| Wed 16 Mar 2011, 17:44 | | SFH - SA French Limited - Terms announcement of the proposed rights offer to |
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SFH
SFH
SFH - SA French Limited - Terms announcement of the proposed rights offer to
raise R20 million of new equity, potential mandatory offer and application for
waiver in terms of rule 8.7 of the SRP code and withdrawal of cautionary
announcement
SA FRENCH LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1982/009174/06)
Share code: SFH ISIN: ZAE000108890
("SA French" or "the Company" or "the Group")
TERMS ANNOUNCEMENT OF THE PROPOSED RIGHTS OFFER TO RAISE R20 MILLION OF NEW
EQUITY, POTENTIAL MANDATORY OFFER AND APPLICATION FOR WAIVER IN TERMS OF RULE
8.7 OF THE SRP CODE AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1 Introduction, Purpose and Rationale
1.1 SA French has been the exclusive distributor in sub-equatorial
Africa of Potain tower cranes for the last 28 years. Potain is part
of Manitowoc Company Inc ("Manitowoc"). Manitowoc is the largest
lifting group in the world and is listed on the New York Stock
Exchange. SA French also holds distribution agreements with Merlo
(manufacturers of telescopic handlers and self-loading concrete
mixers) and Saltec (producers of passenger and other material
hoists) for the sub-equatorial Africa region, which has allowed the
Company to offer complementary materials handling solutions to its
clients for the past 25 years.
1.2 Despite its strong market position, SA French has come under some
operational pressures as a result of the Eskom power crisis, the
global financial crisis of 2008 and the delays in the rollout of the
government`s infrastructure programme. These events impacted on
business confidence and the order books of the major players in the
mining, construction and industrial sectors, who comprise SA
French`s client base.
1.3 As a result of a falloff in revenue SA French has incurred some
losses over the past two years and so came under pressure from its
banks on existing facilities. In addition, the Company has not been
able to access any financing to support its growth plans, in
particular the numerous consolidation opportunities that now exist
within the industry.
1.4 SA French and its advisors have therefore been working with its
banks and creditors to restructure the Company`s liabilities in a
manner that is sustainable for the Company, given the more subdued
market environment in which it is now operating. As a result of
these activities the Company has successfully concluded the
following negotiations and/or agreements:
1.4.1 A stock repurchase agreement with Manitowoc, the result of
which will be a decrease of approximately R45m in both
trade payables and inventories;
1.4.2 Agreements with ABSA, Wesbank and Standard Bank to
capitalise arrears on their asset based finance
arrangements and to re-term their debt over longer periods
that range from 48 to 60 months; and
1.4.3 The conclusion of negotiations with the SA French Group
Trust ("SAFGT") and Speedprops 70 (Proprietary) Limited
("Speedprops") to write-off 50% of their combined
shareholder loans to the Company to the value of R9.5
million and to re-organise the balance of their claims
against SA French in aggregate into an amortising loan
over 6 years, bearing interest at the prime rate of SA
French`s South African bankers from time to time.
1.5 The conclusion of the above negotiations has significantly improved
the balance sheet position of the Company by reducing financial risk
and improving its liquidity position.
1.6 The strengthening of the Company`s balance sheet places it in an
improved position to benefit from consolidation, sales and leasing
opportunities within its industry. In the SADC region SA French has
leveraged its long-term relationships with large construction and
mining entities and so is well positioned to benefit from upcoming
infrastructural and development projects in the region. Within
South Africa, the Company`s national footprint, services
capabilities and competitive pricing on rentals make it the tower
crane supplier of choice to various listed and unlisted construction
firms. Construction projects that had been curtailed or stalled are
beginning to be revisited and significant sales and rental deals
have recently been concluded with the South African government in
respect of both the planned Medupi and Kusile power plants.
1.7 Over the past two years, SA French has made a significant investment
in its rental fleet. From a revenue and profitability perspective,
short-term profitability has been replaced with longer-term
prospective revenues from rentals. This shift has placed pressure
on the Company`s cash flows and, while this has been reduced
following the restructuring of liabilities referred to above, the
board of directors considers that it is prudent and appropriate to
raise R20 million of equity in the form of a rights offer (at 5
cents per rights offer share) (the "SAF rights offer"). The
proceeds of the SAF rights offer will be used to:
1.7.1 repay the bridging finance provided by AfrAsia Corporate
Finance (Proprietary) Limited ("AfrAsia") and referred to
in the SENS announcement dated 26 January 2011;
1.7.2 settle certain other short-term liabilities where it is
advantageous to the Company to do so;
1.7.3 restore working capital to a level that will enable SA
French to continue its organic growth strategy; and
1.7.4 strengthen the balance sheet so that the Company is able
to take advantage of opportunistic consolidation
opportunities that may present themselves.
2 Terms of the SAF Rights Offer
2.1 The board of directors of SA French ("the Board") is pleased to
announce that the terms and conditions relating to the SAF rights
offer are as follows:
2.1.1Total amount sought to R20 000 000.00
be raised in terms of the
SAF rights offer:
2.1.2Ratio of entitlement: 240 SAF rights offer shares for every 100 SA
French shares held on the record date for the
SAF rights offer (to be communicated to
shareholders in due course)
2.1.3SAF rights offer share The issue price of 5 cents per SA French
price (the issue price): ordinary share
2.1.4Excess applications: Excess applications will be allowed and all
excess SAF rights offer shares will be
allocated equitably
2.2 The issue price of 5 cents per SAF rights offer share represents a
discount of 17.4% to the 30 day volume weighted average traded price of
SA French ordinary shares on the JSE Limited ("JSE") 30 business days
prior to the publication of this announcement, being 16 March 2011.
2.3 Qualifying shareholders recorded in the register of SA French at the
close of business on the record date (which will be communicated to
shareholders in due course), will be entitled to participate in the SAF
rights offer.
2.4 In terms of underwriting agreements ("Underwriting Agreements") entered
into by SA French with SAFGT and AfrAsia (hereinafter collectively
referred to as "the Underwriters"), the SAF rights offer has been fully
underwritten by the Underwriters ("the underwritten rights offer
shares").
2.5 The Underwriting Agreements are conditional upon, inter alia, the passing
of the whitewash resolution (as defined in paragraph 4.5 below) and the
obtaining of the Rule 8.7 Exemption (as defined in paragraph 4.5 below).
Accordingly, if the whitewash resolution or the Rule 8.7 Exemption is not
obtained, the Underwriting Agreements shall lapse and be of no further
force or effect and the Underwriters shall not subscribe for the
underwritten rights offer shares.
2.6 Further details of the underwriting are dealt with in paragraph 5 below.
2.7 Qualifying shareholders will be entitled to apply for excess applications
in respect of those SAF rights offer shares that have not been taken up
on the closing date to be communicated to shareholders in due course.
Any SAF rights offer shares that thereafter remain unallocated shall then
be allocated, towards any excess applications, by the Board on a pro rata
basis.
3 Increase in authorised share capital
3.1 There is currently an insufficient amount of authorised unissued ordinary
shares in the share capital of SA French to implement the SAF Rights
Offer. It is therefore necessary to increase the authorised share
capital of SA French.
3.2 Accordingly, SA French shareholders will be asked to approve, by way of a
special resolution, an increase in the authorised share capital of SA
French from R5 000 000 to R10 000 000 by the creation of an additional
500 000 000 authorised shares, which shares will rank pari passu in all
respects with the existing issued shares in the capital of SA French.
4 Potential Mandatory Offer and Waiver by Whitewash
4.1 Company.
4.2 Speedprops is a wholly owned subsidiary of SAFGT and holds approximately
4.8% of the total issued share capital of the Company.
4.3 SAFGT and Speedprops are viewed by the Securities Regulation Panel
("SRP") as concert parties in terms of the Securities Regulation Code on
Takeovers and Mergers and the Rules of the SRP established by the SRP in
terms of section 440C of the Act ("the Code") and, accordingly, SAFGT and
Speedprops together as concert parties, or (in any event, irrespective of
such concert party relationship) if SAFGT alone, come to control 45% or
more of the votes attaching to the issued shares in SA French, pursuant
to the subscription for shares in terms of the SAF rights offer or the
subsequent subscription by SAFGT for underwritten rights offer shares,
then such subscription for shares will be regarded by the SRP as an
"affected transaction" under the Code and would ordinarily result in an
obligation on SAFGT and/or Speedprops to extend a mandatory offer to SA
French Shareholders, to acquire their shares for a comparable
consideration.
4.4 However, in terms of Rule 8.7 of the Code, the SRP may waive the
requirement to make a mandatory offer if such waiver is supported by a
majority of independent shareholders in general meeting.
4.5 As set out in the notice of a special general meeting attached to and
forming part of the first circular ("First Circular") to be distributed
to shareholders on or about 24 March 2011, independent SA French
shareholders will be afforded the opportunity to cast their vote in
favour of a resolution waiving the requirement for a mandatory offer to
be made in terms of the Code ("the whitewash resolution"). Should the
requisite majority of independent votes be cast in favour of the
whitewash resolution, subsequent application will be made to the SRP for
the exemption by the SRP from the obligation to make a mandatory offer in
terms of Rule 8.7 of the Code ("the Rule 8.7 Exemption"). The SRP has
advised that it is willing to consider an application to grant the Rule
8.7 Exemption, subject to the the passing of the whitewash resolution by
a majority of SA French shareholders, who are independent from SAFGT and
Speedprops. Prior to granting the Rule 8.7 Exemption, the SRP will
consider any objections or representations (if any) made by parties as
contemplated in the paragraphs below.
4.6 Any interested party who wishes to object to the Rule 8.7 Exemption shall
have at least 7 (seven) calendar days following the date of posting of
the First Circular, to raise such an objection with the SRP. Objections
should be made in writing and addressed to the "Executive Director,
Securities Regulation Panel" at any one of the following addresses:
Physical Postal Fax
Sunnyside Office Park PO Box 91833 +27 11 642 9284
First Floor, Building B Auckland Park
32 Princess of Wales 2006
Terrace (off St Andrews
Road)
Parktown
Johannesburg
2193
4.7 The date on which objections should reach the SRP in order to be
considered will be communicated to shareholders in due course.
4.8 If any submissions are made to the SRP within the permitted timeframe,
the SRP will consider the merits thereof and, if necessary, provide the
objectors with an opportunity to make representations to the SRP.
Thereafter, subject to the waiver at the special general meeting being
approved by shareholders as aforesaid, the SRP will rule on the
requirement for a mandatory offer.
4.9 In terms of the Code, the directors must ordinarily obtain an independent
expert opinion ("the independent fairness opinion") as to how the
affected transaction will affect SA French shareholders and whether such
affected transaction is considered fair or reasonable or both as the case
may be. The independent fairness opinion shall be included in the First
Circular.
4.10 SA French shareholders are advised that SA French has obtained
irrevocable undertakings from independent shareholders, representing
28.73% of the total issued share capital of the Company and 51.90% of the
total issued share capital, excluding the shareholding of the SAFGT and
Speedprops, to vote in favour of the whitewash resolution.
5 Underwriting
5.1 The Underwriters have agreed to fully underwrite the SAF rights offer.
Accordingly, the SAF rights offer will be 50% underwritten by SAFGT and
50% underwritten by AfrAsia.
5.2 In terms of the Underwriting Agreements, an underwriting fee of R1 000
000.00, being 5% of the total underwriting commitment (being R20 000
000.00), is payable to the Underwriters collectively. The underwriting
fee is, in the opinion of the Board, not greater than the current market
rate charged by independent underwriters and is not subject to any terms
that will render the underwriting commission unreasonable or detrimental
to SA French shareholders. The payment of the underwriting fee is in
accordance with the Companies Act and the provisions of SA French`s
articles of association.
5.3 SAFGT will utilise the proceeds of the underwriting fee to assist it in
servicing a loan facility that it has taken on for the purposes of
underwriting the rights offer.
5.4 The Underwriters have agreed to fully underwrite the SAF Rights Offer
subject to the fulfilment of the conditions precedent in paragraph 8
below.
6 Pro forma financial information
6.1 The pro forma consolidated statement of comprehensive income for the year
ended 30 June 2010 and pro forma consolidated statement of financial
position at 30 June 2010 are the responsibility of the directors and
management of the Group, and they have been prepared for illustrative
purposes only, in order to provide information about the financial
results and position of the Group, assuming the SAF rights offer had been
implemented on 1 July 2009 and 30 June 2010, respectively.
6.2 Due to its nature, the pro forma financial information may not give a
fair reflection of the Group`s changes in equity, results of operations
and cash flows subsequent to the SAF rights offer.
Before the Adjustment After the
SAF rights s for the SAF
offer1 SAF rights corporate
R`000 offer and actions
loans R`000
written
off
R`000
Net asset value per share 28.75 13.26
(cents)
Net tangible assets value 28.75 13.26
per share (cents)
Weighted and actual number 166 376 400 0003 566 376
of shares in issue at the
end of the year (`000)
Notes and assumptions
1 The figures set out in the "Before the SAF rights offer" column above
have been extracted from the published audited consolidated financial
results of the Group for the year ended 30 June 2010.
2 The SAF rights offer is assumed to have been implemented on 30 June 2010.
3. 400 million rights offer shares are assumed to be issued, at 5 cents
each, pursuant to the SAF rights offer, thereby raising capital of R20
million.
4. The net proceeds of the rights offer (after deduction of estimated costs
of R2.25 million) have been assumed to be used to repay R6.5 million of
interest-bearing loans, R5million of short-term debts and to provide
working capital to the Group.
5 The adjustment to share capital and share premium represents the share
capital and share premium arising from the issue of 400 million SAF
rights offer shares of 5 cents each, net of estimated costs related to
the SAF rights offer of R2.25 million.
6 The amount of loans written off is based on an irrevocable undertaking by
the lenders to write off 50% of the combined amounts owed to them
totalling R9.535 million, following the successful rights offer.
7 Special General Meeting of SA French Shareholders
7.1 SA French shareholders will be required to consider and approve the
increase in authorised share capital, the waiver of the mandatory offer
and such other resolutions as may be necessary to implement the SAF
rights offer.
7.2 A special general meeting of SA French shareholders is expected to be
convened for Friday, 15 April 2011 for the purpose of considering and if
deemed fit, approving the resolutions contemplated above.
7.3 A notice of the general meeting will be included in the First Circular.
8 Conditions Precedent
8.1 The SAF rights offer is conditional upon, inter alia:
8.1.1 the approval of the SAF rights offer circular, as contemplated in
paragraph 9.3 below, by the JSE;
8.1.2 the passing of any shareholder resolutions required to implement the
SAF rights offer;
8.1.3 the registration by the Registrar of Companies of all documents
required in respect of the SAF rights offer;
8.1.4 South African Reserve Bank approval;
8.1.5 granting of the ruling by the SRP waiving the mandatory offer as
detailed in paragraph 4.4 above; and
8.16 such regulatory and other approvals that may be required including
the required shareholder approvals.
9 Important dates and times and Documentation
9.1 A further announcement, containing such further information as may be
required, including the salient dates and times in respect of the SAF
rights offer, will be made in due course.
9.2 The First Circular containing full details of, inter alia, the increase
in the authorised share capital of SA French, the waiver of the mandatory
offer and the notice convening the special general meeting, is expected
to be posted to SA French shareholders on or about 24 March 2011.
9.3 A second circular containing full details of the SAF rights offer will be
posted to SA French shareholders on or about 16 May 2011.
10 Withdrawal of cautionary announcement
The further cautionary announcement dated 26 January 2011 is accordingly
withdrawn and shareholders are advised that they are no longer required to
exercise caution when trading their securities in the Company.
16 March 2011
Sandton
Designated Advisor: PSG Capital (Proprietary) Limited
Date: 16/03/2011 17:44:01 Produced by the JSE SENS Department.
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