| Thu 15 Mar 2012, 8:27 | | MTA - Metair Investments Limited - Announcement re |
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MTA
MTA
MTA - Metair Investments Limited - Announcement regarding the acquisition by
Metair of a 99.1% interest in Rombat SA and withdrawal of cautionary
announcement
Metair Investments Limited
(Incorporated in the Republic of South Africa)
(Registration number 1948/031013/06)
Share code: MTA ISIN: ZAE000090692
("Metair" or "the Company")
ANNOUNCEMENT REGARDING THE ACQUISITION BY METAIR OF A 99.1% INTEREST IN
ROMBAT SA AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement published on SENS on 23 February 2012,
Metair shareholders ("Shareholders") are advised that the Company, through
its wholly-owned subsidiary, Metair International Holdings Cooperatief U.A.
("Metair International"), has for a total consideration of Euro42 800 571
("Purchase Price"):
- purchased a 90.05 percent interest in Rombat SA ("Rombat"), a
Romanian private company from Trebela Limited, Mr Dorel Goia, Mr
Ioan Repede, members of management who are shareholders in Rombat
and certain minority shareholders of Rombat ("Part One"); and
- agreed to purchase a 9.09 percent interest in Rombat from the
remaining minority shareholders ("Part Two"),
on the terms set out below ("Transaction").
NATURE OF BUSINESS OF ROMBAT
Rombat manufactures automotive lead-acid batteries. The company was founded
in 1980 and is the largest lead-acid battery manufacturer in Romania,
producing a comprehensive range of over 2 million batteries per year from its
plants in Bistrita. It is vertically integrated with its own recycling plant
which recovers lead and polypropylene through the recycling of used
automotive batteries. Approximately 80% of its products are sold through its
own distribution network to aftermarket customers in Romania and Europe with
the balance to Original Equipment Manufacturers ("OEM") in Romania.
Its products are sold under the "Rombat" brand which is highly regarded in
Romania and Europe (in particular France).
Romania is a cost competitive country that has been part of the European
Union market since 01 January 2007. It is in close proximity to the European
markets that will in the foreseeable future require battery products that
incorporate technology that assist vehicles in reducing their carbon
emissions.
2. RATIONALE FOR THE TRANSACTION
Metair has consistently stated that it will target strategic acquisitions in
the aftermarket sector where it can take advantage of its technological
expertise and balance sheet. The acquisition of Rombat is consistent with
this strategic intent.
International carbon emission protocols continue to drive the move to low
emission engines in the motor vehicle industry. Metair believes that the
future direction of the industry lies in the combination of diesel particle
fuel management systems and Start/Stop battery technology. The world`s
leading lead-acid battery producer believes that globally, 53% of new
vehicles built in 2016 will be equipped with a Start/Stop battery, up from 8%
in 2010 with forecast annual demand for these batteries exceeding 35 million
units with Europe having the largest market globally.
Metair`s wholly-owned subsidiary First National Battery ("FNB") has over 20
years of experience in Start/Stop battery technology where it was developed
for use primarily in mining cap-lamps. Six years ago, FNB made a specific
technical decision that resulted in the successful launch of a Start/Stop
battery product range in 2011. Development and testing work based on the
latest German Automotive Society (VDA) engineering specification for
Start/Stop batteries has been ongoing for the past three years with two
leading German OEMs. This resulted in FNB being awarded in February 2012 its
first series production order for products produced using this technology.
Metair`s strategic intent is to accelerate its penetration of the European
Start/Stop market through the utilisation of the established "Rombat" brand
and Rombat`s distribution network, experience, dominant presence within
Romania and recognised position within the overall European battery market.
Metair believes there is a role to play in this market for a responsible
small to medium size participant.
FNB has for the past 3 years been providing technical assistance to Rombat.
Rombat is an extremely efficient producer and the intention is for FNB and
Rombat to leverage off each other`s respective strengths to increase the
efficiencies of both operations.
There is demand in the European market for a wide range of non-automotive
battery products such as standby, truck, forklift and nuclear battery standby
systems. Rombat does not manufacture or sell these products whereas FNB has
an extensive non-automotive offering. One of Metair`s objectives is to
develop Rombat`s aftermarket and non-automotive product offering to include
these niche products.
An extensive strategic, financial, operational, legal and environmental due
diligence was conducted on Rombat and Metair is confident that the
acquisition will be value-enhancing.
3. PAYMENT OF THE PURCHASE PRICE
Euro1 million of the Purchase Price has been paid by Metair International as
a deposit. The balance of the Purchase Price will be settled as follows:
- Euro37 745 025 on or before Thursday, 22 March 2012 ("Payment
Date") of which Euro2 million will be placed into escrow;
- Euro3 029 203 on 30 March 2012 subject to the condition precedent
detailed in paragraph 4 below being fulfilled ("Closing Date"); and
- Euro1 026 343, together with interest in Euro accrued on such
amount at the London Inter-Bank Offered Rate shall be paid on 17
July 2013.
Metair has hedged the payment of the Purchase Price in order to limit any
currency risk attached to the Transaction.
The acquisition has been funded from existing cash resources and third party
debt.
4. CONDITION PRECEDENT
Part One of the Transaction is unconditional and Part Two is subject to the
approval of the South African Reserve Bank.
5. EFFECTIVE DATE
The effective date for Part One of the Transaction will be on the Payment
Date and for Part Two the effective date will be on the Closing Date.
6. PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTION
The table below sets out the unaudited pro forma financial effects
("Financial Effects") of the Transaction based on Metair`s published
condensed audited financial results for the year ended 31 December 2011 ("YE
Results"). The Financial Effects have been prepared for illustrative purposes
only, to assist Shareholders in assessing the impact of the Transaction on
Metair`s basic earnings per share ("EPS"), headline earnings per share
("HEPS"), net asset value per share ("NAVPS") and net tangible asset value
per share ("NTAVPS").
These Financial Effects have been disclosed in terms of the JSE Limited
Listings Requirements ("Listings Requirements") and, because of their nature,
do not necessarily fairly present Metair`s financial position, changes in
equity, results of operations or cash flows after the Transaction. The
Financial Effects are the responsibility of the directors of Metair.
Before the Pro forma Change
Transaction After the (%)
(1) Transaction
(2)
EPS (cents) (3) 289 280 (3.1%)
HEPS (cents) (3) 260 251 (3.5%)
NAVPS (cents) (4) 1 119 1 109 (0.9%)
NTAVPS (cents) (4) 1 103 1 042 (5.5%)
Weighted average number of 141 217 141 217 -
shares in issue (`000)
Shares in issue at 31 December 141 451 141 451 -
2011
Notes:
1. Based on the YE Results.
2. Represents the pro forma financial effects after the Transaction.
3. The pro forma effects of the Transaction on EPS and HEPS are based
on the following principal assumptions:
- the Transaction was effective 1 January 2011;
- the financial information relating to Rombat in calculating
the Financial Effects was extracted from Rombat`s unaudited
management accounts for the financial year ended 31 December
2011 ("Management Accounts"). The results of discontinued
operations reflected in the Management Accounts were excluded
as these do not form part of the Transaction. Management of
the Company is satisfied with the quality of the Management
Accounts;
- pro forma consolidated income after tax relating to Rombat of
R31.7 million;
- the excess of the fair value of the purchase consideration has
been allocated to identifiable intangible assets in the amount
of R42.1 million and goodwill in the amount of R27.5 million,
based on a preliminary purchase price allocation exercise. In
terms of IFRS 3: Business Combinations, a purchase price
allocation exercise will need to be performed on the effective
date of the Transaction;
- estimated identifiable intangible assets are amortised over 10
years;
- the purchase consideration is settled by a cash payment of
R449.8 million (based on an average Rand/Euro exchange rate of
R10.5);
- interest on the purchase consideration paid is assumed at an
average rate of 7.7% per annum;
- taxation at 28% on a portion of the interest on the purchase
consideration;
- transaction costs of R16 million; and
- deferred tax has been raised on the identifiable intangible
assets arising on consolidation at the tax rate of 16%, being
the effective corporate tax rate in Romania.
4. The pro forma effects of the Transaction on NAVPS and NTAVPS are
based on the following principal assumptions:
- the Transaction was effective 31 December 2011;
- the purchase consideration is settled by a cash payment of
R449.8 million;
- the excess of the fair value of the purchase consideration has
been allocated to the identifiable intangible assets and
goodwill based on a preliminary purchase price allocation
exercise. In terms of IFRS 3: Business Combinations, a
purchase price allocation exercise will need to be performed
on the effective date of the Transaction;
- transaction costs of R16 million; and
- deferred tax has been raised on the identifiable intangible
assets arising on consolidation at the tax rate of 16%, being
the effective corporate tax rate in Romania.
7. CATEGORISATION
The Transaction is classified as a Category 2 transaction in accordance with
the Listings Requirements.
8. MEMORANDUM OF INCORPORATION ("MOI")
Metair undertakes that the MOI of Rombat will conform to Schedule 10 of the
Listings Requirements, as required.
9. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Further to this announcement, Shareholders are advised that they no longer
need to exercise caution when dealing in Metair`s securities.
10. PRESENTATION
There will be a presentation on Monday, 26 March 2012 by Metair management in
Johannesburg at 11:00 at the Crowne Plaza Rosebank Hotel, Pula Room.
Johannesburg
15 March 2012
Sponsor
One Capital
South African legal advisors
Taback and Associates (Pty) Limited
Romanian legal advisors
D&B David si Baias
Corporate advisors
PricewaterhouseCoopers Corporate Finance (Pty) Limited
Investor relations
College Hill
Date: 15/03/2012 07:45:01 Produced by the JSE SENS Department.
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