| Wed 21 Jun 2006, 8:23 | | Control Instruments - Acquisition and withdrawal o |
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CNL
CNL
Control Instruments - Acquisition and withdrawal of cautionary
Control Instruments Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1964/003987/06)
Share code: CNL
ISIN: ZAE000001665
("Control Instruments" or "the Company")
ACQUISITION OF THE BUSINESS OF GABRIEL SOUTH AFRICA (PROPRIETARY)
LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the cautionary announcement dated 18 November 2005,
subsequent cautionary renewal announcements dated 3 January 2006,
14 February 2006, 23 February 2006 and the further cautionary
announcement dated 21 April 2006, Investec Bank Limited is
authorised to announce that agreement was reached on
20 June 2006 between Control Instruments and ArvinMeritor
Incorporated ("ArvinMeritor") and its wholly-owned subsidiary,
Maremont Corporation ("Maremont"), whereby, subject to the
fulfilment of certain conditions precedent, Control Instruments,
through a wholly-owned subsidiary, will acquire the business of
Gabriel South Africa (Proprietary) Limited, the Gabriel trademark
for designated territories in Africa (including South Africa) and
certain intellectual property from an ArvinMeritor group company
("Gabriel") ("the acquisition"), for a consideration to be settled
in cash.
2. Nature of business of Gabriel
Gabriel manufactures, distributes and sells ride control products
(shock absorbers, struts and gas springs) to the automotive market
aftermarket in southern Africa. Gabriel"s brand name has very
strong levels of customer and consumer awareness.
Gabriel"s audited turnover for the year ended 30 September 2005
was R295.5 million and profit after tax R2.6 million. The profit
after tax included royalties of R12.8 million that will not be
paid in future.
3. Rationale for the acquisition
The acquisition of Gabriel meets one of Control Instruments"
strategic objectives for its automotive aftermarket product
distribution business, namely, to increase its offering of quality
branded products to selected market niches in sub-Saharan Africa.
Gabriel will become an integral part of the Control Instruments
aftermarket product and service offering. Control Instruments and
Gabriel have a common customer base.
4. Salient terms of the acquisition
4.1 The purchase consideration of R82 091 881 ("the
consideration") will be settled by the payment in cash on the
second business day after the date on which the last of the
suspensive conditions has been fulfilled, and otherwise subject to
the remaining terms of the agreement ("the effective date"). This
is expected to be on or around 18 October 2006.
4.2 Warranties and indemnities normal in transactions of this
nature have been provided by ArvinMeritor and Gabriel.
4.3 The acquisition will be effective from the effective date.
4.4 Control Instruments will use term loan facilities and
internally generated funds to finance the acquisition.
5. Unaudited pro forma financial effects of the acquisition
The unaudited pro forma financial effects set out below have been
prepared for illustrative purposes only to assist Control
Instruments" shareholders to assess the impact of the acquisition
on the earnings per share ("EPS"), headline earnings per share
("HEPS"), net asset value ("NAV") per share and tangible net asset
value ("TNAV") per share of Control Instruments. The unaudited pro
forma financial effects have been prepared for a twelve-month
period and are based on Control Instruments" audited results for
the year ended 31 December 2005 and Gabriel"s audited results for
the year ended 30 September 2005.
These unaudited pro forma financial effects have been disclosed in
terms of the JSE Limited ("JSE") Listings Requirements and because
of their nature may not fairly present Control Instruments"
financial position, changes in equity, results of operations or
cash flows.
The unaudited pro forma financial effects are the responsibility
of the directors of Control Instruments and are provided for
illustrative purposes only.
Before the After the
acquisition acquisition Change
Cents Cents %
EPS 32.0(1) 61.4(2) 91.9
HEPS 28.3(1) 43.8(2) 54.8
NAV per share 209.0(3) 221.8(4) 6.1
TNAV per share 135.9(3) 100.5(4) (26.0)
Notes:
1. The EPS and HEPS, as set out in the "Before the
acquisition" column of the table, are based on the audited
income statement of Control Instruments for the year ended 31
December 2005 and 69 687 145 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 Control Instruments and Gabriel
for the year ended 31 December 2005 and 30 September 2005
respectively; 69 687 145 weighted average number of shares in
issue; and
the assumptions that the acquisition became effective at the
beginning of the twelve-month period; the consideration was
paid at the beginning of the twelve-month period; an interest
rate of 10.5% nominal annual compounded monthly is applicable
on the term loan facilities; and the royalties of R12.8
million were not paid.
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 sheet of Control Instruments at 31 December
2005 and 78 956 008 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 Control Instruments and Gabriel at
31 December 2005 and 30 September 2005 respectively; 78 956
008 shares in issue; and the assumptions that the acquisition
became effective at the end of the twelve-month period; and
the consideration was paid at the end of the twelve-month
period.
5. The difference between the consideration, including
directly attributable transaction costs of R0.9 million, and
the net asset value of R64.2 million has provisionally been
treated as negative goodwill and immediately recognised in
the income statement. Post-completion of the acquisition
Control Instruments may identify further fair value
adjustments on assets and recognise other intangible assets,
as required by IFRS 3: Business Combinations. This may impact
the negative goodwill.
6. Transaction costs of approximately R0.9 million were
assumed to have been paid in cash at the end of the twelve-
month period and have been capitalised.
6. Conditions precedent to the acquisition
The acquisition is subject to, inter alia, the following:
# the unconditional approval of the relevant Competition
Authorities.
The last day upon which the conditions precedent are capable of
being fulfilled is 18 October 2006, failing which the acquisition
agreement shall lapse and cease to have any force or effect. The
date of 18 October 2006 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. Categorisation of the acquisition
The acquisition has been categorised as a category 3 transaction
in terms of section 9.5(b) of the JSE Listings Requirements.
8. Withdrawal of cautionary announcement
Shareholders are referred to the cautionary announcement dated 21
April 2006 and are advised that caution is no longer required to
be exercised when dealing in the Company"s securities.
Cape Town
21 June 2006
Sponsor: Investec Bank Limited
Attorneys: Jan S. De Villiers Attorneys
Date: 21/06/2006 08:24:06 AM Produced by the JSE SENS Department
