| Tue 25 Oct 2005, 14:57 | | Sethold - Acquisition by SIT of the businesses of |
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Sethold - Acquisition by SIT of the businesses of Fixtrade and Gopro
SET POINT TECHNOLOGY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1996/014334/06)
Share code: STO
ISIN: ZAE000013629
("Sethold")
ACQUISITION BY SET POINT INDUSTRIAL TECHNOLOGY (PROPRIETARY) LIMITED ("SIT") OF
THE BUSINESSES OF FIXTRADE 1092 CC TRADING AS RENG ("FIXTRADE") AND NORTHWEST
GOPRO CC ("GOPRO")
1. Introduction
SIT, a wholly-owned subsidiary of Sethold, has concluded two agreements in terms
of which it has acquired the businesses of Fixtrade and Gopro from Mr Stephen
Ingram and Mr Wessel Verwey and Mr Stephen Ingram and Mrs Wendy Ingram,
respectively, ("the sellers") ("the acquisition"). The acquisition was effective
on 1 October 2005 at which stage all conditions precedent had been met and the
agreement became unconditional.
2.Nature of business
Fixtrade and Gopro are situated in Rustenburg and Stilfontein respectively,
trading under the names RENG and Gopro. They supply wheels, buffers, axles,
skip guides and various other related products to the mines in their respective
areas. In addition, Fixtrade reconditions wheels for hoppers and locomotives
for itself and on behalf of Gopro. For the year ended 28 February 2005, the
revenue of Fixtrade and Gopro was R28.5 million and R28.8 million, respectively.
3. Rationale
With effect from 1 July 2005, Sethold acquired the business of Seran Engineering
& Supplies (Proprietary) Limited ("Seran"). This acquisition enabled Sethold to
take advantage of the outsourcing growth in the mining industry and Seran became
the nucleus of a separate division in Sethold.
Although in diverse areas of activity, the acquisition of Fixtrade and Gopro
complements the current businesses of Sethold and in particular the manufacture
of hoppers at Seran. The acquisitions will allow the group to improve delivery
turnaround to the mines and speed up the process for repairs and maintenance.
4. Terms and conditions
4.1 The purchase considerations
4.1.1 The purchase prices are based upon a multiple of future earnings to be
produced by the businesses. The purchase considerations are an amount equal to
the average profit after tax ("PAT"), annualised if necessary, over a 3 year
period from 1 October 2005 to 31 August 2008, multiplied by 3, plus payment in
respect of stock of approximately R6m and the assumption of some minor sale
liabilities.
4.1.2 Irrespective of the PAT achieved, the various parties specifically agree
that the maximum purchase prices payable shall be R8,5m for each entity ie. a
combined total of R17m for both businesses.
4.1.3 The purchase considerations are payable within 10 business days of the
determination of the average PAT at the end of the three years. Payment for
stock will be made only once SIT has sold and received full payment for the
stock items concerned.
4.2 Warranties and indemnities
The warranties and indemnities usual in transactions of this nature have been
made between the parties.
5. Financial effects of the transaction
The table below sets out the pro forma financial effects of the transaction on
Sethold assuming that the transaction took place on 1 September 2004 for income
statement purposes and 28 February 2005 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 after the transaction. The pro forma
financial effects are the responsibility of the directors.
Before, Before the After Change
Published 28 acquisition incorporating (%)
February 05 but after the
incorporating acquisition
acquisition
of Seran and
issue of 35m
shares
Earnings (cps) 2.8 3.1 3.2 3.2
Headline earnings 3.0 3.2 3.3 3.1
(cps)
Net asset value (cps) 26.6 28.1 28.1 -
Tangible net asset 15.0 (0.3) (3.9) nm
value (cps)
Number of shares in 242 109 277 109 277 109
issue (`000)
Weighted average 242 109 277109 277 109
number of shares in
issue (`000)
nm = calculation not meaningful as denominator nearly zero.
cps = cents per share.
Assumptions:
1. Sethold management"s best estimate of the total purchase consideration
payable for the 2 businesses is R17 million.
2. The deferred purchase consideration, has been net present valued using the
prime rate of 10.5% for the six months ended 28 February 2005 as the discount
rate, in accordance with AC 133: Financial Instruments: Recognition and
Measurement.
3. The allocation of the purchase price in terms of IFRS 3 (AC140); Business
Combinations has not as yet been verified as this is done at year end. The pro
forma financial information has been prepared on the basis that the excess of
the purchase price over the net asset value of the acquisitions will comprise
goodwill.
Notes:
1. The "Before" financial information has been extracted, without adjustment,
from the unaudited interim results of Sethold for the six months ended 28
February 2005.
2. The "Before the acquisition but after incorporating the acquisition of Seran
and BEE share issue" financial information has been extracted, without
adjustment, from the circular to Sethold shareholders dated 14 June 2005
regarding the acquisition of the business of Seran as a going concern and the
introduction of a black economic empowerment shareholder.
3. The "Change (%)" is calculated by dividing the effect of the acquisition by
the figures in the column "Before the acquisition but after incorporating
acquisition of Seran and issue of 35m shares."
4. The "after the acquisition" earnings per share and headline earnings per
share has been adjusted to include the following:
The after taxation earnings of Fixtrade and Gopro for the year ended 28 February
2005 (apportioned for 6 months);
The notional interest charge of R660 000 arising as a result of the net present
valuing of the deferred purchase consideration in terms of AC133: Financial
Instruments: Recognition and Measurement; and
The estimated transaction costs.
5. The "after the acquisition" net asset value and net tangible asset value per
share has been adjusted to include the following:
Certain assets (plant and inventory) of Fixtrade and Gopro;
The raising of the net present valued deferred purchase consideration;
The goodwill arising as a result of the acquisition; and
The net tangible asset value per share excludes patents and goodwill.
6. Cautionary announcement
Shareholders are referred to the cautionary announcement published on 26
September 2005 and are advised that, as negotiations have been successfully
concluded, caution is no longer required to be exercised by Sethold shareholders
when dealing in their Sethold shares.
Johannesburg
25 October 2005
Lead sponsor Sponsor
KPMG Standard Bank
Auditors and Reporting accountants Legal advisor
KPMG Inc Goldman Judin Maisels Inc
(Registration number 1999/012876/07) (Registration number 1998/011368/21)
Date: 25/10/2005 02:57:08 PM Produced by the JSE SENS Department
