| Fri 17 Mar 2006, 8:03 | | ELB Group Limited - Announcement Of The Terms Of T |
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ELR
ELR
ELB Group Limited - Announcement Of The Terms Of The Empowerment
Restructuring
ELB GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1930/002553/06)
ISIN: ZAE000035101
Share code: ELR
("ELB" or "the company")
ANNOUNCEMENT OF THE TERMS OF THE EMPOWERMENT RESTRUCTURING
1. INTRODUCTION
Further to the cautionary announcements released on SENS on 28 February
2006 and published in the press on 2 March 2006, shareholders are
advised that ELB concluded an agreement on 6 February 2006 with ELB
Engineering Limited ("ELB Engineering"), ELB Equipment Holdings Limited
("ELB Equipment Holdings") and ELB Engineering Services (Proprietary)
Limited ("ELB Engineering Services") to restructure the operations of
the company to facilitate the introduction of a suitable empowerment
partner ("the empowerment restructuring"). The empowerment
restructuring relates to the equipment and engineering services
operations of the company, in terms of which a subsidiary of ELB,
namely ELB Engineering, will become the holding company for both ELB
Equipment Holdings and ELB Engineering Services, which will house the
previous ELB Engineering Services division of ELB Equipment Holdings.
The empowerment partner, the ELB Educational Trust for Historically
Disadvantaged South Africans ("the ELB Educational Trust"), will
subscribe for 15% of the issued shares in ELB Engineering.
2. TERMS OF THE EMPOWERMENT RESTRUCTURING
2.1 Business of the restructured operations
2.1.1 Equipment operations
The equipment operations business operates in South Africa
as ELB Equipment and in Australia as Ditch Witch Australia.
ELB Equipment has a number of locally designed and
manufactured products and represents internationally
renowned manufacturers whose products are designed to meet
industrialised first-world standards. Operating in three
specialised divisions, each with responsibility for
specific products, it provides a streamlined and
professional service that can offer the industry a wide
selection of products. Ditch Witch Australia is an importer
and distributor of underground and utility construction
equipment. Originally introduced to the company in 1987,
today this business has positioned itself as one of the
most respected names in the earthmoving, construction and
mining / quarrying equipment supply industry.
2.1.2 Engineering services operations
The engineering services operations are predominantly
focused on equipment and products requiring an engineering
and project management input. The focus is on aligning
with world-class technology and equipment suppliers and,
from mid 2005, co-operation agreements which were signed
with KOCH (Germany), Claudius Peters (Germany) and Sedgman
(Australia) took effect. ELB Engineering Services offers
capability from layout conceptualisation to turnkey
solutions.
2.2 Restructuring and introduction of empowerment
2.2.1 Restructuring of the operations
The equipment and engineering services operations of the
company will be restructured from the effective date. A
subsidiary of ELB, namely ELB Engineering, will become the
holding company for 100% of ELB Equipment Holdings and 79%
of ELB Engineering Services, with the remaining 21% held by
Dr Stephen John Meijers. The equipment operations business
will remain under ELB Equipment Holdings. The engineering
services business, which was previously held by ELB
Equipment Holdings, will be sold to ELB Engineering
Services as part of the empowerment restructuring.
2.2.2 Purchase consideration
ELB Engineering will settle the purchase price for ELB
Equipment Holdings and 79% of ELB Engineering Services,
based on a net asset value of R90 million and a loan
account amounting to R32.5 million as at 31 December 2005,
through the issue of preference shares to the value of R90
million, with the balance as an interest bearing loan
account between ELB Engineering and ELB. The ELB loan
account will remain in place and will carry interest at
the bank prime overdraft rate. The preference shares
comprise 900 cumulative convertible redeemable preference
shares of R1 each, issued at a premium of R99 999 per
preference share. Dividends will be payable on the
preference shares at a rate of 10% per annum, with annual
escalation by the weighted average Consumer Price Index as
determined by Statistics South Africa. The use of the
preference share structure is expected to result in an
increase in the dividends paid out to ELB shareholders, as
the proposed policy is that not less than 80% of the
preference dividends paid by ELB Engineering to ELB will
be paid out to ELB shareholders.
2.2.3 Empowerment partner
The ELB Educational Trust will be established, and a
donation of R3 million will be provided by ELB to the ELB
Educational Trust, the full amount of which will be used
to subscribe for 15% of the ordinary shares in the newly
created structure under ELB Engineering. The ELB
Educational Trust objectives will be to provide
educational opportunities, through various means, to
historically disadvantaged South Africans ("HDSA"). The
Trust Deed provides that the Trustees may not sell or
otherwise dispose of nor encumber the 15% shareholding to
be acquired by the ELB Educational Trust for a minimum of
10 years, calculated from the date of allotment and issue
of such shares.
2.3 Effective date and conditions precedent
The effective date of the empowerment restructuring, excluding the
subscription by the ELB Educational Trust for the shares, to both
restructure the operations of the company and introduce the
empowerment partner, is 1 January 2006. It is anticipated that the
subscription for these shares will be 30 June 2006. There are no
conditions precedent.
2.4 Rationale for the empowerment restructuring
The rationale for the restructuring of the company is to
facilitate the introduction of a suitable empowerment partner into
the equipment and engineering services operations of the company,
which will provide educational opportunities for HDSAs. The use of
the preference share structure for the restructuring of the
business operations should also enhance the dividend flow to ELB
shareholders.
3. FINANCIAL EFFECTS
The pro forma financial effects presented below are the responsibility
of the board of ELB and are presented for illustrative purposes only to
provide information on how the empowerment restructuring might have
impacted on the reported financial information of ELB if it had been
implemented for the 6-month period ended 31 December 2005. Because of
their nature, the pro forma financial effects may not give a fair
reflection of ELB"s financial position at 31 December 2005.
Before the After the Change
empowerment empowerment %
restructuring restructuring
(1) (2,3,4,5)
Earnings per share 25.9 22.6 (12.8)
(cents)
Headline earnings per 25.5 22.2 (13.0)
share (cents)
Dividends per share 5.0 10.6 112.0
(cents)
Net asset value per 607 596 (1.8)
share at 31 December
2005 (cents)
Net tangible asset value 607 596 (1.8)
per share at 31 December
2005 (cents)
Weighted average shares 27 356 049 27 356 049 -
in issue for the period
excluding treasury
shares
Shares in issue at the 33 860 000 33 860 000 -
end of the period
including treasury
shares
Notes
1. The figures in this column are extracted from the unaudited results
of ELB for the 6-month period ended 31 December 2005. The dividend per
share is based on the dividend of 5 cents per share paid during the 6-
month period ended 31 December 2005.
2. The figures in this column are after adjustments have been made to
the figures in the previous column to take into account the empowerment
restructuring. For the purposes of the earnings and headline per share it
was assumed that the empowerment restructuring had been in effect for the
6-month period ended 31 December 2005 and, for the purposes of net asset
value and net tangible asset value per share, that it had been
implemented on 31 December 2005.
3. For dividend purposes it was assumed that the preference shares to
the value of R90 million were in issue for the 6-month period ended 31
December 2005 and earned a preference share dividend at 10% per annum. A
dividend payout of 80% of the preference share dividends to ELB
shareholders was assumed.
4. The balance of the loan account between ELB and ELB Engineering as
at 31 December 2005 amounted to R32.5 million. It was assumed that
interest was received on the outstanding balance for the 6-month period
ended 31 December 2005 at the prime overdraft rate of 10.5% per annum.
5. The shares in issue at the end of the period including treasury
shares was used to calculate the effect on dividend per share. The
weighted average number of shares was used to do all other financial
effects calculations.
4. DOCUMENTATION
In terms of the JSE Limited Listings Requirements, the empowerment
restructuring is a Category 1 transaction, and a circular giving full
details of the empowerment restructuring will be posted to shareholders
within 28 days.
5. WITHDRAWAL OF ELB CAUTIONARY ANNOUNCEMENT
The ELB cautionary announcement dated 28 February 2006 is hereby
withdrawn.
Boksburg
Friday, 17 March 2006
Transaction adviser
BDO Spencer Steward Capital (Pty) Ltd
Sponsor
RAND MERCHANT BANK
(A division of FirstRand Bank Limited)
Legal adviser
Brink Cohen Le Roux
Date: 17/03/2006 08:03:15 AM Produced by the JSE SENS Department
