| Tue 15 Sep 2009, 15:27 | | MML - Metmar Limited - Detailed Terms Announcement |
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MML
MML
MML - Metmar Limited - Detailed Terms Announcement
Metmar Limited
Incorporated in the Republic of South Africa
Registration number: 1998/007269/06
Share code: MML
ISIN code: ZAE000078747
("Metmar" or "the Company")
Detailed terms announcement regarding Metmar`s acquisition of a 20% interest in
Lightwave Trade and Invest 11 (Proprietary) Limited ("the Metmar Consortium"),
the subscription by the Metmar Consortium for a 40% interest in Zimbabwe Alloys
Limited ("Zim Alloys"), the acquisition of a 40% interest in Chromecorp
(Private) Limited ("Chromecorp") by the Metmar Consortium and the transfer of a
5% shareholding in the Metmar Consortium to Euro Mineral Resources Limited
("EMR").
1 Introduction
Shareholders are advised that Metmar has entered into an agreement with the
Metmar Consortium, Zim Alloys and Benscore Investments (Private) Limited, dated
15 September 2009, to acquire a 20% interest in the Metmar Consortium. The
Metmar Consortium represents a consortium of investors with chrome interests in
the Republic of South Africa. Zim Alloys holds certain chrome interests in the
Republic of Zimbabwe and requires access to DC furnace technology and general
technical know-how for the effective and efficient operation and management of
a chrome furnace complex ("the required chrome furnace expertise"). The Metmar
Consortium has access to the required chrome furnace expertise and wishes to
invest in Zim Alloys by way of a subscription for shares in Zim Alloys ("the
Zim Alloys subscription"). The Metmar Consortium shall subscribe for such
number of shares in Zim Alloys as will give it an effective 40% interest in the
issued share capital of Zim Alloys. The effective date of the Zim Alloys
subscription is the subscription date described in paragraph 2.1 hereunder.
In addition to the Zim Alloys subscription, the Metmar Consortium has entered
into an agreement with Euro Chrome Resources (Proprietary) Limited ("Euro
Chrome"), dated 15 September 2009, to acquire 40% of the total interest in
Chromecorp currently held by Euro Chrome and the loan claims of Euro Chrome
against Chromecorp ("the Chromecorp acquisition"). The effective date of the
Chromecorp acquisition is the subscription date described in paragraphs 2.1 and
3.5 hereunder.
As Euro Mineral Resources Limited ("EMR") has introduced the Metmar Consortium
to Zim Alloys, Chromecorp and their shareholders, the Metmar Consortium has
also entered into an agreement with EMR, dated 15 September 2009 whereby, as
consideration for the services of EMR to the Metmar Consortium, the
shareholders of the Metmar Consortium have agreed to issue a 5% shareholding in
the Metmar Consortium to EMR upon the agreements referred to above becoming
unconditional in all respects.
The Zim Alloys subscription and the Chromecorp acquisition are interrelated and
represent one composite transaction. The rationale for the Zim Alloys
subscription is as described in paragraph 1 above. In addition thereto, Metmar
has also been appointed to conduct the sales and marketing activities on behalf
of Zim Alloys jointly with Cometal SA (Spain). Zim Alloys is the ultimate
holding company of Chromecorp.
2 The Zim Alloys subscription
The salient features of the Zim Alloys subscription are as follows:
2.1 The Metmar Consortium shall subscribe for such number of shares as will
give it a 40% interest in the total issued share capital of Zim Alloys ("the
subscription shares"), which shares shall be issued on the 7th (seventh)
business day following fulfilment of the suspensive conditions ("the
subscription date") set out in paragraph 4 hereunder;
2.2 The subscription price payable by the Metmar Consortium for the
subscription shares shall be an amount of USD56.25 million and shall be paid as
follows:
2.2.1 USD4.50 million on the subscription date, against the issue to the Metmar
Consortium of the subscription shares;
2.2.2 USD1.50 million within 90 days of the date of the payment described in
paragraph
2.2.1 above;
2.2.3 USD15.00 million in the following tranches:
2.2.3.1 USD1.50 million in cash at the end of the month following the month of
first production from the A3 furnace; and
2.2.3.2 the balance of USD13.50 million over a period of 90 months in equal
monthly instalments, commencing at the end of the month following the month in
which the payment in clause 2.2.3.1 is made;
2.2.4 the balance of the subscription price, being USD35.25 million, shall
be applied:
2.2.4.1 to the cost of repair of the existing A3 furnace, plant and equipment
of Zim Alloys, as and when required; and
2.2.4.2 to the design, construction and commissioning of a 37 MVA DC furnace,
training of staff and the transfer of knowledge and know-how regarding the DC
technology and/or the refurbishment of existing furnaces A1 and A2, as
determined by the board of directors of Zim Alloys.
2.2.5 The subscription price shall be applied by Zim Alloys to the settlement
of creditors` claims and other liabilities of Zim Alloys.
2.3 Further to the above and subject to compliance with the foreign exchange
control regulations of Zimbabwe prevailing from time to time, Zim Alloys
undertakes to ensure that at least 75% of the profits after tax be distributed
to shareholders in each financial year.
3 The Chromecorp acquisition
The salient features of the Chromecorp acquisition are as follows:
3.1 The Metmar Consortium shall, simultaneously with the Zim Alloys
subscription, enter into an agreement with Euro Chrome to acquire its 40%
interest in Chromecorp, together with the loan claims of Euro Chrome held
against Chromecorp ("the Chromecorp equity");
3.2 Zim Alloys agrees to waive any pre-emptive rights which it, or any of its
subsidiaries, may have against Chromecorp, as a condition to the Chromecorp
acquisition;
3.3 Zim Alloys consents to the Chromecorp acquisition and shall procure the
consent of its subsidiaries thereto;
3.4 The purchase price for the Chromecorp acquisition shall be the face value
of the loan claims currently reflected in Chromecorp`s books of entry, subject
to a maximum purchase price of USD4.10 million;
3.5 The purchase price in respect of the Chromecorp equity shall be paid,
without set-off or right to defer payment, by the Metmar Consortium to Euro
Chrome in cash on the subscription date; and
3.6 All contracts between Euro Chrome and/or EMR and Euro Chrome in respect
of services to be supplied by Euro Chrome and/or EMR shall at the written
election of the Metmar Consortium either:
3.6.1 cease on the subscription date and neither party shall have any claim
against the other party arising in consequence of the termination; or
3.6.2 be assigned to the Metmar Consortium at no cost, in which event Metmar
Consortium shall be entitled to all benefits and liable for all obligations
from date of such assignment.
4 Conditions Precedent to the Zim Alloys subscription and the Chromecorp
acquisition ("the Acquisitions")
The Acquisitions are conditional on the fulfilment of the following conditions
precedent by no later than 30 November 2009:
4.1 Both the Zim Alloys subscription and the Chromecorp acquisition are to
constitute one composite transaction and, in the event any one transaction
fails, the other transaction shall also fail;
4.2 The completion by the Metmar consortium, at its sole discretion and to its
entire satisfaction, of a financial, legal, commercial and technical due
diligence on Zim Alloys and Chromecorp; and
4.3 Compliance with any applicable regulatory approvals pertaining to the
Acquisitions.
5 Pro Forma Financial Effects of the Acquisitions
The unaudited pro forma financial effects set out in the table below have been
prepared in accordance with the Listings Requirements of the JSE Limited and
the Guide on Pro Forma Financial Information issued by The South African
Institute of Chartered Accountants in order to assist Metmar shareholders in
their assessment of the impact of the Zim Alloys subscription and the
Chromecorp acquisition on the earnings per share ("EPS"), headline earnings per
share ("HEPS"), the net asset value ("NAV") and the tangible NAV ("NTAV") per
Metmar ordinary share as at 28 February 2009 and for the twelve months then
ended. The pro forma financial effects have been prepared for illustrative
purposes only and, because of their nature, they may not fairly present
Metmar`s pro forma financial position at 28 February 2009 and the results of
its operations for the twelve months then ended. It has been assumed for the
purposes of the pro forma financial effects the Zim Alloys subscription and the
Chromecorp acquisition took place with effect from 1 March 2008, for Income
Statement purposes, and on 28 February 2009, for Balance Sheet purposes. The
Directors of Metmar are responsible for the preparation of the pro forma
financial effects. The "Before" column has been extracted without adjustment
from Metmar`s unaudited pro forma financial information as contained in the
Circular to Metmar shareholders dated 17 August 2009. That Circular was issued
pursuant to the disposal of Metmar`s 21% interest in PGR 17 Investments
(Proprietary) Limited ("PGR 17"), which included its 11.8% indirect interest in
Mogale Alloys (Proprietary) Limited ("Mogale"), to Ruukki SA (Proprietary)
Limited ("Ruukki SA") with effect from 1 April 2009 ("the Circular"). The
"After" column represents the effects after the Zim Alloys subscription and the
Chromecorp acquisition. The "% Change" column compares the "After" column to
the "Before" column.
Before After % Change
cents per cents per
share Share
(1) (2),(3),(4) and (5)
Notes
EPS 122.4 120.3 -1.72
HEPS 68.5 65.5 -4.38
NAV 239.2 246.2 2.93
NTAV 205.4 212.4 (3.41)
Weighted average shares in
issue (`000) 193.262 193.262
Number of shares in issue
(`000) 194.637 194.637
Notes and assumptions:
1. The "Before" column has been extracted without adjustment from Metmar`s
unaudited pro forma financial information as contained in the Circular;
2. The "After" column represents the effects after the Zim Alloys subscription
and the Chromecorp acquisition;
3. The pro forma earnings and headline earnings per share have been adjusted to
include the following:-
- marketing revenue amounting to R0.60 million;
- Metmar`s pro rata share of transaction costs amounting to R0.20 million;
- the release of the difference between the net present value ("NPV") of the
deferred purchase consideration and the actual amounts payable amounting to
R6.00 million. A NPV discount rate of 10.5% has been used;
- the purchase consideration is paid out of cash on hand and as the cash used
was received post the publication of the Metmar`s audited financial results for
the year ended 28 February 2009, which was used as the basis for the
preparation of the financial effects included in the Circular, no adjustment is
made for interest lost as a result of these transactions;
4. An exchange rate of USD1.00:ZAR7.70 has been applied;
5. The net asset value ("NAV") and net tangible asset value ("NTAV") per share
have been adjusted to include the following:
- the purchase of subscription shares from Zim Alloys amounting to
USD4.50 million, payable upon fulfilment of suspensive conditions (Metmar`s
share: R6.90 million);
- the purchase of subscription shares from ChromeCorp amounting to
USD4.10 million payable upon fulfilment of suspensive conditions (Metmar`s
share: R6.30 million);
- loans, representing the long and short term deferred purchase considerations
at fair value for the acquisition of the subscription shares and certain plant
and equipment, being:
a) the subscription shares, USD1.50 million payable 90 days from payment of
subscription shares being 28 February 2010 (Metmar`s share: R2.30 million);
b) A3 furnace, USD1.50 million payable at the end of the month following month
of first production, expected 30 April 2010 Metmar`s share: R2.30 million);
c) A3 furnace, USD 13.50 million payable in equal monthly instalments over
90 months expected to commence 31 May 2010 (Metmar`s share: R20.80 million);
d) A3 furnace, USD2.50 million required to commence refurbishment
31 January 2010, being part payment of USD35.25 million (Metmar`s share: R3.80
million);
e) A3 furnace, USD6.25 million required to continue refurbishment
30 April 2010, being part payment USD35.25 million (Metmar`s share: R9.60
million); and
f) DC furnace design, construction and commissioning and/or refurbishment of
existing A1 and A2 furnaces, being the balance of USD35.25 million: USD26.50
million payable over a period of 24 months from 30 April 2010 (Metmar`s share:
R40.80 million).
(Note regarding points 5a to 5f above: Metmar`s aggregate share of the deferred
liability is R79.60 million and the fair value R60.80 million.)
6 Categorisation of the Acquisitions
The Acquisitions represent a Category 2 transaction in terms of the Listing
Requirements of the JSE Limited. Accordingly, shareholder approval of the
Acquisitions is not required.
7 Withdrawal of Cautionary
Further to the cautionary announcement released on the Securities Exchange News
Service of the JSE Limited on 1 September 2009, Metmar shareholders are advised
that the aforementioned cautionary announcement is hereby withdrawn and that
caution is no longer required to be exercised when dealing in Metmar
securities.
15 September 2009
Bryanston
Sponsor: QuestCo Sponsors (Pty) Limited
Attorneys: Edwin Jay
Auditors: Grant Thornton
Date: 15/09/2009 15:27:15 Produced by the JSE SENS Department.
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