| Mon 14 Jun 2010, 17:10 | | AVU - Avusa - Cautionary Announcement |
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AVU
AVU
AVU - Avusa - Cautionary Announcement
Avusa Limited
(Incorporated in the Republic of South Africa)
(Registration number 2008/002461/06)
JSE share code: AVU
ISIN: ZAE000115895
("Avusa" or "the Company")
The proposed acquisition by Avusa of the entire issued share capitals of
Universal Print Group (Proprietary) Limited ("UPG") and Hirt & Carter
(Proprietary) Limited ("H&C") from UHC Communications (Proprietary) Limited
("UHC" or "the Seller")
Cautionary announcement
1. Introduction
Nedbank Capital, a division of Nedbank Limited, is authorised to announce
that Avusa and UHC have signed a memorandum of understanding ("MoU"), dated
14 June 2010, approved by the boards of directors of Avusa and UHC,
relating to the acquisition by Avusa (or its nominee/s) of the entire
issued share capitals of UPG and H&C ("the UHC Business") from the Seller,
as well as any claims that the Seller may have against UPG and H&C ("the
Transaction").
This announcement contains the details of the Transaction as contained in
the MoU. It is the intention of Avusa and the Seller to conclude formal
agreements ("the Transaction Agreements"), which will contain terms and
conditions normally found in transactions similar in nature to the
Transaction, on or before 31 July 2010.
2. The Transaction
2.1 Nature of business
The UHC Business is a privately owned diversified media business
operating in the retail, liquor, beverage, fast moving consumer goods
("FMCG") supplier and manufacturer, financial, publication and related
markets. It is involved in the development and implementation of
retail marketing solutions and the execution of below-the-line and
point-of-sale ("POS") solutions, as well as a range of other related
services. The UHC Business has expertise in, inter alia, the
following sectors of the markets in which it operates:
2.1.1 retail advertising production systems and related database
development and management;
2.1.2 the production and execution of retail related advertising
material;
2.1.3 design, production, execution and management of POS
solutions;
2.1.4 printing of POS material, self-adhesive labels, catalogues
and business forms; and
2.1.5 high volume printing of catalogues, magazines and
directories.
2.2 Rationale for the Transaction
The Transaction fulfils the Company`s objectives to diversify revenue
streams and to position Avusa for the conversion to digital. In
addition, as the Seller is a BEE-controlled entity, and due to the
lock-in described in paragraph 3.1.6 below, the Transaction will
result in Avusa`s BEE ownership points per the relevant BEE scorecard
being significantly enhanced.
The key attributes of the UHC Business are:
2.2.1 exceptional intellectual capital resides within the UHC
Business through the high level of strategic integration
with the country`s leading brands and retailers;
2.2.2 the UHC Business is a large operation with a strong,
resilient revenue base, operating margins and cash flow;
2.2.3. the business is well positioned to grow from the evolution
to complementary digital advertising and publishing; and
2.2.4 it operates in markets least affected by economic cycles and
by changing consumption patterns;
2.2.5 the management team of the UHC Business have significant
experience and expertise in the markets in which they
operate.
2.3 Terms of the Transaction
Avusa proposes to acquire the entire issued share capitals of UPG and
H&C from the Seller following the fulfilment of the last of the
suspensive conditions ("the Suspensive Conditions"), set out in
paragraph 3 below, for a total consideration of ZAR925 000 000 ("the
Purchase Consideration"), to be settled by Avusa, within five business
days of the fulfilment or waiver of the last of the Suspensive
Conditions, by the issue of 20 555 555 new Avusa shares ("the
Consideration Shares") to the Seller at a price of 2250 cents per
Avusa share and a cash payment of ZAR462 500 000 ("the Cash Payment")
to the Seller. The allotment and issue of the Consideration Shares
will result in the Seller holding a 16.5% interest in Avusa.
The Purchase Consideration is based on a forward price:earnings
multiple of 7.28 times, determined with reference to the warranted
combined net profit after tax for UPG and H&C for the year ending 30
June 2011 ("the Minimum PAT"). Should UPG and H&C declare audited net
profits after tax, the sum of which is less than 90% of the Minimum
PAT, the Purchase Consideration shall be reduced by the shortfall
multiplied by the ratio that the Purchase Consideration bears to the
Minimum PAT ("the Adjustment"). The Adjustment shall be effected by a
reduction in the Cash Payment and shall be paid by the Seller to Avusa
by no later than 30 September 2011, together with interest from the
date of the Cash Payment until the date of payment of the Adjustment.
In the event that the last of the Suspensive Conditions is not
fulfilled or waived, as the case may be, by 30 September 2010, Avusa
shall, within five business days after the fulfilment or waiver, as
the case may be, of the last of the Suspensive Conditions, make the
Cash Payment together with interest thereon, from 1 October 2010 until
the date of payment of the Cash Payment.
Avusa and the Seller shall identify UPG and H&C employees that are
vital to the management of the UHC Business ("Key Employees") and the
Key Employees shall enter into service agreements for a minimum two-
year period and, where relevant, restraint of trade agreements for a
period of two years following termination of employment.
The Seller shall be permitted to nominate two persons to the Avusa
board of directors ("the Avusa Board").
2.4 JSE Listings Requirements
The Transaction is classified as a Category 1 acquisition in terms of
the Listings Requirements ("Listings Requirements") of the JSE Limited
("the JSE"), which requires a circular to be distributed to Avusa
shareholders in compliance with paragraph 9.20(b) of the Listings
Requirements, and the approval of the Transaction by Avusa
shareholders. The circular setting out the details of the
Transaction, and incorporating a notice of general meeting whereby
approval from the requisite majority of Avusa shareholders will be
sought, will be posted to Avusa shareholders in due course.
As a result of the Transaction, UPG and H&C will become subsidiary
companies of Avusa, or its nominee/s, and in terms of the Listings
Requirements their articles of association will be amended to conform
to Schedule 10 of the Listings Requirements.
3. Suspensive conditions
The Transaction will be subject to the fulfilment or waiver, as the case
may be, of the following suspensive conditions:
3.1 on or before 30 September 2010;
3.1.1 Avusa`s Board passing a resolution, approving or ratifying,
as the case may be, the entry by Avusa into the Transaction
Agreements;
3.1.2 the Seller`s board of directors passing a resolution,
approving or ratifying, as the case may be, the entry by the
Seller into the Transaction Agreements;
3.1.3 Avusa`s shareholders passing the necessary resolutions
approving the Transaction;
3.1.4 the conclusion, to the satisfaction of Avusa, of a due
diligence investigation in relation to UPG and H&C
confirming, inter alia, the combined net cash position at 30
June 2010 and the combined net profit after tax for the year
ending 30 June 2010;
3.1.5 the provision of an irrevocable undertaking by the Seller to
not sell, cede or encumber the Consideration Shares for a
period of three years from the date of implementation of the
Transaction;
3.1.6 the Seller furnishing Avusa with, or procuring from the
relevant parties, an irrevocable undertaking, that each of
the shareholders of the Seller shall not:
3.1.6.1 permit its respective shareholders to sell, cede
or encumber any of their shares in the
shareholders of the Seller;
3.1.6.2 allot or issue any shares from its authorised
share capital to any other person,
for a period of three years from the date of implementation
of the Transaction, without the prior written consent of
Avusa;
3.1.7 the Key Employees concluding service agreements;
3.2 on or before 31 December 2010:
3.2.1 approval by the relevant competition authority for the
implementation of the Transaction, with no conditions
attached or, in the instance of any conditions being
attached, such conditions meeting with the approval of Avusa
and the Seller;
3.2.2 any other regulatory approvals as may be necessary to
implement the Transaction;
3.3 within ten business days of the fulfilment or waiver of the last of
the Suspensive Conditions set out in 3.1 and 3.2, the JSE approving
the listing of the Consideration Shares.
4. Cautionary announcement
As the pro forma financial effects of the Transaction have not yet been
announced, Avusa shareholders are advised that they are required to
exercise caution when dealing in their Avusa shares.
Johannesburg
14 June 2010
Investment bank, corporate adviser and sponsor to Avusa
Nedbank Capital, a division of Nedbank Limited
Legal advisers to Avusa
Werksmans Inc.
Date: 14/06/2010 17:10:01 Produced by the JSE SENS Department.
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