| Thu 20 Oct 2005, 17:09 | | Mathomo - Disposal and further cautionary announce |
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Mathomo - Disposal and further cautionary announcement
MATHOMO GROUP LIMITED
(Registration Number. 1995/004783/06)
Share Code: MTO
ISIN Code: ZAE000037214
("Mathomo" or the "company")
DISPOSAL OF THE PERSONAL PROTECTIVE EQUIPMENT BUSINESS (THE "DISPOSAL") AND
FURTHER CAUTIONARY ANNOUNCEMENT
Java Capital is authorised to announce that Mathomo has agreed to dispose of its
personal protective equipment business carried on through its Select PPE and
ISCOR Stores divisions (the "PPE business") to Jungle Arrow Trading 34
(Proprietary) Limited ("the purchaser"), a subsidiary of Mine Safety Appliances
Company ("MSA"), a company listed on the New York Stock Exchange, with effect
from the first day of the month in which the conditions precedent referred to
below are fulfilled (the "effective date").
RATIONALE FOR THE DISPOSAL
Mathomo has, through its PPE business, developed a strong presence in the on-
site vendor managed supply of personal protective equipment on several mines and
related sites. MSA is the world"s largest company dedicated to safety. With
operations in more than 30 countries, MSA has developed, manufactured and
distributed mine safety and related health products for over 90 years.
The disposal provides an opportunity to significantly reduce Mathomo"s current
debt levels. Consequently, the disposal removes a substantial amount of
financial risk from the over-geared position of the Mathomo group.
The Mathomo board is of the view that the purchase price payable by the
purchaser for the PPE business is attractive in relation to the future prospects
of the PPE business.
TERMS OF THE DISPOSAL
The purchaser will pay Mathomo, on or before the 6th business day following the
date on which the conditions precedent are fulfilled, a cash price of R48
million (the "cash consideration"), subject to a downward adjustment on a Rand
for Rand basis to the extent that the net asset value of the PPE business as at
the effective date is less than the net asset value as at 28 February 2005. In
addition, the purchaser will assume and discharge the book value of the
liabilities of the PPE business, other than the bank overdraft and inter-
divisional loans (the "assumed liabilities"), as at the effective date. The
assumed liabilities amounted to approximately R19 400 000 as at 28 February
2005.
Mathomo has given warranties and restraint of trade undertakings usual for a
transaction of this nature.
The purchase consideration will be utilised by Mathomo to redeem the preference
shares and to reduce its current overdraft.
CONDITIONS PRECEDENT
The disposal is subject to the fulfilment of the following conditions precedent:
- the Competition Commission granting approval for the disposal on or before
9 December 2005;
- all regulatory approvals (including the approval of the JSE Limited ("JSE")
and the Securities Regulation Panel) and exemptions being obtained on or
before 9 December 2005;
- Mathomo shareholders passing all resolutions as may be required to approve
and implement the disposal on or before 9 December 2005;
- MSA , Mineworkers Investment Company (Proprietary) Limited ("MIC") and Two
Ships Trading 36 (Proprietary) Limited (the name of which is in the process
of being changed to SAMSAC Holdings (Proprietary) Limited, which will
become the holding company of the purchaser) ("Holdco") concluding a
subscription and shareholders agreement with the result that MSA and MIC
will hold 74,9% and 25,1% respectively in Holdco on or before Monday, 31
October 2005 and such agreement becoming unconditional on or before
Wednesday, 30 November 2005; and
- the third parties to certain of the contracts of the PPE business agreeing
to the cession and assignment of the contracts to the purchaser, on or
before Friday, 25 November 2005.
PRO FORMA FINANCIAL EFFECTS
The pro forma financial effects of the disposal on the historical
(loss)/earnings, headline loss, net asset value and tangible net asset value per
Mathomo share set out below, are the responsibility of the directors of Mathomo,
have been prepared for illustrative purposes only to show how the disposal may
have affected Mathomo"s published results for the seventeen month period ended
28 February 2005 and may not fairly represent Mathomo"s financial position and
results of its operations.
Before the Pro forma Percentage
disposal after the change
(cents) disposal (%)
(cents)
Historical (loss)/earnings per share (12,42) (1) 45,27 (2) 464
Historical headline loss per share (13,53) (1) (24,90) (3) (84)
Historical net asset value per share 17,89 (1) 71,02 (4) 297
Historical tangible net asset value 17,89 (1) 71,02 (4) 297
per share
The increase in the historical headline loss per share as shown in the "pro
forma after the disposal" column of the table above is evident for the following
reasons:
- the PPE business generated a major portion of the profits in the Mathomo
group (the "PPE profits") over the period and is being "swapped" for a low
return on the preference shares (at rates of between 35% and 46,67% of the
prime overdraft rate) as well as a low interest rate saving on the
reduction of Mathomo"s bank overdraft;
- there was no taxation applied to the PPE profits in the 17 month period
ended 28 February 2005; and
- the R1,5 million fee to Credit Management Solutions (Proprietary) Limited
(the "CMS fee"), referred to below, has not been added back for the purpose
of calculating the headline loss.
The historical loss and historical headline loss as set out in the "before
disposal" column of the table are based on Mathomo"s audited results for the 17
months ended 28 February 2005. The historical net asset value and tangible net
asset value per share as set out in the "before disposal" column of the table
are based on Mathomo"s audited results at 28 February 2005.
The historical earnings per share as set out in the "pro forma after the
disposal" column of the table has been calculated on the assumption that the
disposal occurred on 1 October 2003 and that the cash consideration was received
on that date. In addition, the following adjustments have been made:
- the income and expenses of the PPE business for the 17 months ended 28
February 2005 have been excluded, with the exception of the interest paid
and received on Mathomo"s bank overdraft relating to the PPE business and
inter-divisional loans;
- the dividends on the preference shares and associated secondary tax on
companies savings have been accounted for on the basis that the preference
shares have been redeemed in an amount of R20 million;
- after the reversal of the abovementioned dividend, an interest cost saving
at the company"s average interest rate cost for the 17 months has been
effected;
- the profit on the sale of approximately R37 million less the capital gains
taxation of approximately R4,5 million has been raised;
- transaction costs amount to R 2,9 million, which costs include an incentive
fee of R2 million to the PPE business"s management. These costs have been
set off the profit on the disposal of the PPE business; and
- the CMS fee has been set off against operating profit.
The historical headline loss per share as set out in the "pro forma after the
disposal" column of the table has been calculated in the manner described for
historical earnings per share above but excludes the headline loss adjustments
included in the Mathomo results as well as the net gain after capital gains
taxation on the disposal of the PPE business.
The historical net asset value and historical tangible net asset value per share
as set out in the "pro forma after the disposal" column of the table has been
calculated on the assumption that the disposal occurred on 28 February 2005 and
that the cash consideration was received on that date. In addition, the
following adjustments have been made:
- the asset and liabilities of the PPE business at 28 February 2005 have been
excluded, with the exception of the bank overdraft relating to the PPE
business and inter-divisional loans; and
- the preference shares have been redeemed and the company"s overdraft
reduced by the cash consideration; and
- the net profit on the disposal of approximately R25,1 million (after the
set off of capital gains taxation) has been raised along with the
concomitant provisions for taxation and transaction costs.
It was assumed that there were 47 179 214 Mathomo shares in issue, being the
number in issue as at 28 February 2005.
APPOINTMENT OF INDEPENDENT EXPERT
In compliance with paragraph 10.2 of the JSE Listings Requirements, PKF (Jhb)
Inc. has been appointed to express an opinion on whether the terms of the
disposal are fair and reasonable. A copy of their opinion letter will be
included in the circular referred to below.
CIRCULAR TO SHAREHOLDERS
The disposal is subject to regulatory approvals and the approval of Mathomo
shareholders (excluding CMS, MIC and PPE Management, who the JSE has determined
are related parties due to their vested interests (as further described above),
whose votes in respect of the Mathomo shares held or controlled by them or their
associates will not be taken into account in determining the requisite
majority). A circular containing a notice of general meeting will be issued to
Mathomo shareholders in due course.
FURTHER CAUTIONARY ANNOUNCEMENT
Given that after the disposal, Mathomo will comprise only the Alsafe and M
Stores businesses and the immovable properties, the company is considering a
delisting of its securities from the JSE.
In this regard, shareholders are referred to the announcements published on SENS
on 27 July 2005 and 16 September 2005 and advised to continue to exercise
caution when dealing in the company"s securities until a further announcement is
made.
Rosebank
20 October 2005
Corporate advisor and sponsor to Mathomo
Java Capital (Proprietary) Limited
Mathomo"s reporting accountants and auditors
Deloitte & Touche
Chartered Accountants (SA)
Registered Accountants and Auditors.
Legal advisor to Mathomo
MJ King Inc. Attorneys
Debt advisor to Mathomo
Credit Management Solutions (Proprietary) Limited
Independent expert to Mathomo
PKF (Jhb) Inc.
Legal advisor to MSA
Cliffe Dekker Inc.
Date: 20/10/2005 04:49:07 PM Produced by the JSE SENS Department
