| Tue 23 Aug 2005, 15:50 | | CI - Acquisition of Dana South Africa (Proprietary |
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CI - Acquisition of Dana South Africa (Proprietary) Limited
Control Instruments Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1964/003987/06)
Share code CNL
ISIN ZAE000001665
(`CI` or `the Company`)
Acquisition of Dana South Africa (Proprietary) Limited
1.INTRODUCTION
Further to the cautionary announcement dated 25 July 2005, The Standard Bank of
South Africa Limited (`Standard Bank`) is authorised to announce that agreement
was reached on 23 August 2005 between CI and Dana Corporation (`Dana`), a
company listed on the New York Stock Exchange and its wholly owned subsidiary
EFMG LLC, whereby, subject to the fulfilment of certain conditions precedent, CI
will acquire all the ordinary shares in Dana South Africa (Proprietary) Limited
(`Dana SA`) from EFMG LLC (`the acquisition`), for a consideration to be settled
in cash.
Dana is a major global supplier of automotive components to motor vehicle
manufacturers and has taken a strategic decision to focus on the original
equipment market. Dana SA is primarily focused on supplying products to the
motor vehicle aftermarket and hence no longer fits in with Dana`s business
model.
2. NATURE OF THE BUSINESS OF DANA SA
Dana SA is a leading distributor of aftermarket components for the automotive
and heavy-duty truck market in South Africa. Dana SA has three divisions:
* Echlin Manufacturing, which manufactures automotive components;
* Echlin Distribution, which distributes a variety of components including
ignition, fuel and cooling system parts, principally to major wholesale
distributors; and
* Acsa-Mag, which distributes a variety of automotive electrical and brake
components, principally to selective distributors and fitment shops.
In the Dana SA audited results for the year ended 31 December 2004, Dana SA
reported sales of R147 million and profit after tax of R13 million. The net
asset value (`NAV`) and tangible net asset value (`TNAV`) as at 31 December 2004
was R91 million.
3. RATIONALE FOR THE ACQUISITION
The acquisition of Dana SA will assist CI in achieving one of its strategic
objectives, namely to become a leading supplier to selected niches of the
automotive aftermarket in South Africa. Dana SA will become an integral part of
the CI aftermarket product and service offering. The future development of the
Dana SA business will be in line with CI`s expansion and development plans. It
is envisaged that there will be benefits for CI through cross selling
opportunities to existing customers of both Dana SA and CI.
4. SALIENT TERMS OF THE ACQUISITION
The following are the salient terms of the acquisition:
4.1 The purchase consideration
The purchase consideration of R114 683 150 (`the consideration`) will be settled
by the payment in cash against delivery to CI of the Dana SA ordinary shares on
the first day of the month following the month during which the last of the
conditions precedent have been fulfilled (`the effective date`). This is
expected to be 1 October 2005.
4.2 Warranties and indemnities
Warranties and indemnities normal in transactions of this nature have been
provided by Dana and EFMG LLC.
4.3 The effective date
The acquisition of the Dana SA shares will be effective from the effective date.
4.4 Financing the acquisition
CI will utilise loan facilities provided by Standard Bank to finance the
acquisition.
5. PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITION
The pro forma financial effects set out below have been prepared to assist CI
shareholders to assess the impact of the acquisition on the earnings per share
(`EPS`), headline earnings per share (`HEPS`), NAV per share and TNAV per share
of CI. The pro forma financial effects have been prepared for the year ended 31
December 2004. The material assumptions are set out in the notes following the
table.
These pro forma financial effects have been disclosed in terms of the JSE
Limited (`JSE`) Listings Requirements and do not constitute a representation of
the future financial position of CI on implementation of the acquisition. The
pro forma financial effects are the responsibility of the board of CI and are
provided for illustrative purposes only.
Before the After the
acquisition acquisition Change
Cents Cents %
EPS 27.7(1) 35.4(2) 27.8
HEPS 29.1(1) 36.6(2) 25.8
NAV per share 128.2(3) 127.9(4) (0.2)
TNAV per share 97.4(3) 55.7(4) (42.8)
Notes:
1. The EPS and HEPS, as set out in the `Before the acquisition` column of the
table, are based upon the audited income statement of CI for the year ended 31
December 2004 and 65 357 292 weighted average number of shares in issue.
2. The EPS and HEPS, as set out in the `After the acquisition` column of the
table, are based on the combined audited income statements of CI and Dana SA for
the year ended 31 December 2004 and the assumptions that:
* the acquisition became effective on 1 January 2004;
* the consideration was paid on 1 January 2004; and
* an interest rate of 10.32% nominal annual compounded monthly is applicable on
the Standard Bank loan facilities.
3. The NAV and TNAV per share as set out in the `Before the acquisition` column
of the table are based on the audited balance sheets of CI at 31 December 2004
and 64 999 758 shares in issue.
4. The NAV and TNAV per share as set out in the `After the acquisition` column
of the table are based on the combined audited balance sheets of CI and Dana SA
at 31 December 2004 and the assumptions that:
* the acquisition became effective on 31 December 2004; and
* the consideration was paid on 31 December 2004.
5. The difference between the consideration, including directly attributable
transaction costs of R3.60 million and the net asset value of R91 million has
provisionally been treated as goodwill and not amortised. Post completion of the
acquisition, CI will analyse the difference further into identifiable assets and
goodwill as required by IFRS 3: Business Combinations.
6. Transaction costs of approximately R4.55 million were assumed to have been
paid in cash on 31 December 2004. Of these costs, R3.60 million was capitalised,
R0.20 million was expensed and R0.75 million was set off against the loan upon
initial recognition of the loan facility obtained from Standard Bank.
6. CONDITIONS PRECEDENT TO THE ACQUISITION
The acquisition is subject to the following conditions precedent:
* the approval of the relevant Competition Authorities on an unconditional basis
or on conditions which are acceptable to Dana and CI;
* the approval by the JSE of the circular to CI shareholders;
* the approval by CI shareholders in general meeting of the ordinary resolutions
necessary to implement the acquisition; and
* the completion of any necessary legal agreements between CI and Standard Bank
to allow draw-down of the loan facilities provided by Standard Bank.
The last day upon which the conditions precedent are capable of being fulfilled
is 31 December 2005, failing which the agreement between CI and Dana shall lapse
and cease to have any force or effect. The date of 31 December 2005 shall,
however, be extended under circumstances where the final response of the
relevant Competition Authorities is delayed by reason of the relevant
Competition Authorities extending the periods during which they are to respond
in accordance with the provisions of the Competition Act.
7. IMPORTANT DATES AND TIMES
The important dates and times are set out in the table below.
2005
Last day to lodge forms of proxy
for the general meeting of
shareholders, by 10h00 on Thursday, 22 September
General meeting of shareholders to
be held at 10h00 on Friday, 23 September
Results of the general meeting to be
published on SENS on Friday, 23 September
Results of the general meeting to be
published in the press on Monday, 26 September
Note:
The above mentioned dates and times are South African dates and times, and are
subject to change. Any changes will be released on SENS and published in the
press.
8. OPINIONS AND RECOMMENDATIONS
The board of CI is of the unanimous opinion that the terms and conditions of the
acquisition are to the benefit of CI shareholders. Accordingly, the board
recommends that CI shareholders vote in favour of the resolutions to be proposed
at the general meeting.
In respect of their personal holdings in the share capital of
CI, the board members intend to vote in favour of the resolutions to be proposed
at the general meeting.
9. CIRCULAR
A circular containing the details of the acquisition and the notice of the
general meeting will be posted to CI shareholders by Thursday, 1 September 2005.
10. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 25 July 2005 and
are advised that caution is no longer required to be exercised when dealing in
the Company`s securities.
Cape Town
23 August 2005
Investment bank and sponsor
Standard Bank
Attorneys
Jan S De Villiers
Independent reporting accountants and auditors
PricewaterhouseCoopers
Date: 23/08/2005 03:30:12 PM
Produced by the JSE SENS Department
