| Thu 27 Jul 2006, 16:06 | | Iliad - Acquisition of the businesses of Campwell |
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ILA
ILA
Iliad - Acquisition of the businesses of Campwell Hardware as going concerns
Iliad Africa Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/011938/06)
Share code: ILA & ISIN: ZAE000015038
("Iliad" or "the company")
Acquisition of the businesses of Campwell Hardware as going concerns
1. Introduction
Shareholders are hereby notified that Iliad Africa Trading (Pty) Limited ("the
purchaser"), a wholly-owned subsidiary of Iliad, has entered into an agreement
dated 25 July 2006 ("the signature date"), for the acquisition of the businesses
collectively referred to as "Campwell Hardware" as going concerns, with effect
from 28 August 2006 ("the effective date"), subject to the fulfilment of the
conditions precedent set out in paragraph 2.3 below ("the acquisition").
2. The acquisition
2.1 The acquisition
Campwell Hardware sources, distributes and retails a comprehensive range of
building materials including roof trusses, doors, windows, bricks and related
products from 11 stores in the Western Cape.
2.2 The acquisition consideration
2.2.1 Payment of the acquisition consideration
The purchaser, acting in the capacity as trustee for a company to be acquired
("Holdco"), will acquire the businesses of Campwell Hardware from each of
Campwell Hardware Vasco (Pty) Limited, Campwell Hardware Stellenbosch (Pty)
Limited, Campwell Hardware Montague (Pty) Limited, Campwell Hardware Durbanville
(Pty) Limited, Campwell Hardware Plaza (Pty) Limited, Campwell Hardware Polka
(Pty) Limited, Belgravia Timbers CC, Nyanga Timbers CC, Tile and San Warehouse
CC, Group X Hardware Distributors (Pty) Limited and Campwell Low Cost Building
Supplies CC, collectively "the sellers", for a consideration of R165 million
("the acquisition consideration"), subject to the adjustments set out in
paragraph 2.2.3 below. The acquisition consideration is payable in cash on the
third business day following the fulfilment of the conditions precedent ("the
implementation date"). The acquisition consideration will be financed by Iliad
from existing cash resources and debt facilities.
2.2.2 The security
Of the abovementioned acquisition consideration, R40 million will be held in
trust ("the security") by the purchaser"s attorneys as security for the
discharge of certain warranties and obligations assumed by the sellers, and for
a possible reduction in the acquisition consideration. The security will remain
in place for a minimum period of 18 months from the implementation date and for
a maximum period of 30 months from the implementation date.
2.2.3 Adjustments to the acquisition consideration
The agreement provides for the achievement of, inter alia, a warranted pre-tax
profit target ("the profit target") for the guarantee period, being 12 months
after the effective date. Should the profit target not be met, the acquisition
consideration may be reduced on the basis of R5.00 for every R1.00 shortfall.
The security will be used to satisfy such reduction in the acquisition
consideration. Similarly, if the profit target is exceeded, the acquisition
consideration will be increased by a Rand-for-Rand amount, subject to a maximum
acquisition consideration of R185 million.
2.3 Conditions precedent
The acquisition is subject to the fulfilment of, inter alia, the following
conditions precedent on or before 21 November 2006, unless otherwise stated:
- unconditional approval by the relevant Competition Authority within 120 days
from the signature date;
- Iliad board approval within 14 days from the signature date;
- approval of the JSE Limited, if required;
- the satisfactory conclusion of a due diligence investigation by the purchaser
within 14 days of receipt of the audited accounts for the 12-month period ending
30 July 2006;
- the conclusion of a deed of pledge by the sellers, in terms of which the
sellers shall deposit the R40 million mentioned above with the purchaser"s
attorneys on the implementation date; and
- the conclusion of a written agreement between the purchaser and Campwell
Holdings (Pty) Limited ("Campwell (Pty)"), in terms whereof Campwell (Pty), a
consortium representing the interests of certain key management of Campwell
Hardware, will acquire from the purchaser a 25% interest in Holdco ("the
simultaneous disposal"), details of which are set out in paragraph 3 below.
3. The simultaneous disposal
As mentioned above, the purchaser and Campwell (Pty), which name shall be
changed as soon as possible after the implementation date, have entered into an
agreement for the simultaneous disposal by the purchaser of a 25% interest in
Holdco to Campwell (Pty), on the same terms and conditions as the acquisition.
The disposal consideration will be settled by Campwell (Pty) as follows:
- the cession to the purchaser of all dividends accruing to Campwell (Pty);
- the full purchase price will become due and payable within 60 months of the
implementation date; and
- the 25% interest will be pledged and ceded to the purchaser as security for
payment of the purchase price.
4. Rationale for the acquisition and the simultaneous disposal ("the
transaction")
In line with Iliad"s stated strategic intent of growing its geographical
presence, the acquisition gives the group"s building materials division access
to the Western Cape market, complementing the existing operation in Somerset
West. The rationale for the simultaneous disposal is to retain and motivate the
existing Campwell Hardware management team and to further enhance the group"s
BEE profile.
Campwell Hardware is predominantly a cash business. Iliad will add value and
expand Campwell Hardware through its expertise in both the credit advancement
and procurement disciplines.
5. Financial effects of the transaction
Set out in the table below are the pro forma financial effects of the
transaction based on Iliad"s audited results for the year ended 31 December
2005. The pro forma financial effects have been prepared for illustrative
purposes only to provide information of how the transaction may have impacted on
the results and financial position of Iliad. Because of their nature, the pro
forma financial effects may not give a fair reflection of Iliad"s financial
position after the transaction or the effect on future earnings.
These pro forma financial effects are the responsibility of the company"s
directors.
Before the After the Percentage
transaction transaction change
Notes (cents)1 (cents) (%)
Earnings per share 2 111.1 116.9 5.2
Headline earnings per share 2 110.6 116.4 5.3
Net asset value per share 3 406.2 406.2 -
Net tangible asset value per share 3 295.4 194.4 (34.2)
Notes:
1. Extracted from the published audited results of Iliad for the year ended 31
December 2005.
2. Earnings and headline earnings per share are based on the following
assumptions:
- the acquisition was effective 1 January 2005;
- the expected acquisition consideration of R165 million;
- Campwell Hardware"s historical profit for the 12-month period ended
28 February 2006;
- an adjustment has been made for the 25% minority shareholding arising as a
result of the simultaneous disposal;
- an adjustment has been made for the interest payable on the R165 million
utilised from existing cash resources and debt facility to finance the
acquisition and for the interest receivable on the proceeds of R41.25 million
resulting from the simultaneous disposal;
- transaction costs of R500 000; and
- the weighted average number of shares, net of treasury shares, in issue during
the year of 144 933 286.
3. Net asset value and net tangible asset value per share are based on the
following assumptions:
- the acquisition was effective 31 December 2005;
- the net assets of Campwell Hardware at the effective date; and
- the number of ordinary shares in issue, net of treasury shares, at 31 December
2005 of 153 427 519.
Johannesburg
27 July 2006
Sponsor
Bridge Capital
Attorneys
Fullard Mayer Morrison Attorneys
Date: 27/07/2006 04:06:28 PM Produced by the JSE SENS Department
