| Tue 22 Sep 2009, 8:30 | | PSV - PSV Holdings Limited - Acquisition of Cryoshield (Pty) Limited |
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PSV
PSV
PSV - PSV Holdings Limited - Acquisition of Cryoshield (Pty) Limited
PSV HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1988/004365/06)
JSE code: PSV
ISIN: ZAE000078705
("PSV" or "the company")
ACQUISITION OF CRYOSHIELD (PTY) LIMITED
1 INTRODUCTION
Shareholders are advised that PSV has entered into an agreement with
William John Winterton in terms of which PSV will acquire the entire issued
share capital (including any shareholder`s claims) in Cryoshield (Pty)
Limited ("Cryoshield") on the terms and conditions set out below ("the
transaction").
Warranties and indemnities as are normal in transactions of this nature
have been provided for in the agreement.
2 BACKGROUND INFORMATION
PSV is an industrial engineering holding company which comprises three
operating business segments in South Africa and Africa:
- pumps, spares and valves;
- engineering linings and general industrial supplies; and
- specialised services - comprising petrochemical and cryogenics.
Cryoshield is South Africa`s leading manufacturer of Cryogenic process
equipment. Established in 1986 by John Winterton, Cryoshield supplies,
designs and manufactures prototype process control equipment to the South
African gas industries.
Cryoshield has been manufacturing large capacity, new generation, cryogenic
freezing equipment since 1987. This process requires specialised
fabricating techniques in stainless steel. Cryoshield is renowned for its
technical ability in vacuum and temperature controlled cryogenic processes
and has produced equipment ranging from vacuum furnaces, working at 2 500
degrees Celsius, to low temperature systems, working at minus 270 degrees
Celsius.
Cryoshield`s products include:
- cryogenic food freezing equipment;
- cryogenic dosing systems;
- custom designed cryogenic gas systems;
- transformer oil purification systems;
- cryogenic pressure vessels and heat exchangers; and
- gas phase transformer core dehydration system.
3 RATIONALE FOR THE TRANSACTION
The transaction will add critical mass, advanced technologies and new
clients to the specialised services subsidiaries within PSV. This segment
already houses Rand Air and Gas Installations, which designs and produces
storage vessels and distribution equipment (road tankers) for the cryogenic
industry. The businesses will be combined into a comprehensive cryogenic
service offering to the market.
The directors of PSV believe that the transaction will make it the leading
supplier of cryogenic technology in South Africa. Cryoshield has a number
of long-term contracts from which PSV will also benefit.
4. PURCHASE CONSIDERATION AND PAYMENT TERMS
The purchase consideration is R8 million in cash payable as follows:
- the lower of R2 million or the tangible net asset value as at 28
February 2009 ("TNAV"), payable on the effective date;
- the sum of R4 million plus 66.6% of the amount (if any) by which the
TNAV is less than R2 million, payable on 31 July 2010; and
- the sum of R2 million plus 33.3% of the amount (if any) by which the
TNAV is less than R2 million, payable on 31 July 2011.
5. CONDITIONS PRECEDENT
The transaction is subject only to the completion of a satisfactory due
diligence investigation by PSV on Cryoshield.
6. EFFECTIVE DATE
The transaction will become effective on the first business day of the
month immediately succeeding that during which all of the conditions
precedent shall have become fulfilled, or waived as the case may be.
7. FINANCIAL EFFECTS
The unaudited pro forma financial effects set out below are provided for
illustrative purposes only to assist shareholders to assess the impact of
the transaction on the earnings per share ("EPS"), headline earnings per
share ("HEPS"), diluted earnings per share ("DEPS"), diluted headline
earnings per share ("DHEPS"), net asset value per share ("NAVPS") and
tangible net asset value per share ("TNAVPS") of PSV. These unaudited pro
forma financial effects have been disclosed in terms of the JSE Listings
Requirements and because of their nature may not give a fair presentation
of the PSV`s results and financial position after the transaction. The
unaudited pro forma financial effects are the responsibility of the
directors of PSV and are presented in a manner consistent with the
accounting policies adopted by PSV.
The pro forma effect of the transaction on EPS, HEPS, DEPS, DHEPS, and
NAVPS is insignificant (less than 3%). TNAVPS of 34.1 cents as calculated
from PSV`s audited results for the year ended 28 February 2009 decrease by
7.3% to 31.6 cents on a pro forma basis based on the following assumptions
and information:
- the transaction was effective 28 February 2009;
- the purchase price of R8 million was paid on 28 February 2009 in the
manner described in note 2 above;
- transaction costs have been ignored due to immateriality; 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 Cryoshield of R2 million will comprise goodwill of R6
million.
7. SERVICE AND RESTRAINT AGREEMENT
A written service, confidentiality and restraint agreement has been
concluded between Mr Winterton and PSV.
8. CLASSIFICATION OF THE TRANSACTION
The transaction is classified as a Category 2 transaction in terms of the
Listings Requirements of the JSE Limited.
Johannesburg
22 September 2009
Corporate and Designated Adviser
Vunani Corporate Finance
Date: 22/09/2009 08:30:01 Produced by the JSE SENS Department.
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