| Tue 8 Feb 2011, 16:05 | | AET - Alert Steel Holdings Limited - Disposal of Alert Plumbing The Klerksdorp |
|
AET
AET
AET - Alert Steel Holdings Limited - Disposal of Alert Plumbing, The Klerksdorp
Business, The Lichtenburg Business and The Randfontein Business and renewal of
cautionary announcement
ALERT STEEL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2003/005144/06)
JSE code: AET
ISIN: ZAE000092847
("Alert" or "the company")
DISPOSAL OF ALERT PLUMBING, THE KLERKSDORP BUSINESS, THE LICHTENBURG BUSINESS
AND THE RANDFONTEIN BUSINESS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
1 INTRODUCTION
Shareholders are referred to the cautionary announcements, dated 13 December
2010 and 26 January 2011, and are advised that Alert has entered into an
agreement with Taboo Trading 223 (Pty) Limited ("Taboo") ("the Alert Plumbing
agreement") in terms of which Taboo will acquire the inventory and fixed assets
and all risks and benefits attaching to the assets of Alert Plumbing, the
plumbing division of Alert ("the Alert Plumbing disposal").
In addition Alert entered into an agreement with Sozicento (Pty) Limited
("Sozicento") ("the sale of businesses agreement") in terms of which Sozicento
will acquire the sale assets and all the assumed liabilities and benefits
relating to the Klerksdorp business, the Lichtenburg business and the
Randfontein business ("the subject businesses"). The subject businesses are all
retail steel business operations of Alert trading as going concerns ("the
subject businesses disposal").
2 THE ALERT PLUMBING DISPOSAL
2.1 BACKGROUND AND RATIONALE
Alert currently operates as a retailer of prime steel, building materials,
plumbing and hardware products.
Ten years ago the company decided to diversify by adding building materials
and hardware products to its product range. In 2001, the company extended
its product range to include plumbing materials.
The business environment has since become extremely challenging due to the
volatility in world steel markets, precipitated by the renewed financial
turmoil. Alert`s business has been affected by these factors and therefore
the board decided to return to the company`s original core business of
selling and supplying steel and steel related products and services. The
disposal of Alert Plumbing is part of the company`s restructuring plan to
facilitate the return to its core business.
2.2 EFFECTIVE DATE
The effective date of the Alert Plumbing disposal is 3 January 2011.
2.3 RESTRAINTS OF THE AGREEMENTS
In terms of the Alert Plumbing agreement, Alert has undertaken that the
company or any of its subsidiaries will not at any time within a period of
24 months from the effective date in any province in which Alert conducts
business, whether directly or indirectly:
- gain any interest or be involved in or associated with any company,
partnership, firm or any other entity in Pretoria which carries on a
business similar to that of the current business of Alert Plumbing ;
or/and
- will regard Alert Plumbing as its preferred supplier and will not
directly or indirectly solicit or attempt to engage orders for any
plumbing goods and sanitary ware from any of the suppliers of Alert
Plumbing, unless Alert Plumbing cannot supply.
2.4 CONSIDERATION
The consideration receivable in respect of the Alert Plumbing disposal is
an amount of R8 240 537, payable as follows:
- a deposit of R500 000, which was paid; and
- the balance of the consideration payable shall be paid in 7 equal
monthly installments of R 997 109 each, on or before the seventh of
each month, the first to be paid on or before 7 February 2011.
- The consideration payable for the branch excess stock will be R760 774
, payable on 7 September 2011.
Taboo will pay interest, calculated on the prime lending rate of Nedbank
Limited from time to time, on the outstanding balance from 1 April 2011,
payable monthly, additional to the monthly instalments.
The proceeds of the disposal will be utilized by Alert to settle interest
bearing debt.
2.5 CATEGORISATION OF THE ALERT PLUMBING DISPOSAL AND CIRCULAR TO SHAREHOLDERS
The Alert Plumbing disposal is categorised, in terms of the Listings
Requirements, as a related party transaction. Accordingly, shareholders`
approval of the transaction and an independent opinion relating to the
fairness thereof is required in terms of the Listings Requirements
2.6 PRO FORMA FINANCIAL EFFECTS OF THE ALERT PLUMBING DISPOSAL
The unaudited pro forma financial effects of the Alert Plumbing disposal,
for which the directors are responsible, are provided for illustrative
purposes only to show the effect of the Alert Plumbing disposal on loss per
share ("LPS"), headline loss per share ("HLPS"), fully diluted loss per
share ("FDLPS") and fully diluted headline loss per share ("FDHLPS") as if
the Alert Plumbing disposal had taken effect on 1 July 2009 and on net
asset value per share ("NAVPS") and net tangible asset value per share
("NTAVPS") as if the Alert Plumbing disposal had taken effect on 30 June
2010. Because of their nature, the unaudited pro forma financial effects
may not give a fair presentation of the group`s financial position and
performance. The unaudited pro forma financial effects have been compiled
from the audited consolidated financial results for the year ended 30 June
2010 and are presented in a manner consistent with the format and
accounting policies adopted by Alert and have been adjusted as described in
the notes below:
Note %
s Before After chang
e
LPS (cents) b 39,8 41,0 3,0
HLPS (cents) b 25,5 26,7 4,6
FDLPS (cents) b 39,0 40,1 2,9
FDHLPS (cents) b 25,1 26,3 4,6
NAVPS (cents) c 37,1 36,7 0,9
NTAVPS (cents) c 29,9 29,5 1,2
Shares in issue at 256 028 256 028
period end (`000)
Weighted average number 248 428 248 428
of shares in issue
(`000)
Notes:
a The "Before" column has been extracted from the audited results of Alert
for the year ended 30 June 2010.
b LPS, HLPS, FDLPS and FDHLPS effects, as reflected in the "After" column are
based on the following assumptions and information:
- the Alert Plumbing disposal was effective 1 July 2009;
- the consolidated trading results of the Alert Plumbing disposal for
the year ended 30 June 2010 were reversed;
- the cash proceeds of the Alert Plumbing disposal of R8 240 537
were received, and transaction costs of R303 626 paid on 1 July 2009;
- the full consideration received of R8 240 537 were utilised to settle
interest-bearing debt, which debt would have attracted interest at 10%
per annum pre-tax, resulting in a reduced finance cost;
- a loss on sale of the Alert Plumbing disposal of R858 637 was
recognised, which loss is excluded when calculating HLPS and FDHLPS;
and
- the interest saving and the reversal of the trading results of the
Alert Plumbing disposal referred to above will have a continuing
effect on Alert. All other adjustments are once-off adjustments.
c NAVPS and NTAVPS effects, as reflected in the "After" column are based on
the following assumptions and information:
- the Alert Plumbing disposal was effective 30 June 2010; and
- the disposals proceeds were received and transaction costs paid on 30
June 2010 in the manner described in note 2 above.
3 THE SUBJECT BUSINESSES DISPOSAL
3.1 BACKGROUND AND RATIONALE
The background and rationale relating to the Alert Plumbing disposal (set
out in paragraph 2.1 above) applies to the Subject businesses disposal as
well.
The business environment has since become extremely challenging due to the
volatility in world steel markets, precipitated by the renewed financial
turmoil. Alert`s business has been affected by these factors and the
company is experiencing constrained financial circumstances which if
unresolved could necessitate the closure of the subject businesses. In
order to avoid the closure of these businesses the board decided to sell
them.
3.2 EFFECTIVE DATE
The effective date of the Subject businesses disposal is 1 February 2011.
3.3 CONSIDERATION
The consideration receivable in respect of the Subject businesses disposal
is as follows:
- R4 000 000 in respect of the Klerksdorp business;
- R20 000 000 in respect of the Randfontein business; and
- R3 000 000 in respect of the Lichtenburg business;
consequently, R27 000 000 in aggregate, and will be discharged as
follows:
* R15 000 000 shall be set off against a creditor in Alert`s
financial records which is an associated company of
Sozicento;
* The balance of R12 000 000, shall be payable on the
completion date, as defined in the sale of business
agreement, in cash.
The proceeds of the disposal will be utilised by Alert to settle interest
bearing debt.
3.4 CATEGORISATION OF THE SUBJECT BUSINESSES DISPOSAL AND CIRCULAR TO
SHAREHOLDERS
The Subject Businesses disposal is categorised, in terms of the Listings
Requirements, as a related party transaction as well as a Category 1
transaction. Accordingly, shareholders` approval of the Subject Businesses
disposal and an independent opinion relating to the fairness thereof is
required in terms of the Listings Requirements.
3.5 PRO FORMA FINANCIAL EFFECTS OF THE SUBJECT BUSINESSES DISPOSAL (excluding
the Alert Plumbing disposal)
The unaudited pro forma financial effects of the Subject Businesses
disposal, for which the directors are responsible, are provided for
illustrative purposes only to show the effect of the Subject Businesses
disposal on LPS, HLPS, FDLPS and FDHLPS as if the transaction had taken
effect on 1 July 2009 and on NAVPS and NTAVPS as if the Subject Businesses
disposal had taken effect on 30 June 2010. Because of their nature, the
unaudited pro forma financial effects may not give a fair presentation of
the group`s financial position and performance. The unaudited pro forma
financial effects have been compiled from the audited consolidated
financial results for the year ended 30 June 2010 and are presented in a
manner consistent with the format and accounting policies adopted by Alert
and have been adjusted as described in the notes below:
Notes %
Before After change
LPS (cents) b 39,8 37,5 5,8
HLPS (cents) b 25,5 23,2 9,1
FDLPS (cents) b 39,0 36,8 5,8
FDHLPS (cents) b 25,1 22,9 9,0
NAVPS (cents) c 37,1 37,1 0
NTAVPS (cents) c 29,9 29,9 0
Shares in issue at 256 256 028
period end (`000) 028
Weighted average 248 248 428
number of shares in 428
issue (`000)
Notes:
a. The "Before" column has been extracted from the audited results of Alert
for the year ended 30 June 2010.
b. LPS, HLPS, FDLPS and FDHLPS effects, as reflected in the "After"
column are based on the following assumptions and information:
- the Subject businesses disposal was effective 1 July 2009;
- the consolidated trading results of the Subject businesses disposal
for the year ended 30 June 2010 were reversed;
- the cash proceeds of the disposals of R27 000 000 were received, and
transaction costs of R996 374 paid on 1 July 2009;
- R12 million of the Subject businesses disposal proceeds was utilised
to settle a part of the interest-bearing debt of Alert, which debt
would have attracted interest at 10% per annum pre-tax, resulting in a
reduced finance cost; and
- the interest saving and the reversal of the trading results of the
Subject businesses disposal referred to above will have a continuing
effect on Alert. All other adjustments are once-off adjustments.
c. NAVPS and NTAVPS effects, as reflected in the "After" column are based on
the following assumptions and information:
- the Subject businesses disposal was effective 30 June 2010; and
- the disposals proceeds were received and transaction costs paid on 30
June 2010 in the manner described in note 2 above.
4 COMBINED PRO FORMA FINANCIAL EFFECTS OF THE ALERT PLUMBING DISPOSAL AND
SUBJECT BUSINESSES DISPOSAL ("THE TRANSACTIONS")
The unaudited pro forma financial effects of the transactions, for which
the directors are responsible, are provided for illustrative purposes only
to show the effect of the transactions on LPS, HLPS, FDLPS and FDHLPS as if
the transaction had taken effect on 1 July 2009 and on NAVPS and NTAVPS as
if the transactions had taken effect on 30 June 2010. Because of their
nature, the unaudited pro forma financial effects may not give a fair
presentation of the group`s financial position and performance. The
unaudited pro forma financial effects have been compiled from the audited
consolidated financial results for the year ended 30 June 2010 and are
presented in a manner consistent with the format and accounting policies
adopted by Alert and have been adjusted as described in the notes below:
Notes %
Before After Change
LPS (cents) b 39,8 38,0 4,5
HLPS (cents) b 25,5 23,7 7,1
FDLPS (cents) b 39,0 37,2 4,5
FDHLPS (cents) b 25,1 23,4 7,0
NAVPS (cents) c 37,1 36,7 0,9
NTAVPS (cents) c 29,9 29,5 1,2
Shares in issue at 256 028 256 028
period end (`000)
Weighted average number 248 428 248 428
of shares in issue
(`000)
Notes:
a. The "Before" column has been extracted from the audited results of Alert
for the year ended 30 June 2010.
b. LPS, HLPS,FDLPS and FDHLPS effects, as reflected in the "After" column are
based on the following assumptions and information:
- the transactions are effective 1 July 2009;
- the consolidated trading results of the transactions for the year
ended 30 June 2010 were reversed;
- the cash proceeds of the transactions of R35 240 537 were received,
and transaction costs of R1 300 000 paid on 1 July 2009;
- R20 240 537 of the disposal proceeds was utilised to settle interest-
bearing debt of Alert, which debt would have attracted interest at 10%
per annum pre-tax, resulting in a reduced finance cost; and
- the interest saving and the reversal of the trading results of the
transactions referred to above will have a continuing effect on Alert.
All other adjustments are once-off adjustments.
C NAVPS and NTAVPS effects, as reflected in the "After" column are based on
the following assumptions and information:
- the transactions were effective 30 June 2010; and
- the disposals proceeds were received and related transaction costs
paid on 30 June 2010 in the manner described in note 2 above.
5 FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue exercising caution in dealing in the
company`s securities as negotiations are still in progress, which if
successfully concluded, may have a material effect on the price of the
company`s securities.
Johannesburg
8 February 2011
Designated Adviser
Vunani Corporate Finance
Date: 08/02/2011 16:05:03 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.
