| Thu 30 Sep 2021, 14:59 | | ENX GROUP LIMITED - Divestment of enX’s Southern African materials handling business |
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Divestment of enX’s Southern African materials handling business
ENX GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2001/029771/06)
JSE share code: ENX ISIN: ZAE000222253
(“enX” or “the Company”)
DIVESTMENT OF ENX’S SOUTHERN AFRICAN MATERIALS HANDLING BUSINESS
1. Introduction
Shareholders are advised that enX has agreed binding heads of terms with CFAO Holdings South Africa
Proprietary Limited (“CFAO South Africa”) in relation to the divestment of EIE Group Proprietary Limited
(“EIE Group”) (“the proposed transaction”) for an aggregate consideration of R700 million (the “base
subscription price”).
2. Description of EIE Group and CFAO South Africa
EIE Group provides distribution, rental and value add services for industrial and material handling equipment in
South Africa and other African countries through a network of independent dealers. EIE Group is the market
leader in materials handling and the sole distributor of Toyota Forklifts, BT warehousing equipment, Konecranes
heavy duty forklifts and container handling equipment, Terberg Terminal Tractors, Hawker batteries and chargers
and Hako industrial cleaning equipment in South Africa.
CFAO South Africa group, delivers a range of integrated mobility solutions across the automotive value chain
contributing towards the support, development and growth of the automotive industry in South Africa, and across
the rest of Africa.
3. Rationale and use of proceeds
The transaction represents an attractive opportunity for the Company to monetise its investment in EIE Group at
a valuation that in the view of the board of directors of enX, fairly reflects the future prospects and cash flows of
EIE Group. CFAO South Africa group, being part of the TTC group of companies, being the exclusive supplier
of Toyota forklift for EIE Group, is a natural fit as owner of EIE Group and whom the directors are of the view
will prove to be a sound custodian of the EIE Group business. Furthermore, the board considers that proceeding
with the proposed transaction with CFAO South Africa reduces the implementation risk of the transaction.
The Board is in the process of considering the optimal application of the cash proceeds arising from the proposed
transaction.
4. Structure and certain terms of the proposed transaction
The proposed transaction will be implemented by way of a subscription for ordinary shares by CFAO South
Africa and a repurchase by EIE Group of all the shares in EIE Group, which will be held by enX in EIE Group
post the implementation of the internal restructure defined in the next paragraph. The base subscription price is
subject to typical leakage adjustments between 31 December 2020 and the subscription date, such amount being
the final subscription price.
Prior to the implementation of the proposed transaction, enX will undertake an internal restructure, following
which Saficon Industrial Equipment Proprietary Limited, 600SA Holdings Proprietary Limited and Uni-Cape
Equipment Proprietary Limited will each become wholly owned subsidiaries of EIE Group, which will in-turn be
unbundled so as to become a wholly-owned subsidiary of enX (the “internal restructure”) (EIE Group and its
subsidiaries are collectively referred to hereinafter as the “target companies”).
In terms of a subscription agreement to be concluded between enX, CFAO South Africa and EIE Group (the
“subscription agreement”), CFAO South Africa will subscribe for newly issued ordinary shares in EIE Group
for an amount equivalent to the final subscription price, payable to EIE Group (the “share subscription”). On
the subscription date, and immediately upon payment of the final subscription price by CFAO South Africa, EIE
Group will repurchase the EIE Group shares held by enX for an amount equivalent to the final subscription price
(the “share repurchase”). Following the share subscription and the share repurchase, CFAO South Africa will
be the sole shareholder of EIE Group.
enX has undertaken not to compete with the business carried on by the target companies for a period of three
years from the subscription date in any territory in which the target companies operate however enX companies
including Eqstra Logistics and Fleet Management and certain other enX companies have been carved out of this
provision and are not deemed to constitute a competing business.
The proposed transaction is subject to warranties, representations and indemnities (“WR&I”) that are customary
for transactions of this nature. enX will be liable for the WR&I for periods of either 30 or 60 months after closing.
The WR&I will be secured by the Guarantee (as defined paragraph 5 below).
5. Conditions precedent
The implementation of the proposed transaction remains subject to the fulfilment and/or waiver of the following
conditions precedent, as the case may be, by no later than 31 May 2022 (the “longstop date”):
- the internal restructure being implemented to the satisfaction of CFAO South Africa;
- enX shareholders approving the proposed transaction as required in terms of the Companies Act, 2008, the
listing requirements of the JSE and the memorandum of incorporation of enX;
- all requisite regulatory approvals for the implementation of the proposed transaction having been obtained
from all requisite Competition Authorities and the JSE;
- approval of the internal restructure and disposal by the target companies’ bankers and funders;
- the conclusion of a share repurchase agreement between enX and EIE Group;
- certain material third party consents being obtained;
- the conclusion of a transitional services agreement between CFAO South Africa and the target companies
for a period of up to 12 months;
- the provision of an on-demand bank guarantee in a form acceptable to CFAO South Africa in favour of
CFAO South Africa and/or EIE Group as security for the obligations of enX (“Guarantee”), for an amount
equal to 20% of the base subscription price, which Guarantee shall be in place for a period of 2 years from
the subscription date; and
- no material adverse event having occurred between the date of signature of the subscription agreement and
the subscription date. A material adverse event shall exclude:
- an event, fact or circumstance which has or is reasonably likely to have, individually or in the
aggregate, an adverse impact of less than 30% on the annual net profits after tax of the EIE Group;
- any failure, in and of itself, by the EIE Group to meet any internal or published projections, forecasts,
estimates or predictions in respect of revenues, earnings or other financial or operating metrics for
any period (it being understood that the facts or occurrences giving rise to or contributing to such
failure may be deemed to constitute, or be taken into account in determining whether there has been,
or is reasonably expected to be, a material adverse effect, to the extent permitted by the definition);
or
- any consequence directly related to COVID-19 pandemic.
enX has the unilateral right to extend the longstop date by up to 90 days (for no more than two occasions) provided
the only suspensive conditions outstanding are those in respect of regulatory approvals.
6. Financial information
The value of the consolidated net assets of EIE Group (assuming the internal restructure has been implemented)
as at 28 February 2021 was R755 million. The consolidated net profit after tax attributable to EIE Group
(assuming the internal restructure has been implemented) for the six months ended 28 February 2021 was
R33 million.
The above financial information has been extracted from the unaudited results of enX for the six months ended
28 February 2021, which were prepared in terms of IFRS.
7. Categorisation of the transaction
The proposed transaction is classified as a category 1 transaction in terms of the JSE Listings Requirements and,
accordingly, requires shareholder approval. Full details of the proposed transaction, together with, inter alia, the
pro forma financial effects of the proposed transaction will be included in a circular to be distributed to
shareholders by no later than 15 December 2021. The salient dates and times relating to the proposed transaction
will be released on SENS and published in the press at the time of the posting of the circular.
30 September 2021
Transaction sponsor
Java Capital
Date: 30-09-2021 02:59:00
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