| Thu 9 Sep 2010, 16:00 | | AVU - Avusa Limited - Update on the proposed acquisition by Avusa of the entire |
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AVU
AVU
AVU - Avusa Limited - Update on the proposed acquisition by Avusa of the entire
issued share capitals of Universal Print Group and Hirt & Carter)Limited from
UHC Communications Limited as well as any claims that the Seller may have
against UPG and H&C the pro forma financial effects of the Transaction and
withdrawal of the 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")
Update on 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"), as well as any claims that the Seller may have against
UPG and H&C ("the Transaction"), the pro forma financial effects of the
Transaction and withdrawal of the cautionary announcement
1 Introduction
Further to the detailed cautionary announcement ("the Detailed
Announcement") dated 14 June 2010 and the renewals of cautionary
announcements dated 26 July and 6 September 2010, Nedbank Capital, a
division of Nedbank Limited, is authorised to announce that Avusa and UHC
have now concluded a formal agreement ("the Agreement"), dated 9 September
2010, approved by the boards of directors of Avusa and UHC, relating to the
Transaction.
This announcement contains an update on the details of the Transaction as
contained in the Agreement as well as the pro forma financial effects of
the Transaction on Avusa.
2 Updated terms of the Transaction
2.1 Avusa previously announced in the Detailed Announcement that it
proposes to acquire, with effect from the effective date, being the
first day of the month following the date on which the last of the
suspensive conditions set out below is fulfilled or waived (as the
case may be) ("the Effective Date"), the entire issued share capitals
of UPG and H&C from the Seller, as well as any claims that the Seller
may have against UPG and H&C, for a total consideration of R925 000
000, to be settled by Avusa by the issue of 20 555 555 new Avusa
shares ("the Consideration Shares") to the Seller and a cash payment
of R462 500 000 to the Seller.
Per the Agreement, Avusa and the Seller have agreed that UPG and H&C
will declare and pay a dividend from available cash resources in the
amount of R125 000 000 to the Seller prior to the Effective Date,
which will result in the total consideration payable by Avusa to the
Seller for the acquisition of the entire issued share capitals of UPG
and H&C, as well as any claims that the Seller may have against UPG
and H&C, being reduced to an amount of R800 000 000 ("the Purchase
Consideration"). In settlement of the Purchase Consideration, Avusa
will issue the Consideration Shares as per the Detailed Announcement,
and pay a reduced cash payment in the amount of R337 500 000 ("the
Cash Payment"), as a result of the aforesaid dividend. The Purchase
Consideration, as contained in the Agreement, will ultimately be
determined with reference to the sum of the Cash Payment and the issue
of the Consideration Shares at the price at which Avusa`s shares trade
on the JSE Limited ("the JSE") on the date of issue of such shares,
which is expected to be on or about 8 November 2010.
2.2 The Agreement contains warranties that are normal for a transaction of
this nature ("the Warranties"). With respect to any warranty claims
that Avusa may have in terms of the Agreement, the following
provisions are contained in the Agreement:
2.2.1 All Warranties, save for those relating to the current
shareholding structure and ownership profile of UHC, tax ("the
Tax Warranties") and competition law ("the Competition
Warranties"), are enforceable until 31 December 2011 and shall be
limited to R200 million in aggregate;
2.2.2 The Warranty relating to the maintenance of the shareholding
structure and ownership profile of UHC for a period of three
years from the Effective Date is enforceable for such period;
2.2.3 The Tax Warranties are unlimited in quantum and are enforceable
until 31 December 2011, provided that if at 31 December 2011 any
tax assessment in respect of any financial year of UPG and/or H&C
ending on or before the Effective Date was issued after 31
December 2008, a warranty claim may be made in respect of such
assessment or any matter included in the return on which such
assessment is based, within 30 days after the third anniversary
of the date of the assessment in question; and
2.2.4 The Competition Warranties are unlimited in quantum and a
warranty claim may be made in respect of any such Warranty for
the period referred to in paragraph 2.2.3 above.
2.3 Other material terms of the Transaction as disclosed in the Detailed
Announcement, remain unchanged. Avusa shareholders are reminded that
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 of R127 million ("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 7,28, which shall be effected by means of
a reduction in the Cash Payment.
3 Suspensive conditions
Following signature of the Agreement, the Transaction is subject to the
fulfilment or waiver, as the case may be, of the following outstanding
suspensive conditions ("the Suspensive Conditions"):
3.1 on or before 24 October 2010:
3.1.1 Avusa`s shareholders passing the necessary resolutions to give
effect to the provisions of the Agreement;
3.1.2 the Seller`s shareholders passing all such resolutions as may be
required to give effect to the provisions of the Agreement;
3.13 the Seller furnishing Avusa with irrevocable undertakings,
procured from the relevant parties, confirming that each of the
corporate shareholders of the shareholders of UHC shall not -
3.13.1 sell, cede or encumber any of their shareholdings in the issued
share capital of each of the shareholders of UHC; or
3.1.3.2 allot and issue any shares from its authorised share capital to
any other person,
for a period of three years from the Effective Date, without the
prior written consent of Avusa, in order to preserve the
ownership profile of each of the shareholders of UHC for the
purposes of the Broad-Based Black Economic Empowerment Act, 2003
(Act 53 of 2003), as amended ("the BEE Act");
3.14 the Seller furnishing Avusa with irrevocable undertakings,
procured from the relevant parties, confirming that each of the
shareholders of the shareholders of the Seller, who is a natural
person, shall not sell, cede or encumber any of their
shareholdings in the issued share capital of each of the
shareholders of the Seller for a period of three years from the
Effective Date, without the prior written consent of the Avusa,
in order to preserve the ownership profile of each of the
shareholders of the Seller for the purposes of the BEE Act;
3.15 Avusa confirming to the Seller in writing that it is satisfied
that a sufficient number of employees, mutually identified by
Avusa and UHC as being vital to the management of UPG and H&C,
have concluded service agreements with UPG or H&C, or have
amended their current terms of employment, to the extent required
by Avusa;
3.1.6 the respective articles of association of UPG and H&C, as well as
all of their subsidiary companies, being amended to conform to
Schedule 10 of the JSE Listings Requirements;
3.1.7 the consent of the counter parties to key contracts to the
Transaction being obtained, to the extent required;
3.1.8 the Transaction being approved by the competition authorities of
Namibia and Zimbabwe; and
3.1.9 Avusa securing finance in respect of the Cash Payment on terms
and conditions and from a financial institution acceptable to
Avusa;
3.2 within five business days of the fulfilment or waiver of the last of
the Suspensive Conditions set out in paragraph 3.1 above, the JSE
approving the listing of the Consideration Shares, with no conditions
attached.
4 Pro forma financial effects of the Transaction
The pro forma financial effects set out below have been prepared to
illustrate the impact of the Transaction on the reported financial
information of Avusa for the 12 months ended 31 March 2010. The pro forma
financial effects have been prepared for illustrative purposes only, are
the responsibility of the Avusa board of directors and, because of their
nature, may not give a fair reflection of Avusa`s financial position and
results of operations after the Transaction.
Actual Adjustments Pro forma Percentag
before the 2 after the e change
Transaction1 Transaction
Earnings per
ordinary share
(cents)
Basic and diluted 155 (5)3 150 (3,2%)5
Headline earnings
per ordinary share
(cents)
Basic and diluted 149 (4)3 145 (2,7%)5
Net asset value per 1 420 1244 1 544 8,7%
ordinary share
(cents)
Net tangible asset 1 066 (391)4 675 (36,7%)5
value per ordinary
share (cents)
Number of ordinary 103 821 159 20 555 555 124 376 714
shares in issue
Weighted average 102 448 681 20 555 555 123 004 236
number of ordinary
shares in issue for
the year
Weighted average 102 503 924 20 555 555 123 059 479
number of ordinary
shares in issue for
the year (diluted)
Notes:
1 The "Actual before the Transaction" column has been extracted, without
adjustment, from Avusa`s audited results for the year ended 31 March
2010.
2 The pro forma financial effects have been based on the assumption that
the Transaction was implemented on 1 April 2009, for the purposes of
earnings and headline earnings per share, and 31 March 2010, for the
purposes of net asset value and net tangible asset value per share.
3. Earnings and headline earnings per share include adjustments, which
are in line with Avusa`s accounting policies, for:
Non-continuing adjustments -
A the acquisition by Avusa of the entire issued share capitals of
UPG and H&C, and the settlement of the Purchase Consideration
(based on an indicative share price, as contained in the
Agreement, of R22,50 per Avusa ordinary share) by the issue of 20
555 555 new Avusa ordinary shares and the payment of R337,5
million in cash;
B the re-allocation of UPG and H&C depreciation and amortisation
from cost of sales and operating costs to depreciation and
amortisation;
C the estimated costs of R15 million (including Value-added Tax
("VAT")) relating to the Transaction;
D the additional dividend and Secondary Tax on Companies ("STC") of
R14 million payable by Avusa on the 20 555 555 new Avusa ordinary
shares issued in connection with Avusa`s dividend paid in July
2009;
E the reversal of STC paid by UPG and H&C of R5 million (if UPG and
H&C were wholly-owned Avusa subsidiaries, the STC would not have
been payable);
F the raising fee of 0,5% on the R230 million borrowed to part-
finance the Transaction;
G the elimination of the fair value adjustment, together with the
related tax adjustment, of R7 million in connection with UPG`s
Nedbank Eyethu Share Scheme investment, which is specifically
excluded from the Transaction; and
H the interest adjustments and related tax effects, of R12 million
in respect of cash flows related to the above adjustments.
Continuing adjustments -
I the inclusion of the reviewed consolidated results of UPG and H&C
for the 12 months ended 31 December 2009, being earnings and
headline earnings of R92 million and R91 million, respectively.
Avusa is satisfied with the quality of these results;
J the elimination of intergroup transactions;
K the interest payable of R20 million on the R230 million borrowed
to part-finance the Transaction; and
L the amortisation charge of R21 million, together with the related
tax adjustment of R6 million, in respect of intangible assets
identified by the purchase price allocation exercise undertaken
in respect of the Transaction. The intangibles will be amortised
over periods of 6 - 10 years.
4 Net asset value and net tangible asset value per share include
adjustments, which are in line with Avusa`s accounting policies, for:
A the acquisition by Avusa of the entire issued share capitals of
UPG and H&C, and the settlement of the purchase price (based on
an indicative share price, as contained in the Agreement, of
R22,50 per Avusa ordinary share) by the issue of 20 555 555 new
Avusa ordinary shares and the payment of R337,5 million in cash;
B the inclusion of the consolidated assets and liabilities of UPG
and H&C at 31 December 2009;
C the elimination of intergroup balances;
D the estimated costs of R15 million (including VAT) relating to
the Transaction;
E the payment in cash by UPG and H&C of pre-acquisition dividends
totalling R125 million;
F the R230 million borrowing raised, and the related raising fee of
0,5%;
G the elimination of UPG`s Nedbank Eyethu Share Scheme investment
of R18 million, which is specifically excluded from the
Transaction; and
H the recognition of intangible assets and goodwill identified by
the purchase price allocation exercise undertaken in respect of
the Transaction, and related tax effects.
5 The adjustments included in the pro forma financial effects of the
Transaction include an amortisation charge of R21 million in respect
of intangible assets identified by the Purchase Consideration
allocation accounting exercise undertaken in respect of the
Transaction in terms of IFRS 3 Business Combinations, and estimated
costs of R15 million (including VAT) relating to the Transaction.
5 Withdrawal of the cautionary announcement
As all the details of the Transaction, as contained in the Agreement, and
the pro forma financial effects of the Transaction have been announced,
Avusa shareholders are advised that they are no longer required to exercise
caution when dealing in their Avusa shares.
6 Circular
The circular containing further details of the Transaction and a notice of
general meeting for shareholders to consider and, if deemed fit, approve
the Transaction, will be posted to Avusa shareholders on or about 27
September 2010.
Johannesburg
9 September 2010
Investment bank, corporate adviser and sponsor
Nedbank Capital, a division of Nedbank Limited
Legal advisers to Avusa
Werksmans Inc.
Reporting accountants
Deloitte & Touche
Legal advisers to UHC
Webber Wentzel
Date: 09/09/2010 16:00:01 Produced by the JSE SENS Department.
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