28 349.73 20.1
Net tangible asset value per share
(cents) 258.86 245.15 (5.3)
Number of shares in issue (`000) 113,291 116,367 2.7
Weighted average number of shares
in issue (`000) 103,459 106,535 3.0
Notes:
(1) Extracted from the reviewed TWP annual financial statements for the year
ended 29 February 2008.
(2) Based on the assumption that the TPS acquisition took place on 1 March 2007
for income statement purposes and 29 February 2008 for balance sheet purposes.
(2.1) Balance adjustments represent the following:
The purchase price of R138.0 million is accounted for as follows:
- Cash outflow of R34.5 million;
- Increase in share capital and share premium of R103.5 million;
- Fair value of the net assets acquired amounting to R18.9 million; and
- Goodwill arising on the TPS acquisition amounting to R119.1 million.
(2.2) Income statement adjustments represent the following:
- Additional profit after tax from the acquired business for the year ended 29
February 2008 amounting to R21.5 million (extracted from unaudited management
accounts);
- Impact on net interest paid calculated as follows:
- Interest charge of R3.8 million, before tax at 29%, calculated at a rate of
14.5% per annum on the R34.5 million cash portion of the purchase price over the
9 months prior to the group`s private placement; and
- Reduction in interest earned of R0.9 million, before tax at 29%, calculated
at a rate of 11% per annum on the R34.5 million cash portion of the purchase
price over the 3 months after the group`s private placement.
(2.3) The issue of an additional 4,125,352 new TWP ordinary shares at a price of
R25.09 per share.
Melville
19 May 2008
Investment bank, corporate adviser and sponsor - Nedbank Capital, a division of
Nedbank Limited
Attorneys - TLi Incorporated
Independent reporting accountants and auditors - PWC
Date: 19/05/2008 08:35:04 Produced by the JSE SENS Department.
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