| Tue 17 Aug 2004, 10:01 | | Disposal By Elb Of Its Interests In Elb Mcwade Ele |
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ELB Group Limited - Disposal By Elb Of Its Interests In Elb Mcwade Electrical
(Pty) Limited And Withdrawal Of Cautionary Announcement
ELB Group Limited
Incorporated in the Republic of South Africa)
Registration number: 1930/002553/06
Share Code: ELR
ISIN: ZAE000035101
(`ELB`)
DISPOSAL BY ELB OF ITS INTERESTS IN ELB McWADE ELECTRICAL (PTY) LIMITED AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement dated 15 July 2004, Andisa Capital is
authorised to announce that ELB has reached agreement with Wellspan Investments
(Pty) Limited (`Wellspan`), subject to the conditions precedent set out in
paragraph 2.5 below, to sell all of its shares in and loan account against ELB
McWade Electrical (Pty) Limited (`McWade`) to Wellspan for a total consideration
of R30 million in cash (`the disposal`). In terms of the JSE Securities Exchange
South Africa Listings Requirements, the disposal will be classified as a related
party transaction as the shareholders of Wellspan are also directors of ELB.
2. THE DISPOSAL
2.1 Rationale for the disposal
Marc Austin Hindle and Dasarathan Naidoo, being directors of McWade as well as
Wellspan, already own, collectively, 20% of the issued share capital of McWade.
To ensure the necessary level of black economic empowerment in McWade, it has
been decided to dispose of the remaining 80% of the issued share capital owned
by ELB as well as the loan owing to ELB by McWade, to these two directors as
part of a management buy-out.
2.2 The business of McWade
McWade, whose principal customer is Eskom, manufactures and supplies a niche
product range of proprietary high voltage transmission and distribution
components to the electrical industry. McWade has five main product ranges,
namely high voltage current carrying substation clamps, isolating switches,
insulators, transmission line hardware and compression fittings.
2.3 Consideration and effective date
ELB will, subject to the conditions precedent under paragraph 2.5 below, dispose
of its 80% equity interest in McWade and cede the loan owing by McWade to ELB,
to Wellspan for a total cash consideration of R30 million (`the consideration`).
ELB will use the consideration to further strengthen its balance sheet.
The effective date of the disposal will be the first business day following the
fulfilment of the conditions precedent set out in paragraph 2.5 below or 30
September 2004, whichever is later. Should the conditions precedent in paragraph
2.5 below not be fulfilled by 30 November 2004, the disposal shall be deemed to
be void and of no further force and effect.
2.4 Financial effects of the disposal
The financial effects of the disposal have been prepared for illustrative
purposes only. The disposal would have had the following effect on earnings per
share (`EPS`) and headline EPS of ELB for the six months ended 31 December 2003,
assuming that the transaction had been implemented on 1 July 2003, and on net
asset value (`NAV`) and net tangible asset value (`NTAV`) per share of ELB,
assuming that the transaction had been implemented at 31 December 2003, and that
the cash proceeds on disposal had been invested at an after tax interest rate of
4.55%:
Before the After the Percentage
disposal disposal increase /
(cents per (cents per (decrease)
share)(1) share)(2)
EPS(3) 3.2 50.4 1,470%
Headline EPS 3.0 (6.3) (308)%
Adjusted headline
EPS(4) 21.4 12.0 (44)%
NAV per share(3) 507.5 556.5 9.7%
NTAV per share(3) 477.4 543.6 13.9%
1. Based on the unaudited interim financial results of ELB for the six months
ended 31 December 2003. The weighted average number of shares in issue and the
number of shares in issue for purposes of the calculations are 30,452,368 and
28,273,645, respectively.
2. The adjusting of earnings for the six months ended 31 December 2003 is based
on the assumption that the disposal was implemented on 1 July 2003 for the
purpose of calculating EPS and headline EPS, and on 31 December 2003 for the
purpose of calculating NAV and NTAV.
3. The capital profit on the sale of McWade of R17,212 million has been taken
into account for income statement purposes and R13,860 million for balance sheet
purposes.
4. The adjusted headline EPS is before taking into account the translation loss
of foreign treasury cash of R5,6 million.
2.5. Conditions precedent
The implementation of the disposal is subject to the fulfilment of the following
conditions precedent:
a) the formal granting of a loan by Standard Bank of South Africa Limited to
Wellspan for the consideration;
b) the release of ELB from its obligations to First National Bank (a division of
FirstRand Bank Limited) (`FNB`) in relation to the irrevocable standby letter of
credit issued by FNB on behalf of McWade in favour of A Salvi & C. S.p.A for the
sum of Euro 573,574.08;
c) the necessary approvals are obtained from the JSE Securities Exchange South
Africa; and
d) the approval of ELB`s shareholders of the disposal in a general meeting to be
convened.
2.6 Fair and reasonable opinion
BDO Spencer Steward Inc, the independent professional expert in regard to the
disposal, is in the process of compiling a fair and reasonable opinion on the
terms and conditions of the disposal.
2.7 Irrevocable undertakings
ELB shareholders holding 17,845,755 ELB shares (constituting 52.7% of the issued
share capital of ELB) have consented to the disposal and have undertaken to vote
in favour of the resolutions required to approve the disposal.
3. GENERAL MEETING
A general meeting of ELB shareholders will be held at the offices of ELB at 1st
Floor, 55 Sixth Road, Hyde Park, Sandton at 9:00 on Wednesday, 29 September 2004
for the purpose of considering, and if deemed fit, passing, with or without
modification, the necessary resolutions to approve and ratify the disposal. A
notice convening such general meeting will form part of the circular to be
posted to ELB`s shareholders.
4. CIRCULAR TO SHAREHOLDERS
A circular, providing information on the disposal and incorporating a notice to
convene a general meeting will be posted to ELB`s shareholders on or about 6
September 2004.
5. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
ELB shareholders are advised that caution is no longer required to be exercised
by shareholders when dealing in their securities.
Sandton
17 August 2004
Financial adviser: Andisa Capital
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited) Corporate
Finance
Independent Professional Expert: BDO Spencer Steward Inc.
Date: 17/08/2004 09:52:48 AM
Produced by the JSE SENS Department
