| Tue 16 May 2006, 17:59 | | Dawn - Acquisition Of The Entire Business And Busi |
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DAW
DAW
Dawn - Acquisition Of The Entire Business And Business Assets Of Isca (Pty)
Distribution and Warehousing Network Limited
(Incorporated in the Republic of South Africa)
(Registration number 1984/008265/06)
Share code: DAW ISIN: ZAE000018834
("Dawn")
ACQUISITION OF THE ENTIRE BUSINESS AND BUSINESS ASSETS OF ISCA (PTY)
LTD ("Isca") AND DORA INVESTMENTS CC ("Dora") AND RENEWAL OF CAUTIONARY
ANNOUNCEMENT
1. Introduction
Shareholders are advised that Dawn has, subject to the suspensive
conditions set out below, entered into an agreement to acquire the
entire business and business assets of Isca and fixed property, from
which Isca trades, from Dora (together referred to as "the
acquisition"). On conclusion of the acquisition, the business and
business assets of Isca together with the fixed property will be owned
in a new company, Lexshell 30 General Trading (Pty) Ltd ("Lexshell"),
which company will be a subsidiary of Dawn. In terms of Section 9 of
the JSE Limited"s Listing Requirements, the acquisition is classified
as a Category 3 transaction.
2. Rationale for the acquisition
Currently Dawn through one of its subsidiaries, trading as Cobra, is
involved in the manufacturing of a range of plumbing products. Cobra,
together with Isca, has experienced considerable competition from
imports. Isca imports the bulk of its components which are finished and
assembled locally. The proposed transaction will allow Cobra to supply
locally manufactured items to Isca instead of Isca importing
components. This will substantially increase Cobra"s production volumes
with a consequent reduction in unit costs thereby assisting to reduce
the pressure from imports for both entities, particularly when the
building and construction cycle turns. Additionally Isca"s customers
may benefit from increased access to products through Dawn"s
distribution channels.
3. Description of the business of Isca
Isca is a manufacturer of brass taps and mixers for the domestic
market. The product range is aimed at all sectors from low cost, to the
mass-housing sector and to the top end sector. The manufacturing
activities are confined to the finishing and assembly of imported
components sourced primarily from overseas sub-contractors.
4. Terms of the acquisition
Dawn will acquire, subject to certain suspensive conditions, the above
business, business assets and fixed property and assume specified
business liabilities for a purchase consideration of R95 000 000 in
cash. The vendors are:
- Business and business assets - Isca; and
- Fixed property - Dora.
The shareholders/members of Isca and Dora are Messrs Shachar and
Jaretzkey.
The purchase consideration payable in terms of the acquisition will be
settled as follows:
- R54 000 000 - seven days after the effective date ("closing date");
- R8 000 000 - on 15 July 2007;
- R8 000 000 - on 15 July 2008; and
- R25 000 000 - after the audited financial statements for the year
ending 30 June 2009 have been approved but subject to the following
profit warranty.
The final payment of R25 000 000 is subject to the business of Isca
achieving a cumulative profit before taxation ("PBT") for the three
years from 1 July 2006 to 30 June 2009 of R94 000 000. Should this
cumulative PBT not be achieved then the final payment shall be reduced
proportionately in the ratio that the actual cumulative PBT bears to
R94 000 000.
Other than the payment due on the closing date which shall not bear
interest, interest shall be paid on all outstanding balances from the
effective date up to the date of payment at the rate of 7.5% per annum
compounded.
The acquisition is subject to a net asset value warranty of no less
than R47 000 000 as at the effective date and other warranties and
indemnities normal to a transaction of this nature.
5. Articles of Association
Dawn has instructed its legal adviser to confirm that the articles of
association of Lexshell, which shall as a consequence of the
acquisition be re-named Isca (Pty) Ltd, shall comply with Schedule 10
of the JSE Limited"s Listing Requirements and, where they do not
comply, to affect such changes thereto so that they do comply with the
said schedule.
6. Pro forma financial effects
The unaudited pro forma financial effects provided below are the
responsibility of the directors of Dawn and are disclosed in order to
provide shareholders with information on the impact of the acquisition
on the interim results for the six months ended 31 December 2005.
The unaudited pro forma financial effects have been prepared for
illustrative purposes only and, because of their nature, may not fairly
present the financial position of Dawn, changes in its equity or
results of its operations or cash flows subsequent to the
implementation of the acquisition.
The unaudited pro forma financial effects of the acquisition on the
headline earnings, earnings, net asset value and tangible net asset
value per DAWN share, before and after the acquisition, are set out
below:
Per Dawn share
Notes Before After Change
(cents) (cents) (%)
Headline earnings 1 35.09 40.21 14.6
Earnings 1 35.09 40.21 14.6
Net asset value 2 164.07 164.07 -
Net tangible asset value 2 139.66 109.29 (21.7)
Notes:
1. The amounts in the "Before" column are based on the headline
earnings and earnings per Dawn share as reported in the interim results
of Dawn for the six months ended 31 December 2005. The amounts in the
"After" column represent the headline earnings and earnings that would
have accrued per Dawn share for the six months ended 31 December 2005
had the acquisition been effective from 1 July 2005.
2. The amounts in the "Before" column are based on the net asset value
and net tangible asset value per Dawn share as reported in the interim
financial results of Dawn for the six months ended 31 December 2005.
The amounts in the "After" column represent the net asset value and
tangible net asset value per Dawn share had the acquisition been
effective from 31 December 2005.
3. A purchase price allocation ("PPA") exercise in terms of IFRS 3:
Business Combinations has not yet been performed. For purposes of the
pro forma financial effects, the difference between the fair value of
the purchase consideration and the book values of the net assets
acquired has been attributed to goodwill. Following the PPA exercise,
the values attributed to the assets and liabilities acquired may
differ, which could affect the pro forma financial effects presented.
7. Suspensive conditions
The acquisition is subject to the following principal suspensive
conditions being fulfilled by no later than 31 August 2006, namely:
-approval of the acquisition by the Dawn board of directors;
- service, confidentiality and restraint agreements being concluded
with Messrs Shachar and Jaretzkey; and
- unconditional Competition Commission approval.
8. Renewal of cautionary announcement
Shareholders are referred to the cautionary announcement published on 8
May 2006. Shareholders are advised that Dawn is still in negotiations
unrelated to this announcement which if successfully concluded may have
an effect on the company"s securities. Accordingly, shareholders are
advised to continue to exercise caution when dealing in the company"s
securities until a further announcement is made.
Johannesburg
16 May 2006
Corporate adviser
BISHOP CORPORATE FINANCE (PTY) LTD
(Registration number 2000/012695/07)
Sponsor
Deloitte & Touche Sponsor Services (Pty) Ltd
(Incorporated in the Republic of South Africa)
(Registration number 1996/000034/07)
Legal adviser to Dawn
WERKSMANS INCORPORATED
(Reg. No. 1990/007215/21)
Legal adviser to Isca
Nathanson, Bowman and Nathan
Competition law adviser
WEBBER WENTZEL BOWENS
Date: 16/05/2006 05:59:38 PM Produced by the JSE SENS Department
