| Tue 8 Mar 2005, 9:14 | | Acquisition By Fluid Sa Of 26% Of Letaba |
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Sethold - Acquisition By Fluid Sa Of 26% Of Letaba And Withdrawal Of Cautionary
SETPOINT TECHNOLOGY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1996/014334/06)
Share code: STO ISIN: ZAE000013629
(`Sethold`)
ACQUISITION BY FLUID SA (PROPRIETARY) LIMITED (`FLUID SA`) OF 26% OF LETABA
HOLDINGS (PROPRIETARY) LIMITED (`LETABA`) AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. Introduction
Fluid SA, a wholly-owned subsidiary of Sethold, has concluded an agreement
in terms of which it has acquired 26% of the issued share capital of Letaba
from the minority shareholders (`the sellers`), with effect from 1 March
2005 (`the transaction`).
Letaba supplies high quality specialised pumps to the food, pharmaceutical,
mining, water and agricultural industries, selling them in South Africa and
exporting them to Southern African countries.
2. Rationale
Profitability at Sethold has increased through focused efforts on internal
processes and the organic growth of existing operations. Sethold considered
the opportunities to develop through taking out the minority shareholders
of Letaba. Fluid SA currently owns 74% of the issued share capital of
Letaba. In terms of the transaction, Fluid SA purchased the remaining 26%
of the issued share capital of Letaba from the sellers, the effect being
that Letaba has become a wholly-owned subsidiary of Fluid SA.
3. Terms and conditions
3.1 The purchase consideration
3.1.1 The purchase consideration is based on a pre-tax multiple of
the audited pre-tax earnings of Letaba for the year ended 31
August 2004 and for the period to 31 August 2007.
3.1.2 The purchase consideration will be payable in four tranches
as follows:
3.1.2.1 The first tranche shall be paid by Fluid SA on the
closing date of the sale agreement detailing the
transaction (`the sale agreement`), namely the sum of
R3 732 770 (three million seven hundred and thirty two
thousand and seven hundred and seventy rand) to the
sellers pro rata to their shareholding, such amount
being the equivalent of 40.0% of the purchase
consideration;
3.1.2.2 the second tranche to be paid by Fluid SA to the
sellers pro rata to their shareholding, will be an
amount of R500 000 (five hundred thousand rand) payable
on or before 30 November 2005;
3.1.2.3 the third tranche to be paid by Fluid SA to the sellers
will be an amount of R500 000 (five hundred thousand
rand) payable to the sellers pro rata to their
shareholding on or before 30 November 2006;
3.1.2.4 the fourth and final tranche of the total purchase
price to be paid by Fluid SA to the sellers will be
paid on or before 30 November 2007 and be an amount
based on the audited pre-tax profits of Letaba for the
three 12 month periods, ending 31 August 2005, 31
August 2006 and 31 August 2007.
3.1.3 Notwithstanding the provisions of paragraph 3.1.2 above,
management`s best estimate of the total consideration
payable is R9.34 million. The maximum total consideration
payable is R14 million.
3.2 Warranties
Fluid SA is the existing majority shareholder in Letaba and is aware
of the affairs of Letaba. Accordingly no warranties are furnished by
the sellers to Fluid SA in respect of the shares purchased or in
respect of the performance of Letaba, its assets or liabilities,
contingent or otherwise.
4. Financial effects
The table below sets out the pro forma financial effects of the transaction
on Sethold assuming that the transaction took place on 1 September 2003 for
income statement purposes and 31 August 2004 for balance sheet purposes.
The pro forma financial effects are presented for illustrative purposes
only and because of their nature may not give a fair reflection of
Sethold`s financial position, changes in equity or results of operations or
cash flows after the transaction. The pro forma financial effects are the
responsibility of the directors.
Before After
(cents per (cents per Change
share) share) %
Earnings 3.2(1) 3.6(2) 12.5
Fully diluted earnings 3.1(1) 3.4(2) 12.5
Headline earnings 5.2(1) 5.6(2) 7.7
Fully diluted headline earnings 5.0(1) 5.3(2) 7.7
Net asset value 26.6(1) 25.2(3) (5.2)
Tangible net asset value 14.6(1) 13.3(3) (9.4)
Number of shares in issue (`000) 242 109 242 109
Fully diluted weighted average number
of shares in issue (`000) 253 649 253 649
Assumptions:
1. Management`s best estimate of the total liability payable is R9.34
million.
2. The total liability payable has been net present valued back to 31 August
2004 for balance sheet purposes and 1 September 2003 for income statement
purposes using a discount rate equal to the average interest rate for the
year ended 31 August 2004 of 11.85%.
Notes:
1. The `Before` financial information has been extracted, without adjustment,
from the audited annual financial statements of Sethold for the year ended
31 August 2004.
2. The `After` earnings, fully diluted earnings, headline earnings and fully
diluted headline earnings have been adjusted to exclude the minority
interest in the after taxation earnings of Sethold for the year ended 31
August 2004 of R1.581 million, to include a notional interest charge of
R442 000 in respect of the payment of the first tranche calculated using an
average interest rate of 11.85% for the year ended 31 August 2004 and to
include a notional interest charge of R426 000 arising as a result of the
net present valuing of the deferred portion of the total liability payable.
3. The `After` net asset value and tangible net asset value have been
adjusted to reflect the payment of the first tranche, the elimination of
the minority interest in Letaba, the raising of the net present value of
the deferred liability and the raising of the premium on the acquisition of
the minority interest in Letaba in equity.
5. WITHDRAWAL OF cautionary announcement
Shareholders are referred to the cautionary announcement published on 14
February 2005 and are advised that, as negotiations have been successfully
concluded, caution is no longer required by Sethold shareholders when
dealing in their Sethold shares.
Johannesburg
7 March 2005
Investment bank and sponsor
STANDARD BANK
Corporate legal advisors and consultants
BARTLETTS
ATTORNEYS CONVEYANCERS NOTARIES
Auditors
KPMG
