| Tue 1 Feb 2011, 15:58 | | AND - Andulela Investment Holdings Limited - Acquisition by Andulela of the |
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AND - Andulela Investment Holdings Limited - Acquisition by Andulela of the
business of Gibbsteel (Pty) Limited ("Gibbsteel") and further cautionary
announcement
ANDULELA INVESTMENT HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1950/037061/06)
JSE code: AND
ISIN: ZAE000125894
("Andulela" or "the company")
ACQUISITION BY ANDULELA OF THE BUSINESS OF GIBBSTEEL (PTY) LIMITED ("GIBBSTEEL")
AND FURTHER CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the announcement, dated 9 December 2010, and are
advised that an agreement ("the agreement") has been entered into between
Andulela and Gibbsteel in terms of which Andulela or its nominee will acquire
the business (including the assets and liabilities of Gibbsteel) ("Business")
indivisibly as a going concern ("the transaction").
2. BACKGROUND INFORMATION RELATING TO GIBBSTEEL
Gibbsteel operates as a manufacturer, wholesaler and retailer of steel and
allied products in South Africa with branches in Boksburg, Gauteng and KwaZulu-
Natal. Gibbsteel currently employs 138 staff throughout its branch network in
South Africa.
3. RATIONALE FOR THE TRANSACTION
Andulela is an investment holding company, listed in the Financials, Investment
Instruments - Equities Sector of the Main Board of the JSE Limited ("JSE").
Currently its only asset is a controlling interest in Kilken Platinum (Pty)
Limited, a platinum group metals ("PGM") tailings treatment facility that
delivers PGM concentrate to Rustenburg Platinum Mines Limited. In line with
management`s strategy to diversify the investment base of the company into
growth markets, the steel merchant industry was identified as a suitable market.
In terms of an announcement, dated 9 December 2010, Andulela acquired Pro Roof
Steel Merchants (Pty) Limited ("the Pro Roof Steel transaction"), a steel
merchant company, subject to the fulfilment of the suspensive conditions set out
in the said announcement. Andulela subsequently identified Gibbsteel as a
further suitable business operating in the steel industry to strengthen the
investment base and broaden its geographic footprint.
4. TRANSACTION PURCHASE CONSIDERATION
The transaction purchase consideration of R50 860 895 is based on the net asset
value ("NAV") of the Business at the anticipated effective date ("effective date
NAV"), and will be settled by way of a maximum cash amount of R35 000 000 and
the balance by way of the issue of 39 652 238 Andulela ordinary shares at an
issue price of 40 cents per share ("the NAV consideration").
The NAV consideration is subject to adjustment depending on the effective date
NAV but is in any event limited to a maximum consideration of R80 000 000. Any
amount payable in excess of the NAV consideration will be settled by the issue
of further Andulela ordinary shares at an issue price of 40 cents per share,
subject to the issue of a maximum additional 72 847 762 Andulela ordinary
shares.
Andulela will issue all the consideration shares to Gibbsteel 180 days after the
determination date as defined in the agreement, once the Gibbsteel debtors as at
the effective date have been collected in full, subject to the following:
- neither Gibbsteel nor its shareholders may dispose or encumber the
consideration shares received by them for a maximum period of 36 months
from the date of issue by Andulela; and
- in the event that there is a shortfall in respect of the collection of the
Gibbsteel debtors referred to above, such portion of the consideration
shares will be sold by Gibbsteel, and the proceeds paid to Andulela.
Andulela shall be entitled to resile from the agreement by written notice to
Gibbsteel and Gibbsteel shall have no claim of any nature against Andulela if:
- on the effective date of the transaction, the effective date NAV is less
than R40 000 000; or
- creditors attach Gibbsteel assets as a consequence of the publication by
Gibbsteel of the relevant notice in terms of Section 34 of the Insolvency
Act, 1936.
Andulela has also agreed to pay a restraint of trade to Gibbsteel of R1 500 000
per annum, escalating at 10% per annum and payable quarterly in advance.
Andulela is entitled to set this payment off against any shortfall in the
collection of the Gibbsteel debtors as referred to above.
The transaction is subject to warranties that are normally applicable to a
transaction of this nature.
5. ANTICIPATED EFFECTIVE DATE
The transaction will become effective on the first business day of the first
month after satisfaction of the last of the suspensive conditions set out in
paragraph 6 below. The effective date is anticipated to be 1 May 2011.
6. SUSPENSIVE CONDITIONS
The transaction is conditional upon the fulfilment or waiver of the suspensive
conditions by the expected effective date, as set out below:
- Gibbsteel obtaining a tax clearance certificate;
- the parties entering into a written service, confidentiality and restraint
agreement with EM Gibbon, the key manager of the Business;
- the parties entering into a written gross lease agreement in respect of the
premises situated in Boksburg, the key premises of the Business;
- Andulela confirming in writing that it is satisfied with its due diligence
investigation of Gibbsteel;
- Gibbsteel confirming in writing that it is satisfied with its due diligence
investigation of Andulela;
- where applicable, the financiers and each of the third parties to material
contracts of Gibbsteel consenting in writing to the transaction;
- the shareholders of Gibbsteel approving the transaction in terms of
section 228 of the Companies Act, 1973;
- Andulela`s board approving the transaction;
- approval by the Competition Commission;
- the successful implementation of the Pro Roof Steel transaction ; and
- where applicable, the obtaining of any regulatory approvals that may be
required, including the Securities Regulation Panel and the JSE.
7. CLASSIFICATION OF THE TRANSACTION
The transaction is classified as a Category 2 transaction in terms of the
Listings Requirements of the JSE.
8. FINANCIAL EFFECTS
The financial affects of the transaction will be published in due course.
9. FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue exercising caution in dealing in the
Andulela`s securities until such time as the financial effects of the
transaction are published.
Johannesburg
1 February 2011
Corporate adviser and transaction sponsor
Vunani Corporate Finance
Sponsor
Investec Bank Limited
Attorneys to Andulela
Glyn Marais Incorporated
Attorneys to Gibbsteel
Kaufmann Capital and Corporate Advisers
Corporate adviser to Gibbsteel
Sinergi Corporate Advisory
Date: 01/02/2011 15:58:00 Produced by the JSE SENS Department.
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