| Tue 10 May 2011, 16:49 | | AET - Alert - Reorganisation of Alert Steel Polokwane (Pty) Limited and Alert |
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AET
AET
AET - Alert - Reorganisation of Alert Steel Polokwane (Pty) Limited and Alert
Steel Reinforcing (Pty) Limited 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")
REORGANISATION OF ALERT STEEL POLOKWANE (PTY) LIMITED AND ALERT STEEL
REINFORCING (PTY) LIMITED AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the various cautionary announcements, the last of
which was dated 23 March 2011, and are advised that Alert, Alert Steel Polokwane
(Pty) Limited ("Alert Polokwane") and Alert Steel Reinforcing (Pty) Limited
("Alert Reinforcing") have entered into agreements with Murray & Roberts Steel
(Pty) Limited ("Murray & Roberts Steel") in terms of which:
- Murray & Roberts Steel shall acquire the Alert Polokwane Rebar business (a
division of Alert Polokwane) as a going concern from Alert Polokwane;
- Murray & Roberts Steel shall acquire from Alert 50% of the issued share
capital in Alert Reinforcing and the entire loan account held by Alert in
Alert Reinforcing, such that, pursuant to such transaction, Murray &
Roberts Steel shall hold all of the shares in and shareholders loan
accounts against Alert Reinforcing; and
- Alert shall acquire from Murray & Roberts Steel 50% of the issued share
capital in Alert Polokwane and the entire loan account held by Murray &
Roberts Steel in Alert Polokwane, such that, pursuant to such transaction,
Alert shall hold all of the shares in Alert Polokwane and all of the
shareholders loan accounts against Alert Polokwane.
The transactions referred to above ("the Transactions") form one indivisible
transaction, although they are set out in separate agreements as described in
paragraph 4.1 below.
2. BACKGROUND AND RATIONALE
Alert currently operates as a large retailer of prime steel, building materials,
plumbing and hardware products. Ten years ago the company decided to diversify
its business operations 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 competitive and challenging
due to the volatility in world steel markets, precipitated by the renewed
financial turmoil. Alert`s business has been severely affected by these factors
and therefore the board of directors of Alert ("the board") has decided to
return to the company`s original core business of selling and supplying steel
and steel related products and services. The Transactions are part of the
company`s restructuring plan to facilitate the return to its core business.
3. BACKGROUND TO THE TRANSACTIONS
Prior to the effective date of the Transactions, each of Murray & Roberts Steel
and Alert owns 50% of the issued share capital of Alert Reinforcing and Alert
Polokwane respectively.
The business activities of Alert Reinforcing comprise a rebar yard situated in
Pretoria, and the business activities of Alert Polokwane comprise six steel
retail trading branches and Alert Polokwane Rebar, the rebar yard business
situated in Polokwane.
4. THE TRANSACTIONS
4.1 INTRODUCTION
Alert, Murray & Roberts Steel, Alert Polokwane and Alert Reinforcing
(collectively, "the Parties") have entered into a reorganisation agreement ("the
Reorganisation Agreement") which inter alia confirms that all of the
Transactions constitute indivisible transactions and the sequence of the steps
in which the Transactions will be implemented. The material terms and conditions
relating to the Transactions are set out below.
The Transactions will be implemented on the date immediately following 7
Business Days after the date on which all of the suspensive conditions referred
to in the Alert Reorganisation Agreement have been fulfilled or waived ("the
Effective Date"). Each of the various steps comprised in the Transactions, as
set out below, will be implemented as soon as possible after the preceding step
has been implemented, as follows:
Step 1:
Alert Polokwane shall dispose of the Alert Polokwane Rebar business to Murray &
Roberts Steel on the terms and conditions set out in the sale of business
agreement concluded between Alert and Murray & Roberts Steel ("the Sale of
Business Agreement");
Step 2:
Alert shall dispose of all of its shares in and claims against Alert Reinforcing
to Murray & Roberts Steel on the terms and conditions set out in the sale of
shares agreement concluded between Alert, Murray & Roberts Steel and Alert
Reinforcing ("the Alert Reinforcing Sale of Shares Agreement");
Step 3:
Alert shall acquire from Murray & Roberts Steel all of its shares in and claims
against Alert Polokwane on the terms and conditions set out in the sale of
shares agreement concluded between Alert, Murray & Roberts Steel and Alert
Polokwane ("the Alert Polokwane Sale of Shares Agreement").
The Sale of Business Agreement, the Alert Reinforcing Sale of Shares Agreement
and the Alert Polokwane Sale of Shares Agreement shall be referred to
collectively as "the Transaction Agreements".
4.2 SUSPENSIVE CONDITIONS
The Transactions are subject to the following remaining suspensive conditions:
- by no later than 31 May 2011, the Alert Reinforcing Sale of Shares
Agreement becomes unconditional in all respects save for any conditions in
the Alert Reinforcing Sale of Shares Agreement which requires that the
Reorganisation Agreement becomes unconditional;
- by no later than 31 May 2011, the Alert Polokwane Sale of Shares Agreement
becomes unconditional in all respects save for any conditions in the Alert
Polokwane Sale of Shares Agreement which requires that the Reorganisation
Agreement becomes unconditional;
- by no later than 31 May 2011, the Sale of Business Agreement becomes
unconditional in all respects save for any conditions in the Sale of
Business Agreement which requires that the Reorganisation Agreement becomes
unconditional;
- by no later than 31 May 2011, or such later date as agreed to in writing by
the Parties, the Competition Authorities give their approval to the
implementation of the Transactions (either unconditionally or subject to
terms and conditions reasonably acceptable to the persons on whom such
conditions are imposed);
- by no later than 31 May 2011, or such later date as agreed to in writing by
the Parties, the Parties have complied with the JSE Limited Listings
Requirements in respect of the Transactions and all the consents and/or
approvals which may be required in terms of the JSE Limited Listings
Requirements have been obtained;
- by no later than 31 May 2011, or such later date as agreed to in writing by
the Parties, Alert Polokwane settles any and all outstanding amounts in
terms of any overdraft facilities granted to it by Nedbank Limited and
Alert obtains the written consent of Nedbank Limited to release Murray &
Roberts Steel, with effect from the Effective Date, from any and all
guarantees, warranties or suretyships given by Murray & Roberts Steel in
favour of Nedbank Limited, in its capacity as a shareholder of Alert
Polokwane;
- by no later than 31 May 2011, or such later date as agreed to in writing by
the Parties, Alert Reinforcing settles any and all outstanding amounts in
terms of any overdraft facilities granted to it by Nedbank Limited and
Murray & Roberts Steel obtains the written consent of Nedbank Limited to
release Alert, with effect from the Effective Date, from any and all
guarantees, warranties or suretyships given by Alert in favour of Nedbank
Limited, in its capacity as a shareholder of Alert Reinforcing;
- by no later than 31 May 2011, the Parties obtain, in respect of the lease
agreement between Alert Polokwane and the owner of the premises from which
the Alert Polokwane Rebar Business is conducted, a written letter in which
the owner of such premises agrees to the substitution of Alert Polokwane
with Murray & Roberts Steel as a party to such lease agreement;
- Murray & Roberts Steel does not become aware of any Material Adverse Fact
(as such term is defined in the Sale of Business Agreement) before 7 June
2011, and if Murray & Roberts Steel does so become aware of any Material
Adverse Fact, Alert Polokwane and Murray & Roberts Steel are unable on or
before 14 June 2011 to agree the amount by which the purchase price in
terms of the Sale of Business Agreement should be reduced as a result
thereof;
- Murray & Roberts Steel does not become aware of any Material Adverse Fact
(as such term is defined in the Alert Reinforcing Sale of Shares Agreement)
before 7 June 2011, and if Murray & Roberts Steel does so become aware of
any Material Adverse Fact, Alert and Murray & Roberts Steel are unable on
or before 14 June 2011 to agree the amount by which the purchase price in
terms of the Alert Reinforcing Sale of Shares Agreement should be reduced
as a result thereof; and
- by no later than 31 May 2011, Alert Polokwane advertises the transaction
contemplated in the Sale of Business Agreement in terms of section 34(1) of
the Insolvency Act, No. 24 of 1936.
4.3 PAYMENT IN TERMS OF THE TRANSACTIONS
In terms of the Reorganisation Agreement, the Parties have agreed that the
consideration payable by each of Murray & Roberts Steel and Alert respectively
in terms of the respective Transaction Agreements shall be set off against each
other in the manner set out below.
Murray & Roberts Steel has assigned to Alert, with effect from the Effective
Date, Murray & Roberts Steel`s obligation to pay to Alert Polokwane the purchase
price in terms of the Sale of Business Agreement. The amount of the purchase
price in terms of the Sale of Business Agreement (assigned as aforesaid by
Murray & Roberts Steel to Alert) will be deducted from, and will reduce, any
amounts payable by Alert to Murray & Roberts Steel in terms of the Alert
Polokwane Sale of Shares Agreement.
In addition to the assignment and deduction referred to above, the balance of
the purchase price in terms of the Alert Polokwane Sale of Shares Agreement,
payable by Alert to Murray & Roberts Steel (after taking into account the
deduction referred to above) will be set off against the purchase price payable
by Murray & Roberts Steel to Alert in terms of the Alert Reinforcing Sale of
Shares Agreement.
Any amount still owed to any of the Parties will be settled by electronic funds
transfer on the Effective Date.
4.4 NETT CONSIDERATION
With regards to the payment structure referred to in paragraph 4.3 above the net
consideration payable by Alert to Murray & Roberts Steel amounts to R3 035 552.
4.5 THE EFFECTIVE DATE
As referred to in paragraph 4.1 above, the Effective Date for the Transaction is
the date immediately following seven business days after all of the suspensive
conditions to the Transactions (as referred to above) have been fulfilled or
waived.
5. THE SALE OF BUSINESS AGREEMENT
5.1 INTRODUCTION
Alert Polokwane has entered into the Sale of Business Agreement with Murray &
Roberts Steel in terms of which Murray & Roberts Steel will acquire the Alert
Polokwane Rebar business as a going concern, as described in the Sale of
Business Agreement.
5.2 SUSPENSIVE CONDITIONS
The Sale of Business Agreement is subject to the suspensive conditions referred
to in paragraph 4.2 above.
5.3 CONSIDERATION
The consideration receivable by Alert Polokwane in respect of the Sale of
Business Agreement is R4 684 836, payable as set out in paragraph 4.3 above. The
above purchase price shall be reduced by the total value of any proven claims of
any creditors not listed in Annexure B to the Sale of Business Agreement arising
as a result of the publication of the notices advertising the transaction
contemplated in the Sale of Business Agreement in terms of section 34(1) of the
Insolvency Act No. 24 of 1936.
5.4 THE EFFECTIVE DATE
As referred to above, the effective date for all of the Transactions (including
the Sale of Business Agreement) is the Effective Date.
6. THE ALERT REINFORCING SALE OF SHARES AGREEMENT
6.1 INTRODUCTION
Alert has entered into the Alert Reinforcing Sale of Shares Agreement with
Murray & Roberts Steel and Alert Reinforcing in terms of which Murray & Roberts
Steel will acquire from Alert 50% of the total issued share capital of Alert
Reinforcing and all of the claims on loan account held by Alert against Alert
Reinforcing as at the Effective Date.
6.2 SUSPENSIVE CONDITIONS
The Alert Reinforcing Sale of Shares Agreement is subject to the suspensive
conditions referred to in paragraph 4.2 above.
6.3 CONSIDERATION
The consideration receivable by Alert in respect of the Alert Reinforcing Sale
of Shares Agreement is R7 230 479, payable as set out in paragraph 4.3 above.
In addition, by no later than 21 days after 30 June 2012 Murray & Roberts Steel
will pay to Alert 50% of all amounts recovered by Alert Reinforcing between 28
February 2011 and 30 June 2012 in respect of any bad debt provisions in the
books of Alert Reinforcing as at 28 February 2011.
6.4 THE EFFECTIVE DATE
As referred to above, the effective date for all of the Transactions (including
the Alert Reinforcing Sale of Shares Agreement) is the Effective Date.
7. THE ALERT POLOKWANE SALE OF SHARES AGREEMENT
7.1 INTRODUCTION
Alert has entered into the Alert Polokwane Sale of Shares Agreement with Murray
& Roberts Steel and Alert Polokwane in terms of which Alert will acquire from
Murray & Roberts Steel 50% of the total issued share capital of Alert Polokwane
and all of the claims on loan account held by Murray & Roberts Steel against
Alert Polokwane as at the Effective Date.
7.2 SUSPENSIVE CONDITIONS
The Alert Polokwane Sale of Shares Agreement is subject to the suspensive
conditions referred to in paragraph 4.2 above.
7.3 CONSIDERATION
The consideration payable by Alert to Murray & Roberts Steel in respect of the
Alert Polokwane Sale of Shares Agreement is R14 950 867, payable as set out in
paragraph 4.3 above.
In addition, by no later than 21 days after 30 June 2012 Alert will pay to
Murray & Roberts Steel 50% of all amounts recovered by Alert Polokwane between
28 February 2011 to 30 June 2012 in respect of any bad debt provisions in the
books of Alert Polokwane as at 28 February 2011.
7.4 THE EFFECTIVE DATE
As referred to above, the effective date for all of the Transactions (including
the Alert Polokwane Sale of Shares Agreement) is the Effective Date.
8. CATEGORISATION OF THE TRANSACTIONS AND CIRCULAR TO SHAREHOLDERS
The Transactions are categorised as a related party transaction in terms of the
Listings Requirements. Accordingly, shareholders` approval of the Transactions
and an independent opinion relating to the fairness thereof is required in terms
of the Listings Requirements.
9. WARRANTIES
Warranties as are normal in transactions of this nature have been provided for
in respect of the aforementioned agreements.
10. PRO FORMA FINANCIAL EFFECTS OF 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 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 Transactions had taken effect on 1
July 2010 and on Nett Asset Value per Share ("NAVPS") and Nett Tangible Asset
Value per Share ("NTAVPS") as if the Transactions had taken effect on 31
December 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 reviewed consolidated financial results for the six months ended 31 December
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) ii 33,9 33,3 1,8
HLPS (cents) ii 26,7 26,1 2,2
FDLPS (cents) ii 32,9 32,3 1,8
FDHLPS (cents) ii 25,9 25,3 2,2
NAVPS (cents) iii 3,3 3,0 11,4
NTAVPS (cents) iii 3,3 3,0 11,4
Shares in issue at period 256 256 029
end (`000) 029
Weighted average number of 248 248 429
shares in issue (`000) 429
Notes:
i. The "Before" column has been extracted from the reviewed results of Alert
for the six months ended 31 December 2010.
ii. LPS, HLPS, FDLPS and FDHLPS effects, as reflected in the "After" column are
based on the following assumptions and information:
- the Transactions were effective 1 July 2010;
- the consolidated trading results of the Transactions for the six
months ended 31 December 2010 were reversed;
- a net consideration amount of R3 035 552 was paid by Alert to Murray &
Roberts Steel, and transaction costs of R207 050 paid on 1 July 2010;
- entries processed as part of the Alert consolidation process, relating
to the Transaction, have been reversed; and
- the interest paid on the overdraft facility utilised for the net
consideration payment 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.
iii NAVPS and NTAVPS effects, as reflected in the "After" column are based on
the following assumptions and information:
- the Transactions were effective 31 December 2010; and
- the net consideration payable and the transaction costs were paid on
31 December 2010 in the manner described in note ii above.
11. 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
10 May 2011
Designated Adviser
Vunani Corporate Finance
Date: 10/05/2011 16:49:01 Produced by the JSE SENS Department.
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