| Thu 28 May 2009, 17:09 | | KDV - Kaydav Group - Disposal of Kaydav`s existing operations general and |
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KDV
KDV
KDV - Kaydav Group - Disposal of Kaydav`s existing operations, general and
specific repurchases of Shares and withdrawal of cautionary announcement
KAYDAV GROUP LIMITED
Incorporated in the Republic of South Africa
(Registration number 2006/038698/06)
JSE code: KDV & ISIN: ZAE000108940
("KayDav" or "the company")
DISPOSAL OF KAYDAV`S EXISTING OPERATIONS, GENERAL AND SPECIFIC REPURCHASES OF
SHARES AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Shareholders are referred to the cautionary announcement dated 28 January 2009,
which cautionary announcement was renewed on 12 March 2009 and again on 23 April
2009.
Shareholders are advised that the company has concluded an agreement with
Rapicorp 168 (Pty)Ltd ("Newco"), a company established by a consortium of
investors, including members of management led by the company`s Chief Executive
Officer, Mr Gary Davidson ("the consortium") in terms of which the company will,
subject to the fulfilment of the conditions precedent set out below, dispose of
its wholly owned subsidiaries, Kaydav Industries (Proprietary) Limited ("Kaydav
Industries")and Davidson`s Holding Company (Proprietary) Limited ("Davidson`s")
to Newco("the disposal").
Kaydav Industries and Davidson`s comprise the operating subsidiaries of KayDav,
housing the existing wooden board sale and distribution businesses owned by the
company.
Co-terminus with the implementation of the disposal, in order to afford KayDav
shareholders the flexibility of a cash exit, KayDav will make an offer to all
KayDav shareholders to repurchase KayDav shares for a cash consideration of 38
cents per share (the "cash exit offer").
The disposal and the cash exit offer are collectively referred to in this
announcement as "the transaction".
RATIONALE FOR THE TRANSACTION
Current economic conditions have impacted negatively on Kaydav`s businesses.
High interest rates, the adoption of the National Credit Act and the contraction
in general business activity have contributed to a decline in trading volumes.
The consortium`s proposal relating to the disposal presents KayDav with an
opportunity to afford KayDav shareholders the ability to elect either a cash
exit at 38 cents per share or to remain invested in KayDav (as a listed cash
shell) with a view to participating in any new investment opportunities which
may be reverse-listed into KayDav.
Shareholders are reminded of the fact that the Abalengani Group has indicated to
KayDav that the Abalengani Group is interested in concluding a transaction with
KayDav pursuant to which the Abalengani Group would reverse list a property
portfolio into KayDav. The nature of the property portfolio which the Abalengani
Group proposes reverse listing into KayDav will have a gross property value of
between approximately R500 million and R800 million (and not the approximate R3
billion property portfolio referred to in the 28 January 2009 cautionary
announcement).
Whilst KayDav (as a listed cash shell) may constitute a vehicle through which
new investment opportunities may be reverse listed, the transaction is not
conditional on new assets being reverse listed into KayDav.
THE DISPOSAL
KayDav will dispose of its entire shareholding in and all claims on loan account
against each of Kaydav Industries and Davidson`s to Newco for an aggregate
purchase consideration of R112 188 432 to be discharged as follows:
- by Newco procuring delivery to KayDav of 100 million KayDav ordinary shares
in discharge of R38 million of the purchase consideration (the
"consideration shares") (attributing a value of 38 cents per KayDav
ordinary share) and which shares will be bought back by KayDav pursuant to
the specific repurchase provisions of the Listings Requirements of the JSE
Limited (the "Listings Requirements") and the buy-back provisions of the
South African Companies Act (the "specific repurchase");
- the balance of the purchase consideration (in the amount of R74 188 432) is
to be discharged as to:
- R38 188 432 in cash; and
- R36 000 000 by way of delivery of a secured R36 million loan note to
KayDav (the "loan note"). The loan note shall not bear interest and
shall be payable on 31 August 2009.
The loan note is to be secured as follows:
- by way of a pledge and cession in favour of KayDav of 85 647 988 ordinary
shares in the issued share capital of KayDav (attributing a value of 38
cents per KayDav share) (the "pledged shares");
- by a transfer into an account designated by Java Capital (Proprietary)
Limited ("Java Capital") of an amount of R3 453 765 (the "security
account") and by Newco ceding its rights in and to such security account to
KayDav.
The loan note may either be discharged by payment of a R36 000 000 cash amount
on presentation of the loan note or by way of the sale by Newco to KayDav of the
pledged shares (attributing a value of 38 cents per share) and the payment to
Newco of an amount of R3 453 765 (out of the funds held in the security
account).
THE CASH EXIT OFFER
Through the mechanism of a general offer for the repurchase by KayDav of KayDav
shares for a consideration of 38 cents per share, those KayDav shareholders who
do not wish to remain invested in KayDav (as a listed cash shell) will be
afforded the flexibility of exiting their investment in KayDav for a cash
consideration of 38 cents per share.
CONDITIONS PRECEDENT
The agreement recording the terms of the transaction is conditional on, inter
alia:
- the securing of all shareholder and other regulatory approvals required by
KayDav for:
* the implementation of the disposal;
* the specific repurchase;
* the implementation of the cash exit offer;
* the potential acquisition by Kaydav of the pledged shares,
by no later than 31 August 2009;
- to the extent required under the terms of the relevant supply agreements
agreed into between KayDav and Sonae NovoBoard (Pty) Limited and PG Bison
Limited ("the suppliers"), the written consent of the suppliers to the
disposal by no later than 31 August 2009;
- to the extent required, the securing of Competition Authority approval for
the conclusion and implementation of the disposal by no later than 30
September 2009;
- the lodging with Java Capital of the share certificates and documents-of-
title in respect of:
* the consideration shares;
* the pledged shares,
by no later than 30 June 2009;
- the payment of an amount of R3 453 765 into the security account by no
later than 30 June 2009.
FINANCIAL EFFECTS
The unaudited pro forma financial effects for which the board of directors of
KayDav is responsible are presented for illustrative purposes only and may not
fairly present KayDav`s financial position, changes in equity, results of
operations or cash flows following the implementation of the transaction.
The table below sets out the unaudited pro forma financial effects of the
disposal and the cash exit offer based on the audited published financial
results of KayDav for the year ended 31 December 2008.
Before After % After %
the Change the Change
disposal disposal
Scenario 1 Scenario 2
(cents) (cents) (cents)
Earnings per share (EPS) (33.56) (61.63) (84) (111.73) (233)
Headline earnings per 6.83 2.43 (64) 2.40 (65)
share (HEPS)
Net asset value per share 46.47 37.49 (19) 37.09 (20)
(NAV)
Net tangible asset value 41.62 37.49 (10) 37.09 (11)
per share (NTAV)
Number of ordinary shares 295,233 195,233 109,585
in issue (`000)
After the % After the %
cash exit Change cash exit Change
offer offer
Scenario 1 Scenario 2
(cents) (cents)
EPS (73.09) (19) (153.91) (38)
HEPS 2.38 (2) 2.30 (4)
NAV 36.79 (2) 35.50 (4)
NTAV 36.79 (2) 35.50 (4)
Number of ordinary shares 165,709 80,061
in issue (`000)
Notes / Assumptions
- The "Before" column reflects the EPS, HEPS, NAV and NTAV as disclosed in
KayDav`s audited results for the year ended 31 December 2008.
- The "After the disposal" columns reflect what the NAV and NTAV would have
been at 31 December 2008 had the disposal and specific repurchase taken
place on 31 December 2008 and what the EPS and HEPS would have been had the
disposal and specific repurchase taken place on 1 January 2008.
- In respect of "Scenario 1 - After the disposal":
- The company has disposed of its operating subsidiaries and is a cash
shell.
- The loss on disposal of the operating subsidiaries has been recognised
in the income statement.
- The purchase consideration of R112,188,432 is settled as follows:
- R38,188,432 in cash;
- The loan note of R36,000,000 has been discharged in cash;
- R38,000,000 by way of Newco procuring delivery to KayDav of
100,000,000 KayDav ordinary shares attributing a value of 38
cents per Kaydav ordinary share.
- The company, as a cash shell, earns interest at 9% before tax.
- The expenses of the disposal, estimated to be R1,000,000, have been
expensed.
- Taxation has been provided for at 28%.
- The calculation in the "After the disposal" column is based on 195,233
million KayDav shares in issue.
- In respect of "Scenario 2 - After the disposal":
- The company has disposed of its operating subsidiaries and is a cash
shell.
- The loss on disposal of the operating subsidiaries has been recognised
in the income statement.
- The purchase consideration of R112,188,432 is settled as follows:
- R38,188,432 in cash;
- The loan note of R36,000,000 has been discharged as to R3 453 675
in cash and by way of the sale by Newco to KayDav of 85 647 988
ordinary shares in Kaydav (attributing a value of 38 cents per
share);
- R38,000,000 by way of Newco procuring delivery to KayDav of
100,000,000 KayDav ordinary shares attributing a value of 38
cents per Kaydav ordinary share.
- The company, as a cash shell, earns interest at 9% before tax.
- The expenses of the disposal, estimated to be R1,000,000, have been
expensed.
- Taxation has been provided for at 28%.
- The calculation in the "After the disposal" column is based on 109,585
million KayDav shares in issue.
- The "After the cash exit offer" column reflects what the NAV and NTAV would
have been at 31 December 2008 had the cash exit offer taken place on 31
December 2008 and what the EPS and HEPS would have been had the cash exit
offer taken place on 1 January 2008.
- In respect of the cash exit offer:
- Scenario 1 assumes that the disposal has been effected in terms of
scenario 1 above;
- Scenario 2 assumes that the disposal has been effected in terms of
scenario 2 above;
- 29,523 million KayDav ordinary shares, representing 10% of the Kaydav
ordinary shares in issue have been repurchased at a price of 38 cents
per share;
- Interest income has been reduced by the outflow of cash on the share
repurchase at 9% before tax.
- The expenses of the cash exit offer, estimated to be R1,000,000, have
been written off to share premium.
- Taxation has been provided for at 28%.
IRREVOCABLE UNDERTAKINGS
The company has received written irrevocable undertakings from KayDav
shareholders holding 90% of KayDav`s issued share capital to support the
implementation of the transaction on the basis that they will not accept the
cash exit offer and will continue to own KayDav shares in the listed KayDav cash
shell with a view to participating in any new investment opportunities to be
reverse-listed into KayDav.
SHAREHOLDER UPDATES AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The disposal is a disposal of assets in terms of section 228 of the Companies
Act No.61 of 1973 and a category 1 transaction in terms of the Listings
Requirements and, because the disposal and specific repurchase (and the
potential repurchase of the pledged shares) is indirectly from a consortium that
includes directors of KayDav, aspects of the transaction constitute a related
party transaction for the purposes of the Listings Requirements.
A circular containing details of the transaction, which circular will include an
independent fairness opinion required in the context of the section 228
disposal, related party aspects of the transaction and the cash exit offer, will
be sent to KayDav shareholders in due course.
Shareholders are no longer required to exercise caution in dealing with their
KayDav shares.
Rosebank
28 May 2009
Sponsor, Corporate Advisor and Legal Advisor
Java Capital (Proprietary) Limited
Date: 28/05/2009 17:09:01 Produced by the JSE SENS Department.
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