| Tue 19 Mar 2002, 0:00 | | Disposal By Dorbyl Of Its Metals Trading Division |
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DORBYL LIMITED
(Incorporated in the Republic of South Africa)
(Registration no. 1911/001510/06)
Share code: DLV ISIN code: ZAE 000002184
("Dorbyl" or "the company")
Disposal by Dorbyl of its Metals Trading Division
1. Introduction
Further to the cautionary announcements dated 4 February 2002 and 7
February 2002, Dorbyl shareholders are advised that agreements have
been entered into between Dorbyl, Dorbyl Marine (Proprietary) Limited
("Dorbyl Marine"), a wholly-owned subsidiary of Dorbyl (collectively,
"the Dorbyl group") and Kulungile Metals (Proprietary) Limited
("Kulungile") (formerly Clidet No. 366 (Proprietary) Limited) (the
vehicle representing a management consortium), subject to certain
conditions precedent as set out in 5 below ("the conditions
precedent"), in terms of which the Dorbyl group has disposed of its
entire interest in its Metals Trading Division, comprising the two
Baldwins Steel processing centres at Isando and Vanderbijlpark, and
Stalcor, the specialist stainless steel and aluminium distributor, to
Kulungile ("the disposal"), with effect from 1 February 2002 ("the
effective date").
2. Rationale for the disposal
On 1 October 2001, Dorbyl issued an announcement which inter alia
stated that "it is planned to increasingly refocus the Group, entailing
a further reduction in activities locally."
The Baldwins Steel operation has been significantly reduced in size
over the past few years as a result of the disposal of the Automotive
operations and the sale of numerous trading branches to Metal Land
franchisees. The operation now consists of only two processing sites
at Isando and Vanderbijlpark, and in view of its reduced size is no
longer regarded as core.
Stalcor, though it has always provided an excellent return in the past,
is being sold as well as it has become an integral part of the Baldwins
business.
While this transaction will have the effect of reducing earnings as
reflected below, it will release cash amounting to approximately one
third of the Group's total market capitalization. Earnings generated
by these operations contributed a disproportionately lower percentage.
Accordingly the cash realised will either be invested within the Group
at better returns or, alternatively, returned to shareholders.
3. Consideration
3.1 The total sale consideration amounts to R205m and is to be paid as
follows:
3.1.1 R36,7m on the effective date;
3.1.2 within ten business days after the conditions precedent have been
fulfilled, an amount of R105m shall be paid to Dorbyl in cash.
Interest at call rate ruling between the effective date and the
date of payment is payable;
3.1.3 the remaining portion of the purchase consideration of R63,3m is
to be paid to Dorbyl in four equal instalments of R15,8m on the
last day of February 2002, March 2002, April 2002 and May 2002.
No interest will be payable on these instalments.
3.2 As part of the disposal, Dorbyl will advance a R40 million interest
bearing loan to Kulungile to assist in the funding of working capital.
This loan will be repaid in equal instalments by 31 March 2003.
3.3 The Metals Trading Division had a net asset value of R196,6 million on
the effective date and achieved attributable profit of R11,9 million
(excluding any interest effects) during the six-month period ended 30
September 2001.
4. Financial effects
The table below sets out the pro-forma financial effects of the
disposal on the earnings and headline earnings and the net asset value
and net tangible asset value per Dorbyl share, based on the assumptions
that:
- for purposes of the earnings and headline earnings per share
calculations:
the disposal was effective during the six-month period ended 30
September 2001; and
the whole of the purchase consideration was received on 1 April
2001 and that such purchase consideration was invested to earn an
after tax return of 7,23% during the six-month period ended 30
September 2001;
- for purposes of the net asset value and net tangible asset value
per share calculations, the disposal was effected on 1 April 2001.
Unaudited Pro-forma
- - %
before after Change
(cents) (cents)
Earnings per share 140,4 123,1 (12,3)
Headline earnings per share 150,5 133,2 (11,5)
Net asset value per share at 30 2558,1 2564,1 0,2
September
Tangible net asset value per
share at 2432,8 2467,4 1,4
30 September
5. Conditions precedent
The disposal is subject, inter alia, to the following conditions
precedent:
- resolution of various commercial considerations relating to the
disposal which are in the process of being finalised;
- the passing of the requisite resolutions by Dorbyl shareholders in
general meeting approving the disposal;
- the approval of the disposal by the Competition Commission; and
- the approval, to the extent required, of the disposal by the JSE
Securities Exchange South Africa ("the JSE") and the Securities
Regulation Panel.
6. Related party transaction and independent opinion
6.1 Included in the management consortium controlling Kulungile are Messrs
M L Bosch and V Lefrere who are directors of Dorbyl Marine. Messrs
Bosch and Lefrere are accordingly deemed to be related parties to
Dorbyl in terms of the Listings Requirements of the JSE.
6.2 The Listings Requirements of the JSE require that an independent
opinion be obtained as to whether the terms and conditions of the
disposal are fair and reasonable to Dorbyl shareholders. PSG
Investment Bank Limited has been appointed to provide such opinion,
which will be contained in the circular to Dorbyl shareholders referred
to below.
7. Circular to shareholders
A circular to Dorbyl shareholders, containing details of the disposal
and incorporating a notice of general meeting of Dorbyl shareholders
will, subject to the approval by the JSE, be mailed to shareholders
within 28 days of this announcement or within such longer period as the
JSE may approve.
8. Withdrawal of cautionary announcement
Shareholders of Dorbyl are advised that caution is no longer required
when dealing with the securities on the JSE.
Johannesburg
20 March 2002
Sponsor Attorneys Funder to Kulungile
PSG INVESTMENT BANK T W FERGUSON ABSA BANK LIMITED
(PROPRIETARY) LIMITED
