| Mon 12 Dec 2011, 12:47 | | AFT - Afrimat Limited - Acquisition by Afrimat of |
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AFT
AFT
AFT - Afrimat Limited - Acquisition by Afrimat of the Clinker Group and
withdrawal of cautionary announcement
Afrimat Limited
Incorporated in the Republic of South Africa
(Registration number: 2006/022534/06)
Share code: AFT ISIN: ZAE000086302
("Afrimat" or "the Company")
ACQUISITION BY AFRIMAT OF THE CLINKER GROUP AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
The directors of Afrimat are pleased to announce that the Company has
entered into an agreement to acquire 100% of the issued ordinary share
capital of SA Block (Pty) Limited and its 100% owned subsidiary
Clinker Supplies (Pty) Limited (jointly referred to as the "Clinker
Group" or "Group"), for an amount of R123.5 million (one hundred and
twenty three million, five hundred thousand rand) ("the Purchase
Price") from Aureos Southern Africa Fund LLC, Hans-Elisabeth Pfeffer
No.1 Trust, Hans-Elisabeth Pfeffer No.2 Trust, Hans-Elisabeth Pfeffer
No.3 Trust, S.A. Block Employees Trust and Karl-Anton Pfeffer
(collectively, "the Sellers").
2. CLINKER GROUP - BRIEF PROFILE
The Clinker Group, is the pioneer and leading processor of clinker for
supply mainly to the concrete manufacturing industry. The group also
manufactures its own concrete products from clinker material. The
Group`s activities include the extraction of clinker raw material from
various stock piles and the processing thereof into products of
various specifications primarily for use in the concrete manufacturing
and civil construction industries.
Key operations are located close to Vereeniging and Sasolburg with
support services based in Alrode. It is situated close to the recently
acquired and highly successful Glen Douglas Mine, creating exciting
opportunities for synergy. The processing and manufacturing plants are
well established and maintained.
The Clinker Group supplies customers in the wider Gauteng market and
adjacent northern provinces. Based on current sales volumes,
sufficient clinker raw material resources have been secured under
contract for the next ten years - despite a shorter life than that of
the average aggregate mine, the expected financial returns of this
investment are attractive.
The concept of utilising clinker in concrete manufactured products was
developed by the late Mr. J.B. Pfeffer in the 1950`s. The Clinker
Group is currently managed by his son Karl Pfeffer, supported by a
strong and loyal management team and workforce.
3. SALIENT FEATURES OF THE TRANSACTION
The Clinker Group currently returns profit after tax of approximately
R30.0 million per annum which would equate to a return on equity on
Afrimat`s R123.5 million investment of approximately 24% per annum.
The effective date of the acquisition will be the last day of the
month in which all conditions precedent are met. The Purchase Price
will be settled by a combination of cash in the amount of R95 million
and Afrimat ordinary shares, currently held as treasury shares to the
value of R28.5 million. The number of Afrimat ordinary shares will be
determined with reference to the 30 trading days Volume Weighted
Average Price of Afrimat`s ordinary shares on 9 December 2011 being
R4,35 per share. The purchase price may be adjusted in the event that
the Clinker Group`s minimum cash holding is below the value of R10
million at 31 December 2011 and its net asset value at 30 December
2011 is below the comparable figure as at 28 February 2011.
4. RATIONALE OF THE TRANSACTION
The parties to the transaction recognise the scale of potential
opportunity of the acquisition, with Afrimat and the Clinker Group
having complementary and supplementary strengths. Leveraging these
combined strengths will result in new revenue opportunities as well as
increased profitability, specifically through product development and
a focused marketing strategy.
Clinker, the main product supplied by the Clinker Group has unique
advantages to manufacturers of concrete products which are difficult
to substitute. This competitive advantage has rendered the Group
resistant to the volatile cyclicality associated with the construction
materials industry.
The acquisition will enable Afrimat to gain a foothold in the northern
provinces` clinker supply market and concrete manufacturing industry
without creating more capacity in the industry.
5. CONDITIONS PRECEDENT
The Acquisition is subject to the following conditions precedent:
5.1 Compliance by the Clinker Group and Afrimat with matters of an
administrative nature;
5.2 Approval by the Board of Directors of Afrimat;
5.3 Approval by the Shareholders of the Clinker Group;
5.4 Obtaining all required regulatory approvals or clearances.
Items 5.2 and 5.3 have been completed and the submission to the
Competition Commission, in terms of Chapter 3 of the Competition Act
1998, is in progress.
6. FINANCIAL EFFECTS OF THE ACQUISITION
The unaudited pro forma financial effects of Afrimat before and after
the acquisition are based on the Reviewed Condensed Consolidated
Interim Financial Statements of Afrimat for the six months ended 31
August 2011. The financial information utilised for the Clinker Group
was extracted from the unaudited management accounts of the Clinker
Group as at 31 August 2011, Afrimat`s directors are satisfied with the
quality of the management accounts utilised in preparing these
financial effect. The unaudited financial effects are presented for
illustrative purposes only, to provide information on how the
acquisition may have impacted on the results and financial position of
Afrimat. The unaudited pro forma financial effects are the
responsibility of Afrimat`s directors. Due to the nature of the
unaudited pro forma financial effects, they may not fairly present
Afrimat`s financial position and the results of its operations after
the acquisition. It has been assumed for the purpose of the financial
effects that the acquisition took place with effect from 1 March 2011.
The financial effects do not purport to be indicative of what the
financial results would have been, had the acquisition been
implemented on a different date. The unaudited pro forma financial
information has been presented in a manner consistent in all respects
with IFRS and Afrimat`s accounting policies applied consistently
throughout the period.
The unaudited pro forma financial effects of the acquisition for the
six months ending 31 August 2011 are set out below:
Before the After the %
acquisitio acquisiti Chang
n on e
Amount Amount
Basic earnings per share (EPS) 32.4 40.9 26.2
(cents)
Diluted earnings per share 32.0 40.4 26.3
(Diluted EPS) (cents)
Headline earnings per share 29.8 38.4 28.9
(HEPS) (cents)
Diluted headline earnings per 29.4 37.9 28.9
share (Diluted HEPS) (cents)
Net asset value per share 443 460 3.8
(NAV) (cents)
Tangible net asset value 363 328 -9.6
(TNAV) (cents)
Number of ordinary shares in 143,262,41 143,262,4 0.0
issue 2 12
Number of net ordinary shares 137,455,77 143,034,0 4.1
in issue 4 83
Weighted average number of net 137,457,10 143,034,0 4.1
ordinary shares in issue 7 83
Diluted weighted average 139,483,28 145,060,2 4.0
number of net ordinary shares 5 61
in issue
Notes:
1. The "% Change" column of the table is the result of the actual
calculations whereas the "Before" and "After" columns of the
table are rounded figures, as reflected in the Reviewed Condensed
Consolidated Interim Financial Statements of Afrimat for the six
months ended 31 August 2011.
2. The EPS and HEPS in the "Before" column of the table are based on
the Reviewed Condensed Consolidated Income Statement of Afrimat
for the six months ended 31 August 2011 and 137,457,107 Afrimat
ordinary shares in issue (being the weighted number of net
ordinary shares in issue for the six months ended 31 August 2011,
net of treasury shares).
3. The Diluted EPS and HEPS in the "Before" column of the table are
based on the Reviewed Condensed Consolidated Income Statement for
the six months ended 31 August 2011 and 139,483,285 Afrimat
ordinary shares in issue (being the weighted diluted number of
net ordinary shares in issue for the six months ended 31 August
2011).
4. The EPS and HEPS in the "After" column of the table are based on
143,034,083 Afrimat net ordinary shares in issue and the
assumptions that:
- the acquisition became effective on 1 March 2011 and the
purchase price was settled on that date; and
- the purchase price was settled in cash and shares.
5. The Diluted EPS and HEPS in the "After" column of the table are
based on 145,060,261 Afrimat net ordinary shares in issue and the
assumptions that:
- the acquisition became effective on 1 March 2011 and the
purchase price was settled on that date; and
- the purchase price was settled in cash and shares.
6. The NAV per share and TNAV per share in the "Before" column of
the table are based on the Reviewed Consolidated Statement of
Financial Position of Afrimat at 31 August 2011 and 143,262,412
Afrimat ordinary shares in issue.
7. The NAV per share and TNAV per share in the "After" column of the
table are as at 31 August 2011 and are based on the assumption
that the acquisition was completed on 1 March 2011.
8. The pro forma financial effects have not been reviewed by
Afrimat`s auditors.
7. ARTICLES OF ASSOCIATION
Afrimat undertakes that the Articles of Association of the companies
comprising the Clinker Group, will conform to Schedule 10 of the
Listings Requirements of the JSE, as required.
8. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Following the disclosure of financial effects and the terms of the
acquisition, shareholders are no longer required to exercise caution
when dealing in Afrimat ordinary shares and accordingly, the
cautionary announcement dated 3 November 2011 is withdrawn.
Johannesburg
12 December 2011
Sponsor: Bridge Capital Advisors (Pty) Limited
Date: 12/12/2011 12:37:26 Produced by the JSE SENS Department.
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