| Tue 14 Jul 2009, 8:00 | | CMG - Cenmag Holdings - Proposed acquisition of the Redwood Timber Merchants |
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CMG
CMG
CMG - Cenmag Holdings - Proposed acquisition of the Redwood Timber Merchants
Group of Companies
CENMAG HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/004821/06)
Share code: CMG ISIN code: ZAE000001533
("Cenmag" or "the company")
PROPOSED ACQUISITION OF THE REDWOOD TIMBER MERCHANTS GROUP OF COMPANIES ("the
Redwood Timber Merchants Group")
1. Introduction
Shareholders are referred to the s228 disposal ("the disposal") and
change in control announcement and further cautionary announcement
released by Cenmag on 1 July 2009 and are advised that Aurora
Empowerment Systems (Proprietary) Limited ("Aurora") has concluded an
agreement ("the Acquisition Agreement") with Naas Grimbeek Family Trust
("the Vendor"), the sole shareholder of Global Afrigro Investments
Limited ("Global Afrigro Investments"), the holding company of the
Redwood Timber Merchants Group, in terms of which Aurora, or its
nominee, will acquire all the shares in, and claims against, Global
Afrigro Investments with effect from the Effective Date, for a maximum
purchase consideration of R78.5million, in addition to which, Aurora
will procure funding for the discharge of certain liabilities of the
Redwood Timber Merchants Group in an amount of approximately R15 million
by way of an issue of shares by Cenmag ("the proposed acquisition").
The Redwood Timber Merchants Group comprises of Global Afrigro
Investments and its wholly owned subsidiaries, Natural Africa Timbers
(Proprietary) Limited and Redwood Timber Merchants Limited ("Redwood
Timber Merchants"), which in turn has as its wholly-owned subsidiaries,
Natural Africa Timbers Limited, Next Trading International Limited and
Zambezi Sands Limited ("Zambezi Sands").
Aurora shall, upon the change in control of Cenmag and the disposal
becoming unconditional and being duly implemented, nominate Cenmag as
the purchaser in terms of the proposed acquisition and procure that
Cenmag accepts such nomination.
Shareholders are, however, advised that in terms of the Listings
Requirements of the JSE Limited ("JSE"), the continued listing of the
company remains in the discretion of the JSE and is contingent upon the
JSE`s assessment of the suitability for listing of the company following
implementation of the proposed acquisition.
2. Nature of the business of the Redwood Timber Merchants Group
Redwood Timber Merchants is a Zambian-based company, which, together
with its subsidiaries, holds a concession in respect of hard-wood and
pine forests. The Redwood Timber Merchants Group owns and operates one
of the largest saw-mills in the Southern Hemisphere and specialises in
the harvesting of various species of trees as well as the manufacture of
finished timber beneficiation products for export to the Gulf as well as
Far-East markets. Products manufactured through the beneficiation
process include decking, flooring, balustrades, doors, windows,
laminated beams and furniture. The Redwood Timber Merchants Group also
owns the Zambezi Sands Lodge and Campsite, a unique safari retreat on
the banks of the Zambezi River and, although still at an early stage, it
is the intention of Aurora to expand the business operations in Zambia
into the tourism market through Zambezi Sands which will develop and
market the Zambezi Sands Lodge and Campsite.
3. Rationale for the Acquisition
At present, the timber industry throughout the Southern African region
is fragmented. The acquisition of the Redwood Timber Merchants Group
will be the first step in the proposed consolidation of the industry.
Through its investment in the industry and its access to capital to fund
the growth of the business as well as the proposed expansion into the
tourism industry, Aurora will be creating numerous employment
opportunities, thus bringing real and significant empowerment
opportunities to many hundreds of indigenous Africans.
4. Earnings Warranties and Settlement of Purchase Consideration
The purchase consideration payable in respect of the proposed
acquisition is the aggregate of:
* the sum of R18.5 million; plus
* an amount equal to the profit before tax of the Redwood Timber
Merchants Group for the financial year of the Redwood Timber
Merchants Group ending on 28 February 2010, provided that such
portion of the purchase consideration shall not exceed the sum of
R20 million; plus
* an amount equal to the profit before tax of the Redwood Timber
Merchants Group for the financial year of the Redwood Timber
Merchants Group ending on 28 February 2011, provided that such
portion of the purchase consideration shall not exceed the sum of
R20 million; plus
* an amount equal to the profit before tax of the Redwood Timber
Merchants Group for the financial year of the Redwood Timber
Merchants Group ending on 29 February 2012, provided that such
portion of the purchase consideration shall not exceed the sum of
R20 million.
The purchase consideration will be discharged as follows:
* as to the sum of R18.5 million, such sum shall be discharged by the
issue to the Vendor of 9 250 000 ordinary shares in Cenmag following
upon the capital restructure referred to in paragraph 6 below, at an
issue price of R2.00 per share, which shares will be placed on
behalf of the Vendor; and
* as to the balance of the purchase price in the maximum sum of R60
million, such sum will, at the discretion of Cenmag, be discharged
in cash or by way of the issue of ordinary shares in Cenmag to the
Vendor at an issue price calculated at a 10% discount to the 30 day
Volume-Weighted-Average-Price at the time of such issues.
In addition to the purchase consideration set out above, Aurora will
procure funding for the discharge of certain Liabilities of the Redwood
Timber Merchants Group in an amount of approximately R15 million by way
of an issue of shares by Cenmag.
5. Effective Date
The Effective Date of the proposed acquisition is the first day of the
month following the month in which all of the conditions to which the
proposed transaction is subject, become fulfilled.
6. Sub-division of Shares and increase in Authorised Share Capital
Cenmag`s issued capital currently comprises 9 600 000 ordinary shares
having a par value of R0.01 per ordinary share. In conjunction with the
proposed acquisition by Cenmag, it is proposed that the company`s
authorised and issued share capital be subdivided on a 10:1 basis,
resulting in an issued capital comprising of 96 000 000 shares having a
par value of R0.001 per ordinary share. This, together with a proposed
increase in the authorised share capital, will ensure that the company
has sufficient authorised ordinary shares available to it to conclude
the proposed acquisition and future acquisitions and aims to increase
the liquidity of the company`s shares on the JSE, which is likely to be
more attractive to retail investors.
7. Conditions Precedent
The nomination by Aurora of Cenmag as the purchaser of the Redwood
Timber Merchants Group and the proposed acquisition remain subject to
the fulfillment, inter alia, of the following conditions precedent:
* the change in control agreement concluded between Aurora and the
current controlling shareholders of Cenmag as announced on SENS on 1
July 2009, becoming unconditional and being implemented;
* the disposal by Cenmag of its existing business to Blaf Investments
CC as announced on SENS on 1 July 2009, becoming unconditional and
being implemented;
* the approval of resolutions relating to:
* the proposed acquisition by the requisite majority of Cenmag
shareholders at a general meeting convened for this purpose
following the implementation of the change in control and disposal
transactions;
* the proposed capital restructure referred to in paragraph 6 above;
* the proposed issue of shares for the purposes of discharging the
purchase consideration payable in terms of the proposed
acquisition;
* the proposed issue of shares to fund the discharge of certain
liabilities of the Redwood Timber Merchants Group;
* approval of the JSE, the Securities Regulation Panel ("SRP"), the
South African Reserve Bank and any other regulatory authorities to
the extent required; and
8. Pro forma Financial Effects
The pro forma financial effects of the proposed acquisition which will
relate solely to Cenmag in its new guise as proposed owner of the
Redwood Timber Merchants Group will be announced in due course.
9.Documentation
In terms of the JSE Listings Requirements, the proposed acquisition
will constitute a reverse listing for Cenmag. A circular, containing
full details of the proposed acquisition and incorporating revised
listing particulars and a notice of a general meeting of shareholders
will be posted to Cenmag shareholders within 28 days of Aurora
nominating Cenmag as the purchaser in accordance with the provisions of
the Acquisition Agreement.
10.Further Cautionary Announcement
Shareholders are advised to continue to exercise caution in dealing in
the company`s securities until such time as an election has been made by
Aurora to nominate Cenmag as the purchaser of the Redwood Timber
Merchants Group and the associated pro forma financial effects of the
proposed acquisition have been announced on SENS.
Johannesburg
14 July 2009
Sponsor
Arcay Moela Sponsors (Pty) Ltd
(Registration number 2006/033725/07)
Attorneys
Fluxmans Inc
(Registration number: 2000/024775/21)
Date: 14/07/2009 08:00:01 Produced by the JSE SENS Department.
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