| Thu 5 Jun 2008, 10:17 | | RAC - Racec Group Limited - Acquisition by Racec of 100% of Greenbro Close |
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RAC
RAC
RAC - Racec Group Limited - Acquisition by Racec of 100% of Greenbro Close
Corporation ("GREENBRO")
RACEC GROUP LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/006153/06)
Share code: RAC ISIN: ZAE000105409
("RACEC" or "the company")
ACQUISITION BY RACEC OF 100% OF GREENBRO CLOSE CORPORATION ("GREENBRO")
1 INTRODUCTION
Further to the announcement released on SENS on 22 May 2008, shareholders are
advised that RACEC, through its subsidiary, RACEC Gauteng (Proprietary) Limited
("RACEC Gauteng"), has acquired an 100% interest in the business of Greenbro
("the acquisition"). RACEC has acquired the trade and assets of Greenbro as a
going concern for a price consideration of R10 335 953.
RACEC has also acquired from Shavron Properties Close Corporation ("Shavron
property"), the building and premises from which Greenbro currently conducts its
business for a consideration of R3 761 184 ("acquisition of the Shavron
property"). Hereinafter, the acquisition and the acquisition of the Shavron
property are collectively referred to as "the acquisitions".
John Robert Hugh Greenless, the managing member of Greenbro ("John"), will
retain an interest in Greenbro by acquiring a 20% interest in RACEC Gauteng.
2 THE ACQUISITION
2.1 Nature of Greenbro business
Headquartered in Parrow, Cape Town, Greenbro specialises in the supply and
manufacture of industrial and commercial generators and electrical equipment.
Greenbro was established in 2002 and has developed a range of products and
services which are well diversified across the production, supply and
installation of electrical components including control and switchgear, control
boxes and circuit breakers and the manufacture of a range of generators, which
present additional growth opportunities. In light of the power crisis which is
expected to persist for at least five years until new power stations have been
built, strong demand for generators in the commercial sector (and private
sector, where relevant) is ensured across the country.
Greenbro is also involved in installation services associated with its
equipment, complementing RACEC`s extensive skills in the sector.
2.2 Purchase consideration
The purchase consideration for the acquisition and the acquisition of the
Shavron property is R10 355 953 and R3 761 184, respectively.
2.2 The rationale for the acquisitions
The rationale for the acquisitions is, inter alia, as follows:
- through the acquisitions, RACEC will effectively broaden its exposure in
the electrification market;
- Greenbro manufactures a range of generators which presents additional
growth opportunities.
2.3 Funding and payment of the purchase consideration
The purchase consideration of the acquisition will be settled as follows:
- R6 459 970 is to be paid to Greenbro in cash 21 days after the signing of
the acquisition agreement, which was concluded on 29 May 2008. The purchase
consideration will be paid out of cash funded by internal cash resources
and borrowings;
- the balance of R3 895 983 is to be settled via the issue of shares in
RACEC. The issue price of the shares will be determined at the 30 day
volume weighted average price calculated on the date of the signature of
the acquisition agreement.
The purchase consideration of R3 761 184 payable for the acquisition of the
Shavron property will be settled in cash funded from internal cash resources and
a bond obtained from ABSA Bank Limited.
2.4 Conditions precedent and effective date
In terms of the acquisition agreement, the acquisition is subject to:
- John acquiring a 20% shareholding in RACEC Gauteng from RACEC;
- John and Terry Webster Usher, a member of Greenbro, entering into a
restraint of trade agreement in terms of which they undertake not to
compete with the business of Greenbro;
- RACEC Gauteng acquiring ownership of the Shavron property.
The effective date of the acquisition is 1 March 2008.
3 PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTIONS
The table below sets out the unaudited pro forma financial effects of the
acquisitions on RACEC`s earnings per share, headline earnings per share, net
asset value per share and tangible net asset value per share.
The unaudited pro forma financial effects have been prepared to illustrate the
impact of the proposed acquisitions on the reported financial information of
RACEC for the six months ended 31 March 2008, had the proposed acquisitions
occurred on 1 October 2007 for income statement purposes and on 31 March 2008
for balance sheet purposes.
The unaudited pro forma financial effects have been prepared using accounting
policies that comply with International Financial Reporting Standards and that
are consistent with those applied in the audited results of RACEC for the twelve
months ended 30 September 2007 as well as the six months ended 31 March 2008.
The unaudited pro forma financial effects, which are the responsibility of the
directors, are provided for illustrative purposes only and, because of their pro
forma nature may not fairly present RACEC`s financial position, changes in
equity, results of operations or cash flow.
Before the After the Percentag
acquisitions acquisitions e change
(%)
Basic earnings per share (cents) 6.5 7.0 7.7
Headline earnings per share 6.6 7.1 7.6
(cents)
Net asset value per share (cents) 45.3 46.1 1.8
Tangible net asset value per share 43.7 43.7 -
(cents)
Weighted average number of shares 100 000 103 005 3
in issue (000`s)
Fully diluted weighted average 100 000 103 005 3
number of shares in issue (000`s)
Notes:
1 The amounts in the "Before the acquisitions" column have been extracted
from the reviewed interim results of RACEC for the six months ended 31
March 2008.
2 The amounts in the "After the acquisitions" column reflect the financial
effects of the acquisition on RACEC.
3 The effects on basic earnings per share and headline earnings per share are
calculated based on the assumption that the acquisitions were effected on 1
October 2007.
4 The effects on net asset value per share and tangible net asset value per
share are calculated based on the assumption that the acquisitions were
effected on 31 March 2007.
5 June 2008
Sponsor
Merchant Sponsors (Proprietary) Limited
Auditors and reporting accountants
BDO Spencer Steward (Cape) Inc.
Date: 05/06/2008 10:17:01 Produced by the JSE SENS Department.
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