| Fri 19 Nov 2010, 15:17 | | HDC - Hudaco Industries Limited - Announcement regarding the acquisition of the |
|
HDC
HDC
HDC - Hudaco Industries Limited - Announcement regarding the acquisition of the
trading assets and liabilities of Global Communications (PROPRIETARY) Limited
and Ikwezi Maintenance and Communications (PROPRIETARY) Limited (COLLECTIVELY
"GLOBAL")
HUDACO INDUSTRIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1985/004617/06)
Share code: HDC & ISIN: ZAE000003273
("Hudaco")
ANNOUNCEMENT REGARDING THE ACQUISITION OF THE TRADING ASSETS AND LIABILITIES OF
GLOBAL COMMUNICATIONS (PROPRIETARY) LIMITED AND IKWEZI MAINTENANCE AND
COMMUNICATIONS (PROPRIETARY) LIMITED (COLLECTIVELY "GLOBAL")
1 INTRODUCTION
Shareholders are advised that Hudaco has signed binding Heads of Agreement
to acquire the trading assets and liabilities of Global with effect from 1
December 2010 ("the effective date") ("the Transaction").
2 RATIONALE FOR THE TRANSACTION
Hudaco is a South African group of companies specialising in the
importation and distribution of selected high quality engineered and
security products in the southern African region. One of Hudaco`s key
strategies is to apply its strong cash flows to acquire new businesses in
similar fields of activity when the opportunity arises.
Global is an integrated network solution provider specialising in the
design, supply, installation, commissioning and maintenance of
telecommunications infrastructure and is the largest distributor of Kenwood
Land Mobile Radios in Africa. Major customers include the South African
National Defence Force, South African Police Services, mines, various
municipalities and all users of durable and reliable two way radio systems.
Products offered range from two-way radios to satellite hardware, military
communication equipment and microwave equipment, all sourced from leading
international producers such as Kenwood and JVC. Global employs 75 people
in a single location and generates sales of R185 million per annum.
The business of Global is an ideal fit for Hudaco in that it focuses on
selling quality, branded products, which is an area of core competency for
Hudaco. Hudaco will be able to utilise its experience and expertise in that
market to enhance Global`s position, resulting in long term benefits to
shareholders.
3 DETAILS OF THE TRANSACTION
3.1 Purchase consideration
The purchase consideration will be a multiple of the average profit after
tax (but before interest) of Global for the three years ending 30 November
2013, subject to a maximum consideration of R172.5 million, settled out of
Hudaco`s available cash resources as follows:
* an initial amount of R74.75 million payable in cash on the effective
date;
* three tranches payable in cash on 31 January 2012, 2013 and 2014,
based on actual levels of average profitability achieved in each of
those years. If the business grows profits at 12% per annum, the total
consideration is expected to be R134 million.
3.2 Management
The two major shareholders, Paul Werner and Errol Baker ("the major
shareholders"), will enter into service contracts for a minimum period of
two years and restraint of trade agreements in favour of Hudaco for a
period of three years after their employment ceases.
3.3 Suspensive conditions
The Transaction is conditional upon the following:
* such approvals as may be required by the Competition Authorities;
* satisfactory due diligence of the business of Global;
* approval of the major suppliers of Global to continue their supply
arrangements;
* approval of the board of directors of Hudaco;
* signature of service agreements and restraint of trade agreements by
the major shareholders; and
* signature of a lease over the property of Global in Pretoria.
4 PRO FORMA FINANCIAL EFFECTS
The major shareholders have committed to deliver a minimum of R30 million
net trading assets and liabilities on the effective date, which assets
produced R15.3 million net profit after taxation in the last financial year
ending 28 February 2010.
The table below sets out the unaudited pro forma financial effects of the
Transaction on Hudaco`s earnings per share ("EPS"), headline EPS ("HEPS"),
fully diluted EPS ("FDEPS") net asset value per share ("NAV") and net
tangible asset value per share ("NTAV"). The unaudited pro forma financial
information and the preparation thereof, which is the responsibility of the
directors of Hudaco, has been prepared for illustrative purposes only, and
because of its nature, may not give a fair reflection of Hudaco`s financial
position and results of operations, nor the effect and impact of the
Transaction on Hudaco going forward.
Before the After the Change
Transaction Transaction %
(cents)1 (cents)2,3
EPS 341 353 3.5%
HEPS 341 353 3.5%
FDEPS 336 348 3.6%
NAV 3 787 3 780 -0.2%
NTAV 3 365 3 237 -3.8%
Notes:
1 The amounts in the "Before" column are based on Hudaco`s unaudited interim
group results for the six months ended 31 May 2010.
2 The amounts in the "After" column have been calculated using the unaudited
results of Global for the six months ended 31 August 2010.
3 The amounts in the "After" column have been adjusted to take into account
notional interest forfeited on the initial purchase consideration of R74.75
million at 5.65% per annum, less taxation thereon. Notional interest on
deferred payments has been imputed based on the level of profitability of
Global for the six months ended 31 August 2010 as used for these pro forma
financial effects.
4 For the purposes of calculating the HEPS, EPS and FDEPS, it was assumed
that the Transaction was effective on 1 December 2009.
5 Per share earnings have been calculated using the weighted average number
of shares in issue for the six months ended 31 May 2010, being 31 394 569
shares for HEPS and EPS and 31 908 840 shares for Diluted HEPS. Net asset
value per share and net tangible asset value per share have been calculated
based on the 31 532 203 shares in issue at 31 May 2010 net of those held by
a Hudaco subsidiary.
6 Estimated transaction costs of a non-recurring nature amounting to R1
million (net of taxation) relating to the Transaction have been included in
the determination of HEPS, EPS and Diluted EPS.
7 As no purchase price allocation has yet been conducted, no account has been
taken of amortisation of intangible assets that may be identified.
5 CATEGORISATION
The Transaction has been classified as a category 2 transaction in terms of
Section 9 of the JSE Limited Listing Requirements and accordingly,
shareholder approval is not required.
Johannesburg
19 November 2010
Investment bank and sponsor
Nedbank Capital
Date: 19/11/2010 15:17:01 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.
