| Fri 18 Jun 2010, 14:34 | | BSS - BSI Steel - Acquisition by BSI Steel of Staalbeer (Pty) Limited and |
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BSS
BSS
BSS - BSI Steel - Acquisition by BSI Steel of Staalbeer (Pty) Limited and
Universal Pulse Trading 103 (Pty) Limited (collectively "Staalbeer") and renewal
of the cautionary announcement
BSI STEEL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2001/023164/06)
JSE code: BSS
ISIN: ZAE0000125134
("BSI Steel" or "the Company" or "the Group")
ACQUISITION BY BSI STEEL OF STAALBEER (PTY) LIMITED AND UNIVERSAL PULSE TRADING
103 (PTY) LIMITED (COLLECTIVELY "STAALBEER") AND RENEWAL OF THE CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcements, dated 29 April 2010 and 10 June
2010, shareholders are advised that an agreement has been entered into
between the company and the vendors of Staalbeer in terms of which BSI
Steel will acquire 100% of the issued share capital in and claims against
Staalbeer from the respective shareholders ("the transaction").
2. BACKGROUND INFORMATION ON STAALBEER
Staalbeer is a steel merchant operating principally in South Africa, with
limited exports to Namibia. Staalbeer operates through branches situated in
Potchefstroom, Bothaville and Vereeniging, and focuses on cash and carry,
retail, mining, agricultural and industrial steel supply.
3. RATIONALE OF THE TRANSACTION
BSI Steel operates in the steel and associated industries with
strategically located operations in South Africa, the Democratic Republic
of the Congo ("DRC"), Zimbabwe, Mozambique and Zambia to service the
Southern African markets. BSI Steel markets through three distinct
channels, being stockists, bulk sales and exports; all of these divisions
are supported by its steel processing operations.
Staalbeer is a steel merchant operating from three branches in the Gauteng
area.
The Staalbeer acquisition will:
- expand BSI Steel`s geographical footprint into new areas of South
Africa;
- expand the group`s product range and service offerings;
- bring expertise on the retail sector into BSI Steel
- diversify revenue streams; and
- add critical mass to BSI Steel.
Furthermore Staalbeer is an established profitable operation with a
presence and track record and can operate as a stand-alone and self-
efficient business unit.
4. PURCHASE CONSIDERATION
Subject to the provisions set out below, the purchase consideration payable
by BSI Steel in respect of the transaction is a maximum of R70 million with
a minimum payment of R46 million being the Net Tangible Asset Value
("NTAV") of Staalbeer at the Effective Date.
The purchase consideration will be settled as follows:
- an initial amount of R30 million ("initial payment") discharged as
follows:
70%, being R21 million, will be paid in cash, and the remaining 30%,
being R9 million, will be settled by the issue of BSI Steel ordinary
shares at the higher of:
- the 30 day volume weighted average price ("VWAP"), being the 30
days after the date of the release of the formal announcement on
SENS; or
- 1.83 times the BSI Steel NTAV, being 98 cents per BSI Steel
share; and
- a final payment of R40 million ("final payment") based on Staalbeer
achieving profit after tax of R10 million for the 12 months ending 31
March 2011 ("2011 PAT") with a pro rata adjustment if the 2011 PAT is
lower than R10 million. The purchase consideration will be reduced by
R24 million if the 2011 PAT is below R5 million.
The final payment will be discharged as follows:
40% of the final payment will be paid in cash and the balance, being
60%, will be settled by the issue of BSI Steel ordinary shares at the
higher of:
- the 30 day VWAP being the 30 days after the BSI Steel March 2011
results have been released on SENS; or
- 1.6 times the NTAV of BSI Steel as at March 2011 ; or
- The actual purchase consideration paid divided by the NTAV of
Staalbeer as at the effective date, being R46 million, multiplied
by the NTAV of BSI Steel as at March 2011.
The BSI Steel ordinary shares issued will be locked up as follows:
- no shares are entitled to be sold in the first year of issue and
allotment;
- not more than 50% may be sold in the second year of issue and
allotment; and
- not more than 75% may be sold in the third year of issue and
allotment.
5. EFFECTIVE DATE
The transaction will become effective on 1 April 2010 subject to the
successful fulfilment of the conditions precedent set out in paragraph 6
below.
6. CONDITIONS PRECEDENT
The transaction is conditional, inter alia, upon:
- the successful conclusion of the Due Diligence Investigation;
- management of Staalbeer entering into service agreements and restraint
undertakings;
- the NTAV of Staalbeer not being less than the sum of R46 million; and
- compliance with all regulatory obligations to the extent necessary to
effect the transaction.
7. FINANCIAL EFFECTS
The financial effects of the transaction are being finalised and will be
released shortly.
8. DETAILS OF THE VENDORS
The vendors are collectively the Johan Roos Familie Trust (Master Reference
Number IT3112/02), LC Kleinhans Familie Trust (Master Reference Number
IT9292/02), Sue Fraser Familie Trust (Master Reference Number IT166/02) and
Yolande and Morne Familie Trust (Master Reference Number IT9293/02).
9. CLASSIFICATION OF THE TRANSACTION
The transaction is classified as a Category 2 transaction in terms of
paragraph 21.10 of the Listing Requirements of the JSE Limited.
10. FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue exercising caution when dealing in the
Company`s securities until such time as the financial effects of the
transaction are released.
Johannesburg
18 June 2010
Designated Adviser
Vunani Corporate Finance
Date: 18/06/2010 14:34:01 Produced by the JSE SENS Department.
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