| Wed 23 Mar 2005, 11:05 | | Acquisition Of The Businesses Of The Powermite |
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Hudaco - Acquisition Of The Businesses Of The Powermite Africa (Pty) Limited
Group Of Companies And Ampco Electric
Hudaco Industries Limited
(Incorporated in the Republic of South Africa)
(Registration number 1985/004617/06)
Share code: HDC ISIN: ZAE000003273
(`Hudaco`)
ACQUISITION OF THE BUSINESSES OF THE POWERMITE AFRICA (PTY) LIMITED GROUP OF
COMPANIES (`POWERMITE`) AND AMPCO ELECTRIC (PTY) LIMITED (`AMPCO`) (COLLECTIVELY
`THE POWERMITE BUSINESSES`)
1. Introduction
Shareholders are advised that Hudaco`s wholly owned subsidiary Hudaco
Trading Limited has entered into an agreement dated 18 March 2005 to acquire the
Powermite businesses with effect from 1 December 2004 (`the effective date`)
for a cash consideration of approximately R65 million on the terms and
conditions set out below (`the acquisition`).
2. Rationale for the acquisition
Hudaco is a South African industrial group focussed on the importation and
value added distribution of selected high quality branded industrial and
security products in southern Africa. One of Hudaco`s key strategies is to apply
its strong cash flows to acquire new businesses in similar fields of activity
when the opportunity arises.
The Powermite businesses import, manufacture and distribute electrical
cabling, plugs, sockets, festoon systems, conductors, current collectors, cable
reeling equipment and other related products to a wide range of industrial and
mining customers in South Africa. Operating under the names Powermite
(distribution) and Ampco (manufacture), they employ some 160 people in 10
locations and generate sales of R90 million per annum.
The Powermite businesses, which will operate as a separate division of
Hudaco Trading, will expand the product range offered by the Hudaco Group to its
industrial and mining customers and its electrical bias will fit well alongside
the businesses of Bauer Geared Motors and Varispeed (variable speed drives),
which were acquired by Hudaco in the last three years.
3. Salient terms of the acquisition
3.1 Purchase consideration
The purchase consideration is approximately R65 million, subject to
adjustment as set out below, and will be settled from Hudaco`s available cash
resources as follows:
* a fixed amount of R44 million, which is equal to the net asset value of the
Powermite businesses at the effective date, is payable in cash on completion of
the acquisition. This amount will bear interest at prime less 3% from the
effective date to the date paid. The net asset value includes R10 million in
cash and the Powermite businesses have no borrowings.
* three tranches of approximately R7 million each will be paid in cash on 1
December 2005, 2006 and 2007 respectively, subject to upward or downward
adjustment, based on agreed levels of profitability to be achieved by the
Powermite businesses in each of those years, subject to a maximum payment of
R31 million in aggregate. (The present value of these expected tranches is R17,4
million)
3.2 Management
Siegfried Roediger and Manfred Braun, the managing directors of Powermite and
Ampco respectively, have entered into service contracts for a minimum of three
years and restraint of trade agreements in favour of the Hudaco Group for a
period of three years after their employment ceases.
3.3 Suspensive conditions
The acquisition is conditional upon such approvals as may be required in terms
of the Competition Act 89 of 1998, as amended and the publication of notices of
the intended transfer of the businesses in accordance with the provisions of
section 34 of the Insolvency Act 36 of 1924, as amended.
4. Unaudited pro forma financial effects of the acquisition
The table below sets out the unaudited pro forma financial effects of the
acquisition on Hudaco`s earnings per share and net asset value per share. This
unaudited pro forma financial information and the preparation thereof, which is
the responsibility of the directors, has been prepared for illustrative purposes
only and because of its nature may not give a fair reflection of Hudaco`s
financial position and results of operations, nor the effect and impact of the
acquisition on Hudaco going forward.
Before After Change%
the the
acquisit acquisit
ion ion
(cents)1 (cents)2
,3
Headline earnings per share 371 400 8%
Earnings per share 303 333 10%
Fully diluted earnings per 299 328 10%
share
Net assets value per share 1 736 1 736 -
Net tangible assets value 1 580 1 521 -3.7%
per share4
Assumptions:
1. The amounts in the `Before` column are based on the audited financial
results of Hudaco for the year ended 30 November 2004.
2. The amounts in the `After` column have been calculated utilising the
audited results of the Powermite businesses for the eleven months ended 30
November 2004 extrapolated to a twelve month period and the balance sheet at
that date.
3. The amounts in the `After` column have been adjusted to take into
account notional interest forfeited on the initial purchase consideration of
R44,0 million at 8,0% per annum less taxation thereon, plus notional interest on
the deferred consideration of R17,4 million imputed at 10,0% per annum less
taxation thereon .
4. The tangible net asset value per share in the `After` column takes
into account the estimated goodwill amounting to R18,0 million, arising on the
acquisition, calculated with reference to the tangible net asset value of the
businesses at 30 November 2004 and the present value of the estimated purchase
consideration plus transaction costs.
5. Earnings per share and headline earnings per share effects have been
calculated utilising the weighted average number of Hudaco shares in issue for
the year ended 30 November 2004, being 29 288 976 Hudaco shares and fully
diluted 29 702 299 shares. Net asset value per share and the tangible net asset
value effects have been calculated based on the shares in issue at 30 November
2004, net of those held by a Hudaco subsidiary, being 29 437 974 Hudaco shares.
Johannesburg
23 March 2005
Attorneys to Hudaco Attorneys to the Sellers
Werksmans Incorporated Fluxmans
Investment bank and sponsor to Hudaco
Nedbank Capital
Date: 23/03/2005 10:42:17 AM
Produced by the JSE SENS Department
