| Mon 23 Jun 2008, 17:02 | | ADW - African Dawn Capital - Acquisition And Withdrawal Of The Cautionary |
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ADW
ADW
ADW - African Dawn Capital - Acquisition And Withdrawal Of The Cautionary
Announcement
AFRICAN DAWN CAPITAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/020520/06)
JSE code: ADW
ISIN: ZAE000060703
("African Dawn" or "the Group")
ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL AND LOAN ACCOUNTS OF LIMOSA
BUSINESS FINANCE (PROPRIETARY) LIMITED ("LIMOSA") AND WITHDRAWAL OF THE
CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement, dated 11 June 2008, shareholders
are advised that a Sale of Shares Agreement has been entered into between
African Dawn and;
- the JLN Family Trust, represented by J van Heerden ("van Heerden") in
his capacity as Trustee; and
- the Arthur Dykes Family Trust, represented by P A Dykes ("Dykes") in
this capacity as Trustee
(collectively "the vendors")
in terms of which African Dawn will acquire the entire issued share capital
and loan accounts of Limosa and the shares in Yellowstar Trading 1079
(Proprietary) Limited ("the agreement") for a maximum purchase
consideration of R240 000 000 ("the transaction").
2. BACKGROUND INFORMATION
2.1. African Dawn is a specialist financial services group focusing on bridging
finance, structured finance, single invoice discounting, Home Improvement
Finance and Cellular Airtime Contract Finance. The Marketing Division
focuses on Cell Phone Banking, Property Sales and Financial Literacy
Education.
2.2. Limosa is a financial services business, providing property transfer
funding to buyers, sellers, estate agents and property developers.
3. RATIONALE FOR THE TRANSACTION
The acquisition will allow African Dawn to increase its national footprint
in the Short Term Secured Finance market. It will also allow African Dawn
to increase its existing advances book by a further R100 000 000 to
approximately R900 000 000, resulting in increased earnings.
4. PURCHASE CONSIDERATION AND PAYMENT
4.1. Purchase price
The maximum purchase price payable for the transaction will be the lesser
of the amount of:
- R240 000 000; or
- the average after tax profit ("average PAT") of Limosa for the
financial years ending 28 February 2009 ("2009 PAT") and 28 February
2010 ("2010 PAT") multiplied by 5.
In effect, the maximum payment shall be calculated on a Price Earnings
("PE") multiple of five times the average PAT, capped at R240 000 000.
4.2. Discharge of the purchase price
The purchase price will be discharged as follows:
4.2.1. First payment - payable within 7 days after the last of the
conditions precedent have been met ("closing date"):
- An amount of R37 500 000 in cash; and
- African Dawn shares to the value of R37 500 000, at an issue
price of R4.97 per African Dawn ordinary shares, being the 30 day
volume weighted average price per share prior to 11 June 2008
(i.e. 7 545 272 African Dawn shares).
4.2.2. Second payment - payable within 7 days after the 2009 PAT
certificate has been received by African Dawn:
- An amount of R37 500 000 in cash; and
- African Dawn shares to the value of R37 500 000 at an issue price
of R4.97 per African Dawn ordinary shares, being the 30 day
volume weighted average price per share prior to 11 June 2008
(i.e. 7 545 272 African Dawn shares);
- In the event that the 2009 PAT is less than R30 000 000 the
second and first payments will be reduced pro rata, if
applicable.
4.2.3. Third payment - payable within 7 days after the 2010 PAT
certificate has been received by African Dawn:
- After February 2010, the balance of the purchase price, if any,
will be determined by African Dawn`s auditors and this amount,
less the amounts paid in terms of 4.2.1. and 4.2.2. above, will
be paid to the vendors as to 50% in cash and 50% in African Dawn
shares.
- In the event that the average PAT is less than R30 000 000 there
will be an adjustment to the first and second payments on a pro
rata basis, if applicable and no further payment will be made.
- Any shares so issued will be issued at the volume weighted
average share price of African Dawn over the three months
preceding the date of the 2010 PAT certificate.
4.2.4. Fourth payment - payable within 7 days after the 2010 PAT
certificate has been received by African Dawn:
- In the event of the aggregate combined 2009 and 2010 PAT
exceeding R70 000 000, the vendors will receive a further payment
of R3 500 000, payable as to 50% in cash and 50% in African Dawn
shares.
- Any shares so issued will be issued at the volume weighted
average share price of African Dawn over the three months
preceding the date of the 2010 PAT certificate.
4.3 Restrictions
The vendors have agreed not to sell or encumber any of the African Dawn
shares issued to them in terms of the agreement ("the consideration
shares") for a period of 2 years from the date of issue thereof. After two
years, the vendors may sell or encumber such shares at the lesser rate of:
- 10% per month; or
- 50% of the monthly average volume of African Dawn shares traded on the
JSE for any six month period immediately preceding the date of the
intended sale or encumbrance.
The consideration shares will be held in trust by African Dawn`s auditors
on behalf of the vendors.
5. EFFECTIVE DATE
The effective date of the transaction is deemed to be the closing date of
the transaction.
6. CONDITIONS PRECEDENT
The transaction is conditional, inter alia, upon:
- The successful conclusion of a due diligence exercise by African Dawn
before 15 July 2008;
- compliance with any regulatory obligations to the extent necessary to
effect the transaction.
Warranties as are normal in agreements of this nature have been provided.
The vendors have signed restraint agreements and will remain in the employ
of Limosa upon substantially the same terms and conditions as they are
currently employed for at least three years from the first business day
after the closing date.
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, headline earnings, diluted earnings and
diluted headline earnings per share as if the transaction had taken effect
on 1 March 2007 and on net asset value and net tangible asset value per
share as if the transaction had taken effect on 29 February 2008. 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 audited
consolidated financial statements for the year ended 29 February 2008 and
are presented in a manner consistent with the format and accounting
policies adopted by African Dawn and have been adjusted as described in the
notes below:
Moveme
nt
Audited Unaudited (%)
Notes Before After the
the transaction
transacti
on
Earnings per share 2 57.0 65.4 14.7
(cents)
Headline earnings per 2 57.0 65.4 14.7
share (cents)
Net asset value per 3 145.11 156.95 8.2
share (cents)
Net tangible asset 89.53 63.88 (28.6)
value per share 3
(cents)
Weighted average 181 179 188 724 4.2
number of shares in
issue (000`s)
Shares in issue at 199 851 207 396 3.8
year end (000`s)
Notes:
1. The earnings, headline earnings, net asset value and net tangible asset
value per share, as set out in the "Before" column of the table, are
extracted from African Dawn`s audited results for the year ended 29
February 2008.
2. Earnings and headline earnings per share effects are based on the following
assumptions and information:
- the transaction was effective 1 March 2007;
- the first payment which equates to R75 million was paid on 1 March
2007 by way of an issue of 7 545 272 ordinary shares at R4.97 per
share and a cash payment of R37 500 000 million to the vendors, which
cash payment was financed through existing cash on hand earning
interest at 10% per annum (pre tax);
- the second, third and fourth payment, to a maximum of R165 million is
subject to profit warranties;
- estimated transaction costs of R4 million have been accounted for
against share premium; and
- the total after tax profit attributable to Limosa is R23 million for
the year ended 29 February 2008 as per its annualised three months
year to date management accounts.
3. Net asset value and net tangible asset value effects are based on the
following assumptions and information:
- the transaction was effective 29 February 2008;
- the first payment of R75 million was paid on 29 February 2008 in the
manner described in note 2 above;
- the second, third and fourth payment, to a maximum of R165 million is
subject to profit warranties;
- estimated transaction costs of R4 million were paid on 29 February
2008 in the manner described in note 2 above and 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 Limosa will comprise goodwill of
approximately R82 million.
8. CLASSIFICATION OF THE TRANSACTION
The transaction is classified as a Category 2 transaction in terms of the
Listing Requirements of the JSE Limited, with no related parties.
9. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The cautionary announcement is hereby withdrawn.
Johannesburg
23 June 2008
Designated Adviser
Vunani Corporate Finance
Date: 23/06/2008 17:02:42 Produced by the JSE SENS Department.
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