| Tue 27 Mar 2012, 13:03 | | AET - Alert Steel Holdings Limited - Capital and organisational restructure |
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AET
AET
AET - Alert Steel Holdings Limited - Capital and organisational restructure,
rights offer, introduction of BEE partner 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 Group")
CAPITAL AND ORGANISATIONAL RESTRUCTURE, RIGHTS OFFER, INTRODUCTION OF BEE
PARTNER AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
During 2011, Alert embarked on an aggressive restructuring of the Group
and all of its operations as well as its capital and debt structure,
with a view to right-sizing the Group`s balance sheet and returning
Alert to profitability. As part of such capital and debt restructure,
the following has already been achieved:
* Raised R50 million through a rights issue;
* Restructured debt as follows:
- Renegotiated better terms on a property loan;
- Converted R70 million of the overdraft facility to a 5 year long-
term loan at prime less 2%; and
- Converted R20 million of the overdraft facility to a 2 year long-
term loan at prime, with a one year payment holiday prior to
commencement of repayments;
* Acquired a further 50% stake in Alert Steel Polokwane (Pty) Limited
from Murray and Roberts Steel (Pty) Limited;
* Returned non-profitable branches to profitability;
* Implemented cost savings plans and improved efficiencies; and
* Subleased premises.
As a further part of the Group`s restructuring process, Alert also
revisited its business strategy and embarked on a process of adjusting
the business of Alert to become more of a retail steel business
compared to operating mainly in the industrial and building
construction sectors. The following strategic projects have been
implemented:
* Changed the Group`s products to only be steel and steel related
products, no building or plumbing materials;
* Changed the branding look and feel in all branches and divisions;
* Revamped all the branches to the new branding look and feel and to
include a new retail store, new product lines and branding; and
* Revamped all the branches to cater for products aligned to the rural
and retail steel sector markets.
2. Rights offer
2.1 Introduction
In order to enable Alert to complete the restructuring process
that it commenced during 2011, increase its Black Economic
Empowerment ("BEE") shareholding and strengthen the Group`s
balance sheet for the long-term, the Board of Directors of Alert
("Board") proposes that a further R120 million be raised by means
of a rights offer ("Rights Offer") to be utilised as follows:
* R30 million to settle the purchase consideration of various
acquisitions, details of which will be set out in further
announcements ("Settlement of Purchase Considerations");
* R55 million to restructure Alert`s current debt package,
inclusive of R15 million interim funding;
* R30 million to be utilised as working capital and address cash
flow requirements; and
* R5 million will be used to finalise the Group`s restructuring
process.
2.2 Salient terms of the Rights Offer
In terms of the Rights Offer, 4 285 714 286 new no par value
ordinary shares in Alert ("the Rights Offer Shares") will be
offered to Alert ordinary shareholders ("Shareholders") at a
subscription price of 2.8 cents per Rights Offer Share in the
ratio of 241.96943 Rights Offer Shares for every 100 ordinary
Alert shares. No excess subscriptions will be permitted and there
will be no minimum subscription. The rights offer price represents
a discount of 63.63% to the 30-day volume weighted average price
of Alert ordinary shares of 7.6988 cents as at 26 March 2012,
being the date that the underwriting agreement (as discussed in
paragraph 2.3 below) was entered into by Alert. The Board has duly
considered all existing circumstances relating to Alert in
determining the rights offer price referred to above. The Rights
Offer Shares once subscribed for and issued, will rank pari passu
in all respects with the existing issued Alert shares.
2.3 Underwriting of Rights Offer
An underwriting agreement has been entered into between Alert,
Omphile Investments Proprietary Limited ("Omphile Investments")
and certain of Alert`s major shareholders (collectively "the
Underwriters"), in terms of which the Underwriters have agreed to
partially underwrite the Rights Offer in the total amount of
R102.5 million ("the Underwriting Agreement") amounting to 85.4%
of the Rights Offer. It has been agreed with the Underwriters that
the substantial majority of the underwritten amounts will be made
available to Alert, prior to the implementation of the Rights
Offer, on loan account with interest on such loans accruing at the
prime rate plus two percent.
The Underwriting Agreement is subject, inter alia, to the
fulfilment of the following suspensive conditions:
* to the extent required, all necessary regulatory approvals
having been obtained from all relevant regulatory authorities; and
* the JSE Limited granting a listing in respect of the Rights
Offer Shares.
3. Introduction of BEE shareholder
Nedbank Limited has introduced Alert to Omphile Investments, a 100%
Black Economic Empowered ("BEE") company with investments primarily in
the mining industry, founded and chaired by Ari Rasempe Kgomongwe.
Omphile Investments has undertaken, in terms of the Underwriting
Agreement, to underwrite R44 million of the Rights Offer (as discussed
in paragraph 2.3 above) ("the BEE Investment"). In order to secure an
investment by Omphile Investments in Alert of at least 25.1% subsequent
to the Rights Offer, the Underwriters, other than Omphile Investments,
have undertaken to renounce a portion of their Rights Offer Shares in
favour of Omphile Investments in order to secure a minimum investment
by Omphile Investments in Alert, in terms of Omphile Investments`
underwriting of the Rights Offer, of not less than 25.1%.
Subsequent to the BEE Investment, Alert will be at least 30% empowered.
The Board views the BEE Investment as a significant step forward for
Alert, ensuring that the Group can tender for government and major
corporate transactions in future.
4. Further cautionary announcement
Further to the cautionary announcements dated 30 January 2012 and 12
March 2012, Alert shareholders are advised that further details
pertaining to the Rights Offer and Settlement of Purchase
Considerations will be announced as and when such details are
finalised. Accordingly, shareholders are advised to continue exercising
caution when dealing in the Group`s securities until all information
has been disclosed.
Pretoria
27 March 2012
Transaction and Designated Advisor
QuestCo(Pty) Limited
Date: 27/03/2012 13:03:01 Produced by the JSE SENS Department.
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