| Wed 30 Sep 2009, 15:00 | | BSR / TWP - Basil Read / TWP Holdings - Proposed Acquisition And Withdrawal Of |
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BSR TWP
BSR TWP
BSR / TWP - Basil Read / TWP Holdings - Proposed Acquisition And Withdrawal Of
Cautionary Announcement
Basil Read Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1984/007758/06)
Share code: BSR & ISIN: ZAE000029781
("Basil Read")
TWP Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/025640/06)
Share code: TWP & ISIN: ZAE000110763
("TWP")
PROPOSED ACQUISITION BY BASIL READ OF THE ENTIRE ISSUED ORDINARY SHARE CAPITAL
OF TWP BY WAY OF A SCHEME OF ARRANGEMENT IN TERMS OF SECTION 311 OF THE
COMPANIES ACT, 1973 (ACT 61 OF 1973), AS AMENDED, TO BE PROPOSED BY BASIL READ
BETWEEN TWP AND ITS SHAREHOLDERS ("THE SCHEME") AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
Further to the joint cautionary announcement of Basil Read and TWP on 11 August
2009 and renewal thereof on 22 September 2009, Basil Read and TWP hereby advise
that agreement has been reached ("the Agreement") for Basil Read to acquire the
entire issued share capital of TWP ("the Acquisition") subject to the
conditions precedent set out in paragraph 6 below.
In terms of the Agreement, the purchase price for TWP is to be settled through
the scheme and in the manner set out in paragraph 5.3 below.
2. BUSINESS OF BASIL READ
Founded in 1952 and listed on the Main Board of the JSE Limited ("the JSE") in
1987, Basil Read through its subsidiaries, engages in civil engineering, road
construction, building, integrated housing developments, property development,
bitumen distribution, and opencast mining operations in South Africa and
internationally.
The group`s construction division is involved in the development and
implementation of technical and financial engineering for private and public
sector clients covering various projects, such as earthworks, bridges,
pipelines, harbour and marine works, industrial plants, stadiums, roads,
highways, airports, retail and office complexes, apartment blocks, educational
facilities, hospitals, prisons and residential housing. The group`s opencast
mining operations comprise drill and blast opencast contract mining, mine
spoils rehabilitation, bulk earthmoving, seam mining, hard rock selective
mining, and materials handling. Basil Read`s developments division is involved
in the construction, development and project management of integrated housing
schemes and other property-related developments.
As a leading black-empowered construction group in South Africa, Basil Read
also enjoys the competitive advantage of a long-standing partnership with the
global construction group, Bouygues Construction SA.
For more than five decades, Basil Read has entrenched its reputation for
quality, service, innovation and professionalism on even the most challenging
contracts.
3. BUSINESS OF TWP
TWP was founded in 1982 by Mr Nigel Townshend, the company`s current group
chief executive officer. The initial focus of the business was in civil and
structural design and engineering. Over time, the business became
increasingly aligned with clients in the mining industry and these clients
required a broader service that included both engineering skills and project
management. TWP became a public company on 1 December 2004.
During the late 1980`s TWP`s staff complement grew to approximately 150 where
it remained until the 1990`s when the political situation both in South Africa
and the mining industry had stabilised, and especially platinum group metals
showed resurgence. The TWP group then started to really prosper, managing some
of the largest and most prestigious projects in the mining industry in Africa,
the Americas and Australasia.
TWP`s core business is engineering design, procurement and construction
management, typically referred to as EPCM. However, TWP also accepts lump sum
turnkey projects. It is important to note however that TWP is not a
construction company in the true sense of the word, although it employs these
skills directly or for and on behalf of clients when necessary.
TWP provides a wide spectrum of services such as resource identification,
bankable feasibility studies, mine and production planning, process
engineering, project execution, delivery and handover. TWP has been and will
continue its involvement in projects for most minerals including platinum,
gold, diamonds, nickel, copper, chrome, cobalt and coal.
In pursuance of its ongoing growth and expansion horizons, TWP listed on the
Main Board of the JSE during November 2007 following a successful private
placing of shares, raising R200 million of equity capital.
4. RATIONALE FOR THE ACQUISITION
Currently operating in two different spaces, the acquisition of TWP by Basil
Read will be complementary to both businesses.
With prospective clients, especially those outside the borders of South Africa
looking for a single point of contact for their projects, the Basil Read group
of companies, as enlarged with the addition of TWP ("the enlarged group"), will
be uniquely equipped to offer a full service to the world`s building
environment and mining sectors. Whilst both Basil Read and TWP will continue to
grow their core businesses in their respective sectors, the enlarged group will
be able to accept a wider range of new and exciting projects encompassing:
- PPP - Public Private Partnerships where funding is often part of the
offering;
- BOOT - Build, Own, Operate and Transfer;
- EPC - Engineer, Procure, Construct; and
- Plant, Process and Mine operation.
The enlarged group will have skills across the entire construct and design
spectrum, will facilitate the growth of professionals across all disciplines
and contribute significantly to the advancement of engineering and construction
in general. TWP will have access to construction skills and, conversely, Basil
Read will have access to design and project management expertise. TWP`s
significant exposure to the African and Australasian markets can be leveraged
and costs can be reduced across the enlarged group by exploiting areas of
synergy.
The size of the enlarged group will allow it to compete for larger contracts,
pursue international acquisitions and compete globally. Furthermore, savings
will be possible by having only one listing and one board, sharing executive
management and skills and a reduction in general business overheads.
5. KEY STEPS TO THE ACQUISITION AND IMPLEMENTATION THROUGH THE SCHEME
5.1 Basil Read general meeting
In terms of the Listings Requirements of the JSE, the Acquisition is a Category
1 transaction for Basil Read requiring the approval of Basil Read shareholders.
Accordingly, a general meeting of Basil Read shareholders ("general meeting")
will be convened at which, inter alia, the approval of Basil Read shareholders
will be sought for the Acquisition as well as to increase the authorised share
capital of Basil Read sufficient to fulfil the share element of the scheme
payment referred to in paragraph 5.3 below.
5.2 The scheme and the scheme meeting
Implementation of the Acquisition through the mechanism of the scheme will
constitute TWP as a wholly owned subsidiary of Basil Read. In terms of the
rules and regulations of the Securities Regulation Code on Takeovers and
Mergers ("the Code"), such a transaction will give rise to an "affected
transaction" as defined. Accordingly, the board of directors of TWP ("the TWP
board") is required to appoint an independent adviser to provide an opinion as
to the fairness of the scheme to TWP shareholders. In this regard, the opinion
of Moore Stephens (Jhb) Corporate Finance (Proprietary) Limited ("Moore
Stephens Corporate Finance"), the independent adviser, is provided in paragraph
9.3 below.
In order to convene a scheme meeting of TWP shareholders ("the scheme
meeting"), application will be made to the South Gauteng High Court ("the
Court") for an order to this effect.
The scheme, if approved by a 75% majority of votes cast by TWP shareholders
present and voting, either in person or by proxy, at the scheme meeting and
sanctioned by the Court, will result in Basil Read acquiring the entire issued
share capital of TWP and TWP shareholders receiving the scheme payment referred
to in paragraph 5.3 below, regardless of whether or not they voted in favour of
the scheme at the scheme meeting.
As regards the scheme meeting, shareholders of TWP and Basil Read are referred
to paragraph 7 below regarding irrevocable undertakings received by TWP from
certain shareholders of TWP.
5.3 Scheme payment
Scheme payment
Subject to fulfilment of the paragraph 6 conditions precedent and on
implementation of the scheme, Basil Read will pay and TWP shareholders will
receive the scheme payment, namely a total of 37 317 507 new Basil Read shares
and R143 672 400 in cash, in the ratio of 31,16 new Basil Read shares and
R119,96 for every 100 TWP shares ("scheme payment").
It is expected that the scheme payment will be settled on the operative date of
the scheme expected to be Monday, 21 December 2009.
The scheme payment is based on the assumption that the Vunani option to
subscribe for new TWP shares, which is covered in more detail in paragraph 5.4
below, does not arise.
TWP shareholders holding less than 100 TWP shares or not holding whole number
multiples of 100, will receive the scheme payment on a pro rata basis.
Deferred payment
In addition, by agreement between Basil Read and TWP, a negotiated Target EBIT
has been set for TWP as is more fully explained in paragraph 5.5 below. In the
event of TWP achieving the Target EBIT, the deferred payment outlined in
paragraph 5.6 below will be made to those shareholders of TWP who will have
received the scheme payment.
In compliance with the requirements of the Code, Basil Read has obtained a
letter from its bankers to the satisfaction of the Securities Regulation Panel
("the SRP") that Basil Read has access to cash resources sufficient to fulfil
its obligations for the cash element of the scheme payment and the deferred
payment.
5.4 Vunani option
An agreement was concluded at the time of the listing of TWP on the JSE namely,
26 November 2007, between certain founding shareholders of TWP, TWP and Vunani
Group (Proprietary) Limited ("Vunani") through its subsidiary Anchor Park
Investments 81 (Proprietary) Limited ("Anchor Park") regarding the introduction
of Vunani as a BEE shareholder.
The agreement, inter alia, provides for Vunani to increase its shareholding in
TWP after the lapse of a period of 12 months from the date of listing by
exercising a right of first refusal to buy shares from the founding
shareholders and after a period of 24 months, namely 26 November 2009, to
exercise an option to acquire an additional 9,1% up to a maximum percentage of
25,1% of the issued shares in TWP through various methods, including by way of
a subscription of new shares in TWP ("Vunani option").
At the date of this announcement, Vunani holds 18 251 876 shares in TWP being
15,24% of TWP`s total issued share capital. Should Vunani be able to exercise
its option by way of share subscription, TWP may be required to allot and issue
a maximum of 15 765 859 new shares for cash which will result in the issued
share capital of TWP being 135 528 825 shares.
5.5 Target EBIT
For purposes of the deferred payment referred to in paragraph 5.6 below, the
Target EBIT shall mean the earnings before interest and tax (as defined by
International Financial Reporting Standards) of TWP for the 12-month period
ending 31 December 2010 of R212 million as will be reflected in the signed
audited annual financial statements of TWP for such period.
5.6 Deferred payment
The Agreement provides for a deferred payment in the amount of R59 863 500 to
be paid by Basil Read to TWP shareholders in the event that Target EBIT is
attained, subject to the following provisos:
5.6.1 should TWP fail to achieve Target EBIT but achieves 80% or more of Target
EBIT then Basil Read shall make a reduced deferred payment in relation to the
percentage of the actual EBIT achieved by TWP during the 12-month period ending
31 December 2010 equal to the percentage of the Target EBIT actually achieved.
By way of an example to illustrate the intention, should the actual EBIT
achieved by TWP during the 12-month period ending 31 December 2010 be 90% of
the Target EBIT, then the deferred payment shall be 90% of the sum of
R59 863 500; and
5.6.2 should the actual EBIT earned by TWP for the 12-month period ending 31
December 2010 not achieve 80% of Target EBIT, then the purchase consideration
shall be reduced by the full deferred payment and therefore no additional
amount will be paid to TWP shareholders.
Subject to TWP achieving Target EBIT, the deferred payment will be paid to TWP
shareholders within five business days following signature of the annual
financial statements of TWP for the year ending 31 December 2010, which is
anticipated to take place no later than 31 March 2011.
6. CONDITIONS PRECEDENT
The Acquisition by Basil Read of TWP and the implementation through the
mechanism of the scheme are interrelated and interconditional. Accordingly, in
order for the Acquisition to be implemented and for TWP shareholders to receive
the scheme consideration, all of the following conditions precedent must be
fulfilled, namely:
6.1 TWP and Basil Read obtain the irrevocable undertakings from their
respective shareholders as is contemplated in the Agreement on or before 15 and
16 October 2009, respectively.
6.2 On or before 15 October 2009, TWP obtains written confirmation that Vunani
exercises or waives the Vunani Option referred to in paragraph 5.4 above.
6.3 Basil Read shareholders at the general meeting:
6.3.1 approving the Acquisition by a majority representing not less than 50%
plus one vote of the votes exercisable by the Basil Read shareholders as are
present and/or represented and voting, either in person or by proxy;
6.3.2 approving an increase in Basil Read`s authorised share capital
sufficient to provide for the share element of the scheme consideration, by a
majority representing not less than 75% of the votes exercisable by the Basil
Read shareholders as are present and/or represented and voting, either in
person or by proxy;
6.3.3 approving any and all other matters related to the Acquisition by the
requisite majorities;
6.4 TWP shareholders at the scheme meeting approving the scheme by a majority
representing not less than 75% of the votes exercisable by the TWP shareholders
as are present and/or represented and voting, either in person or by proxy, at
the scheme meeting;
6.5 the Competition Authorities giving its approval for the deemed `merger`
of Basil Read and TWP occasioned by the Acquisition;
6.6 the Court sanctioning the scheme;
6.7 a certified copy of the Order of Court sanctioning the scheme as well
as all approvals obtained at the general meeting, being approvals in the form
of special resolutions, being registered by the Companies and Intellectual
Property Registration Office;
6.8 completion of a due diligence on both companies;
6.9 conclusion of management agreements and restraints for senior management
of TWP; and
6.10 all other legal and necessary regulatory approvals and consents to the
implementation of the Acquisition and the scheme, as may be required, being
obtained.
7. IRREVOCABLE UNDERTAKINGS IN REGARD TO THE SCHEME
In anticipation of the conclusion of the Agreement and prior to this
announcement, dispensation was sought and obtained from the SRP permitting TWP
to approach a select number of TWP shareholders, being original shareholders of
TWP prior to its JSE listing and the majority of who are still senior
management of TWP, with a view to obtaining irrevocable undertakings from them
to support and to vote in favour of the scheme at the scheme meeting.
With reference to paragraph 6.1 above, the following signed irrevocable
undertakings have been received to date from TWP shareholders, being duly
entitled/authorised, totaling 57 339 447 TWP shares and representing 47,87% of
TWP`s existing issued share capital, to vote in favour of the scheme at the
scheme meeting:
Number of % of issued share
Name of TWP shareholder shares capital of TWP
Townshend Family Trust (Mr N Townshend) 29 294 021 24,46
JPMS Trust (Mr J Russell) 6 167 792 5,15
SML Trust (Mr S Dewsbery) 4 224 574 3,53
Glover Family Trust (Mr D Glover) 4 119 846 3,44
M&E MacNab Family Trust (Mr M MacNab) 4 119 846 3,44
Ragamuffin Reward Trust (Mr G Chamberlain) 4 119 846 3,44
Roditis Family Trust (Mrs N Roditis) 2 059 923 1,72
Trinity Family Trust (Mr G Brook) 1 676 681 1,40
JSD Trust (Mr J van der Linde) 1 556 918 1,30
In the event that the Vunani option referred to in paragraph 5.4 above is
exercised, such above percentage shareholdings will change accordingly.
Copies of the above irrevocable undertakings are available for inspection at
the registered office of TWP during normal business hours on business days from
the date of this announcement. The registered office of TWP is located at The
Atrium, 7th Avenue and Rustenburg Road, Melville, Johannesburg, South Africa
("the TWP registered office"). Shareholders should note that with effect from 5
October 2009, the TWP registered office will be situated at Level 1, 54 Melrose
Boulevard, Melrose Arch, Melrose, Johannesburg, South Africa.
8. FINANCIAL EFFECTS
The following unaudited pro forma financial effects, which have been prepared
by and are the responsibility of the directors of Basil Read and TWP,
respectively, are presented for illustrative purposes only to show the effects
of the Acquisition and the scheme and because of their nature, may not give a
fair reflection of the financial position or the effect of future earnings on
Basil Read and TWP.
Pro forma financial effects on six-month results:
Effects per Basil share (cents)
After Mvela %
Read Effects per
Basil Read Before 1 acquisition 2 After 3 change
Earnings per share 4 141,21 162,29 143,86 (11,4)
Headline earnings per
share 4 153,66 174,74 154,75 (11,4)
Net asset value 5 996,22 996,22 1 187,92 19,2
Net tangible asset value
5 827,61 518,77 428,17 (17,5)
Weighted average shares
in issue (`000) 86 476 86 476 123 812
Shares in issue (`000) 86 476 86 476 123 794
After
(excluding cash %
Effects per TWP share (cents) Before 1 consideration) 3 change
Earnings per share 4 43,61 45,03 3,3
Headline earnings per share 4 45,88 48,43 5,6
Net asset value 5 450,31 371,79 (17,4)
Net tangible asset value 5 259,81 134,01 (48,4)
Weighted average shares
in issue (`000) 119 233 123 812
Shares in issue (`000) 119 233 123 794
After
(including cash %
Effects per TWP share (cents) consideration) 3 change
Earnings per share 4
Headline earnings per share 4
Net asset value 5 537,45 19,4
Net tangible asset value 5 299,67 15,3
Weighted average shares
in issue (`000) 123 812
Shares in issue (`000) 123 794
Notes:
1. Basil Read "Before" results are extracted from the published, unaudited
interim results of Basil Read for the six months ended 30 June 2009. TWP
"Before" represents the results of TWP for the six months ended 28 February
2009 based on the annual financial statements of TWP for the financial year
ended 28 February 2009 after deducting the results for the six months ended 31
August 2008 as presented in TWP`s published unaudited interim results for such
period.
2. Represents the pro forma financial effects after the Mvela acquisition
based on the assumption that the Mvela acquisition was effective 1 January 2009
for earnings and headline earnings effects and 30 June 2009 for net asset and
net tangible asset value effects. (Refer to published circular to Basil Read
shareholders dated 21 August 2009 for detailed notes on the pro forma effects
of the Mvela acquisition.)
3. Represents the pro forma financial effects of the Acquisition and scheme
per Basil Read share and equivalent Basil Read share per TWP share.
4. Earnings and headline earnings effects are based on the following principal
assumptions:
(i) TWP results for the six months ended 28 February 2009 are based on the
annual financial statements of TWP for the financial year ended 28 February
2009 after deducting the results for the six months ended 31 August 2008 as
presented in TWP`s published unaudited interim results for such period;
(ii) the Acquisition and scheme were effective 1 January 2009;
(iii) the excess of the fair value of the purchase consideration has been
allocated to the tangible and identifiable intangible assets based on a
preliminary purchase price allocation exercise. In terms of IFRS 3: Business
Combinations, a purchase price allocation exercise will need to be performed on
the effective date of the Acquisition;
(iv) amortisation of estimated identifiable intangible assets;
(v) interest foregone on the cash consideration at an average rate of 8,5%
per annum; and
(vi) amortisation of the present value of the deferred purchase consideration
at 8,5% per annum.
5. Net asset and net tangible asset value per share effects are based on the
following principal assumptions:
(i) the Acquisition and scheme were effective 30 June 2009;
(ii) the purchase consideration is settled as follows:
issue of 37 317 507 shares in Basil Read at an assumed price of R16,75 per
share, being the latest share price of Basil Read;
initial cash payment of R143.672 million, funded from cash reserves; and
cash payment of R59.864 million to be paid on 31 March 2011 subject to TWP
having achieved the target EBIT. The deferred purchase consideration has been
accrued at its present value, discounted at a rate of 8,5% per annum;
(iii) the excess of the fair value of the purchase consideration has been
allocated to the tangible and identifiable intangible assets based on a
preliminary purchase price allocation exercise. In terms of IFRS 3: Business
Combinations, a purchase price allocation exercise will need to be performed on
the effective date of the Acquisition;
(iv) cash consideration funded out of cash resources; and
(v) accrual for transaction costs of R16 million, which are capitalised to
equity.
9. OPINIONS AND RECOMMENDATIONS
9.1 Opinion of the Basil Read board
Based on the terms and conditions of the Acquisition, the board of directors of
Basil Read is of the opinion that the terms and conditions of the Acquisition
are favourable to shareholders of Basil Read and recommends that Basil Read
shareholders vote in favour of the Acquisition and all other resolutions
related thereto as are to be proposed at the general meeting.
All of the directors of Basil Read who own shares in their personal capacity
intend to vote in favour of all resolutions to be proposed at the general
meeting.
9.2 Opinion of the TWP board
Based on the terms and conditions of the scheme, the views of, and the level of
support for the scheme shown by significant shareholders as is evidenced in
paragraph 7 above, as well as the independent advice of Moore Stephens
Corporate Finance referred to in paragraph 9.3 below, the TWP board of
directors is of the opinion that the terms and conditions of the proposed
scheme are fair to shareholders of TWP and that the scheme payments referred to
in paragraph 5.3 above fall within the value range indicated by Moore Stephens
Corporate Finance and therefore recommends that TWP shareholders vote in favour
of the scheme at the scheme meeting.
9.3 Opinion of Moore Stephens Corporate Finance
As explained in paragraph 5.2 above, the TWP board appointed Moore Stephens
Corporate Finance as independent adviser to consider the terms of the scheme
from a point of view of fairness to TWP shareholders. Having considered all
terms and conditions pertinent to the scheme, Moore Stephens Corporate Finance
considers the scheme and the terms and conditions thereof to be fair to TWP
shareholders.
The written opinion of Moore Stephens Corporate Finance is available for
inspection at the TWP registered office during normal business hours on
business days from the date of this announcement and will be included in the
scheme document referred to in paragraph 11 below.
10. INDICATIVE IMPORTANT DATES
At the date of this announcement and due to the complexity of the
implementation of the Acquisition through the mechanism of the scheme, the
following indicative important dates are provided purely as an anticipated
guide for the timing of the transaction. A further detailed announcement is
expected to be made on the Securities Exchange News Service of the JSE ("SENS")
and in the press on or about 21 October 2009 confirming or changing indicated
dates.
2009
General meeting circular and notice of general meeting
posted to shareholders of Basil Read Thursday, 22 October
Scheme document posted to TWP shareholders Thursday, 22 October
Scheme meeting of TWP held at 10:00 Tuesday, 17 November
General meeting of Basil Read held at 11:00 or
immediately after the conclusion or adjournment of
the scheme meeting convened to be held at the same
venue on the same date at 10:00 (whichever
shall occur later) Tuesday, 17 November
Expected date for confirmation of the scheme by the
Court Tuesday, 1 December
Expected last day to trade in the shares of TWP in
order to be eligible to receive the scheme payment Thursday, 10 December
Listing on the JSE of the shares of TWP expected to be
suspended from the commencement of trading on the JSE Friday, 11 December
Listing on the JSE of the new shares of Basil Read
comprising the share element of the scheme payment
expected from the commencement of trading on the JSE Friday, 11 December
Expected record date for the scheme Friday, 18 December
Expected operative date of the scheme and termination
of the listing of the shares of TWP on the JSE Monday, 21 December
Expected date for payment to TWP shareholders of the
scheme payment Monday, 21 December
Share certificates in TWP may not be dematerialised or rematerialised after
Thursday, 10 December 2009.
11. WITHDRAWAL OF CAUTIONARY AND DOCUMENTATION
As details of the Acquisition and the scheme, and the financial effects
thereof, have now been disclosed, shareholders of Basil Read and TWP are no
longer required to exercise caution when dealing in either Basil Read or TWP
shares on the JSE.
Respective documentation of Basil Read and TWP containing full details of the
Acquisition and the scheme is presently in the course of preparation and will,
subject to the required approvals of the JSE and SRP, be posted to shareholders
of Basil Read and TWP on or about Thursday, 22 October 2009.
Johannesburg
30 September 2009
Corporate adviser to the transaction
and transaction sponsor
PRICEWATERHOUSECOOPERS
PricewaterhouseCoopers
Corporate Finance (Pty) Ltd
(Registration number 1970/003711/07)
Auditors to Basil Read and TWP
and reporting accountants
PRICEWATERHOUSECOOPERS
PricewaterhouseCoopers
Charteren Accountants (SA)
Registered Accountants and Auditors
(Registration no 1998/012055/21)
Attorneys to Basil Read
RAMSAYWEBBER
Attorneys, Notaries & Conveyancers
Sponsor to Basil Read
SAFIN CAPITAL
Attorneys to TWP
Investment bank and sponsor
to TWP
NEDBANK CAPITAL
Independent adviser to TWP
shareholders
MOORE STEPHENS
Corporate Finance
Date: 30/09/2009 15:00:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
