| Thu 10 Sep 2009, 12:59 | | SPG - Super Group - Disposal of SGIP Powerstar |
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SPG
SPG
SPG - Super Group - Disposal of SGIP Powerstar
SUPER GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1943/016107/06)
Share code: SPG
ISIN code: ZAE000011334
("Super Group")
ANNOUNCEMENT REGARDING
* THE PROPOSED ESTABLISHMENT OF A NEW COMMERCIAL VEHICLE ASSEMBLY AND
DISTRIBUTION ENTITY IN COOPERATION WITH NORINCO MOTORS;
* THE PROPOSED SALE BY SUPER GROUP OF SUPER GROUP INDUSTIAL PRODUCTS`
INVENTORY; AND
* RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
In previous announcements Super Group advised shareholders of its
intention to dispose of its Equipment and Commercial Vehicle
businesses, housed in Super Group Industrial Products ("SGIP").
Shareholders are hereby advised that Super Group is in the process of
concluding an arrangement that will provide continuity of the
commercial vehicle operations and support for its customers.
2. Nature of business
SGIP, now in the process of discontinuance, imports and distributes a
range of commercial vehicles and industrial equipment.
3. Overview
2.1 Establishment of commercial vehicle assembly and distribution
entity
Shareholders are advised that Super Group through its wholly
owned subsidiary Super Group Trading (Proprietary) Limited and
China North Vehicle Corporation Limited ("Norinco Motors") have
concluded a letter of intent in terms of which Norinco Motors
will participate in a business co-operation agreement with Super
Group through the establishment of a new Commercial Vehicle
Assembly and Distribution Entity ("CVADE"). In terms of the
proposed arrangement Super Group will contribute certain assets
(including, inter alia, the land and buildings comprising the
existing assembly plant located in Pietermaritzburg ("the
Assembly Plant")) to CVADE at their independently determined fair
values in exchange for an up to 30% equity interest in the
business and Norinco Motors and its nominees will contribute cash
in proportion to Super Group`s contribution, such that Norinco
Motors and its nominees will hold at least a 70% equity interest
in the business ("the CVADE Transaction"). CVADE will conduct the
business of assembling and distributing the Powerstar range of
vehicles in South Africa and Africa.
China Construction Bank Corporation - Johannesburg branch ("CCB")
has agreed to provide bridging finance to Super Group to settle
the outstanding liabilities related to the Assembly Plant and to
ensure that Super Group is able to contribute all the stated
assets as unencumbered to CVADE. The bridging finance will be for
a period of 11 months. Super Group will pledge its shares in
CVADE to CCB for the purpose of security against the bridging
finance facility (including costs and accrued interest). CCB has
been granted a call option to call for delivery of Super Group`s
shares in CVADE in settlement of the aforementioned bridging
finance facility. Super Group is entitled to settle the bridging
finance facility in cash in lieu of delivery of Super Group`s
shares in CVADE.
Despite the aforementioned entitlement, Super Group`s
responsibility and liability in terms of the repayment and
settlement of the bridging finance facility is limited to the
delivery and transfer of the shares to CCB on or before the
maturity date or on the date applicable to the call option should
CCB exercise its option.
2.2 Disposal of Powerstar inventory and related liabilities
To facilitate the proposed CVADE Transaction, and in order to
protect CCB`s security rights under a trade finance facility
advanced by CCB to Super Group, Super Group has concluded an
agreement to dispose of its Powerstar inventory (comprising
Powerstar trucks and spare parts) for a selling price equivalent
to the rand equivalent of Super Group`s outstanding exposure to
CCB under its trade finance facility of approximately USD 15.3
million.
The Powerstar inventory will be sold to a newly incorporated
company ("Newco"). Super Group has no power to govern or control
Newco. Super Group shall be released from all its obligations to
CCB under the trade finance facility upon payment of the relevant
purchase price by Newco and the corresponding settlement of the
amount owing under the trade finance facility from the purchase
price proceeds ("the Powerstar Disposal").
CCB will provide Newco with a revolving short term trade finance
and working capital facility. The inventory and any debtors
arising from the sale thereof will be pledged by Newco to CCB as
continuing covering security of its facility to Newco.
As a condition for the sale of the Powerstar inventory on the
above terms, Newco has agreed to be responsible for the following
costs associated with the Powerstar business and inventory :
* all product warranty claims and costs on all Powerstar
vehicles sold (irrespective of the date of sale);
* the assembly costs to be incurred by Super Group in
assembling the Powerstar inventory that is in semi knock
down kit form; and
* the operating expenses of the Powerstar business up to the
date of the contribution by Super Group of the assets to
CVADE pursuant to the CVADE Transaction.
The revolving short term trade finance and working capital facility
granted to Newco will be utilised by Newco to cover, amongst others,
the above costs.
Newco will appoint Super Group to sell the Powerstar inventory, and to
render related maintenance and warranty services, on its behalf. All
proceeds from the sale of the Powerstar inventory will be utilised by
Newco to settle the trade finance and working capital facility granted
by CCB to Newco. From 1 July 2009, Newco assumed the liability for,
and the costs of, all warranty claims on all Powerstar vehicles sold
(irrespective of date of sale).
The Powerstar Disposal will become effective on the business day
following the fulfilment or waiver of the conditions precedent set out
in paragraph 6 below.
4. Rationale
The board of directors of Super Group has resolved to consider both
the CVADE Transaction and the Powerstar Disposal mainly as a
consequence of the:
* continued losses in the Super Group Industrial Products division
and Super Group`s inability to inject further cash into the
business;
* need for a strategic partner that will be able to grow the
business with adequate working capital contributions;
* decision by the board of Super Group to implement a refocused
strategy leading to resultant disposals of non-core assets; and
* announcement of a recapitalisation and debt restructure for Super
Group.
5. Purchase consideration
The proposed purchase consideration related to the CVADE Transaction
is the contribution of the specified assets at their independently
determined fair values.
The selling price of the Powerstar inventory in terms of the Powerstar
Disposal is equivalent to the rand equivalent of Super Group`s
outstanding exposure to CCB under its trade finance facility of
approximately USD 15.3 million taking into account applicable FEC and
spot rates (exclusive of VAT). The proceeds will be utilised by Super
Group to settle its trade finance obligations with CCB.
6. Conditions precedent
The Powerstar Disposal is subject to, inter alia, the fulfilment or
waiver of the following conditions precedent by 30 October 2009:
* approval of the Powerstar Disposal by Super Group shareholders in
general meeting; and
* the obtaining of the necessary approvals, including those from
the JSE Limited and the Securities Regulation Panel, to the
extent required.
The CVADE Transaction is still subject to conclusion of final and
binding transaction agreements in substitution of the letter of
intent.
7. Pro forma financial effects
Once the majority of the conditions are met and the pro forma
financial effects of both the CVADE Transaction and the Powerstar
Disposal can be determined, appropriate announcements will be made by
Super Group.
8. Transaction categorisation and circulars to Super Group shareholders
The Powerstar Disposal is a Category 1 transaction for Super Group in
terms of the JSE Limited Listings Requirements. A circular providing
information on the Powerstar Disposal and a notice convening a general
meeting of Super Group shareholders to approve the Powerstar Disposal,
will be posted to Super Group shareholders in due course.
9. Further cautionary announcement
Further to the cautionary announcements dated 18 March 2009, 28 May
2009, 10 July 2009, 30 July 2009, 31 July 2009 and 4 September 2009
shareholders are advised that the proposed restructure and rights
offer; discussions with regard to an alternative recapitalisation and
the negotiations with regard to the disposal of the Autozone and
Emerald businesses are still in progress which, if successfully
concluded, may have a material effect on the price of Super Group`s
securities. Shareholders are advised that it is anticipated that final
agreements relating to the disposals of Autozone and Emerald are
expected to be signed shortly. Accordingly, shareholders are advised
to continue exercising caution when dealing in Super Group`s
securities until a full announcement is made.
Shareholders are also advised to continue exercising caution until the
detailed financial effects of the CVADE Transaction and the Powerstar
Disposal are published.
10 September 2009
Sandton
Financial advisor and Sponsor to Super Group
Deutsche Securities (SA) (Proprietary) Limited
Date: 10/09/2009 12:59:08 Produced by the JSE SENS Department.
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