| Mon 2 Nov 2009, 7:38 | | GPL - Grand Parade Investments - Acquisition |
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GPL
GPL - Grand Parade Investments - Acquisition Of 100% Of Carentan Investments
(Proprietary) Limited ("Carentan")
GRAND PARADE INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1997/003548/06)
Share code: GPL & ISIN: ZAE000119814
("GPI" or "the company")
ACQUISITION OF 100% OF CARENTAN INVESTMENTS (PROPRIETARY) LIMITED ("CARENTAN")
1. INTRODUCTION
1.1 Shareholders are hereby advised that GPI, through its 100% held subsidiary
GPI Slots (Pty) Ltd, has entered into an agreement, dated 2 November 2009,
to purchase 100% of the issued share capital of Carentan plus shareholders
loan accounts from Tatts Group Limited ("Tatts"), an international gaming
company listed on the Australian Stock Exchange ("the acquisition").
1.2 Carentan is the majority shareholder of Thuo Gaming South Africa (Pty) Ltd
("Thuo SA"), a holding company with interests in operating entities that
hold gaming licenses in the limited payout machine ("LPM") industry
throughout South Africa.
1.3 The acquisition referred to in 1.1 above constitutes a category 2
transaction in terms of the Listings Requirements ("LR") of the JSE Limited
("JSE"). This announcement is for information purposes only and no action
is required by GPI shareholders with regards to the acquisition.
2. DETAILS OF THE BUSINESS OF CARENTAN
Carentan was originally established as an investor in operators of LPM's
throughout South Africa. Carentan established Thuo SA to hold its
interests in companies that submitted bids for gaming licenses in various
provinces, and to house certain centralised services for the bid companies.
When a provincial bid was successful, the bid companies commenced business
by installing, operating and servicing LPM's at gaming sites.
Successful license applications led to the formation of two operating
companies, Thuo Gaming Western Cape (Pty) Ltd ("Thuo WC") and Thuo Gaming
Kwazulu-Natal (Pty) Ltd ("Thuo KZN"). The gambling licenses are held
within these entities and Thuo WC and Thuo KZN were both given permission
to operate 1000 LPM's in their respective provinces. Other bid companies
were established and in certain instances were successful in obtaining
gambling licenses. To date Thuo WC and Thuo KZN are the only operating
subsidiaries of Thuo SA.
GPI already has an interest in the two provincial operating companies,
through its subsidiaries, GPI Slots (25.1% effective stake in Thuo WC) and
Akhona GPI (22.5% effective stake in Thuo KZN).
3. RATIONALE FOR THE ACQUISITION
It has long been the intention of GPI to grow shareholder wealth by taking
control of an operating business. As an already significant minority
shareholder in the two operating companies (Thuo WC and Thuo KZN), GPI
identified these companies as attractive targets to control. GPI believes
that this acquisition provides a tremendous opportunity to leverage the
gaming industry expertise that exists within its senior management team.
Thuo WC (trading as Grandslots) is already a strongly cash generative
business and GPI is confident that Thuo KZN (trading as Kingdomslots) will
follow suite once its site roll out program reaches critical mass. The two
businesses have developed strong market positions that can be further
improved through synergies within the GPI group.
In taking control of these businesses, GPI remains true to its stated
strategy of investing in quality, cash-generative gaming assets from which
significant value can be derived.
4. PARTICULARS OF THE ACQUISITION
4.1 Subject matter of the acquisition
The subject matter of the acquisition is 100% of the issued share capital
in Carentan plus shareholders loan accounts against that company held by
the vendor referred to below.
4.2 The vendors
The vendor is Wintech Investments (Proprietary) Limited, a company
incorporated in Australia and a 100% subsidiary of the Tatts Group.
4.3 The effective date
The effective date of the acquisition is 1 July 2009.
4.4 Purchase consideration
The purchase consideration is R170.0 million, payable in full in cash on
the closing date.
4.5 Suspensive conditions
The acquisition is subject to a due diligence by GPI and to regulatory
approvals being obtained to the extent required, including approvals from
The Competitions Commission, The South African Reserve Bank and the
provincial gambling boards of the provinces in which each Carentan
subsidiary company is a licensee.
4.6 Other
Post the implementation of the acquisition in its entirety, Carentan will
become a wholly owned subsidiary of GPI and as such GPI will undertake to
ensure that the articles of association of Carentan are amended to comply
with Schedule 10 of the JSE LR, should such amendments be required.
5. FINANCIAL EFFECTS OF THE ACQUISITION
The pro forma financial effects of the acquisition are presented for
illustrative purposes only and because of their nature may not give a fair
reflection of GPI's financial position nor of the effect on future earnings
after the acquisition. Set out below are the unaudited pro forma financial
effects of the acquisition, based on GPI's audited results for the year
ended 30 June 2009 and the draft annual financial statements of Carentan
for the year ended 30 June 2009. The directors of GPI are responsible for
the preparation of the unaudited pro forma financial effects.
Audited Pro forma Change(%)
before after
Acquisition Acquisition
(cents) (cents) (1)(2)
Basic earnings 37.2 35.5(3) (4.6)
per share
Basic headline 20.9 19.2(3) (8.0)
earnings per
share
Normalised 20.9 20.6(3) (1.3)
earnings per
share
Net asset 370.0 368.4(4) (0.3)
value per
share
Net tangible 370.0 354.1(4) (4.2)
asset value
per share
Notes and assumptions:
1. The financial effects in the "Pro Forma after the Acquisition" column
have been calculated on the basis that the acquisition was effected on
1 July 2008 for the purposes of calculating the basic earnings per
share("EPS"), basic headline earnings per share ("HEPS") and
normalised earnings per share.
2. The financial effects in the "Pro Forma after the Acquisition" column
have been calculated on the basis that the acquisition was effected on
30 June 2009 for the purposes of calculating the net asset value per
share and net tangible asset value per share.
3. The EPS, HEPS and normalized EPS have been calculated after taking
into account the following assumptions:
3.1 It has been assumed that the total purchase consideration of R170
million has been settled by way of a debt facility raised by GPI.
Deal costs have been estimated to be R5 million and have been funded
through the use of existing cash resources. In accordance with IFRS 3:
Business Combination, applicable at 30 June 2009, deal costs have been
capitalized. IFRS 3 has been revised for years beginning on or after 1
July 2009 in terms of which the accounting treatment of deal costs
would be required to be expensed to the income statement. No taxation
has been raised on the deal expenses as they are deemed to be of a
capital nature.
3.2 Interest on the debt facility raised has been calculated at a pre-tax
rate of 10.5% per annum for the purposes of calculating EPS, HEPS and
normalized EPS. Foregone interest on the R 5 million cash utilized by
GPI to pay deal costs has been calculated at a pre-tax rate of 6.50%
per annum.
3.3 The taxation rate applicable is assumed to be 28%.
3.4 EPS, HEPS and normalized EPS are calculated based on a weighted
average number of 462,033,176 shares in issue.
3.5 HEPS after acquisition as set out above has been calculated in
accordance with the Circular 3/2009 as issued by the South African
Institute of Chartered Accountants. Management are however of the
view that certain costs incurred, and in particular, costs incurred by
subsidiaries that have incurred bid costs but have not been successful
in winning the respective provincial license, are of a non-recurring
nature and thus may distort the financial effects of the acquisition.
As such the board has calculated normalized EPS, which calculation
adjusts for the aforementioned non-recurring costs. The pro forma
financial effects of such calculation results in a decrease in
normalized EPS of 1.3% as opposed to an 8.0% decrease in HEPS as
calculated above. In addition to the above, Thuo KZN is now nearing
its breakeven point in terms of machine roll out and it is the view of
GPI management that this asset will contribute to headline earnings in
the future.
4. The net asset value per share and net tangible asset value per share
after the acquisition are calculated after taking into the following
assumptions including the assumptions as set out in 3.1 above:
4.1 The net asset value per share and the net tangible asset value per
share are calculated based on 443,761,319 shares in issue at 30 June
2009. The number of shares in issue is calculated after deducting the
5,800,000 treasury shares held by the Grand Parade Share Incentive
Trust.
4.2 The net asset value of Carentan at the date of acquisition is R 11.7
million plus shareholders loans of R 94.9 million. The estimated
goodwill arising from the transaction amounts to R68 million. The
allocation of the purchase price in terms of IFRS 3: Business
Combinations will be undertaken by GPI within 12 months of the
effective date of this transaction and may result in the amount
currently allocated to goodwill being split between goodwill, tangible
and intangible assets if any are indentified. The identification of
such intangible assets may result in an increase in the intangible
assets of GPI which will, if identified, be amortised over their
estimated useful lives.
Cape Town
2 November 2009
Sponsor: PSG Capital (Pty) Limited
Corporate advisor: Leaf Capital (Pty) Ltd
Attorneys: Bernardt Vukic Potash & Getz
Date: 02/11/2009 07:38:25 Produced by the JSE SENS Department.
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