| Wed 2 Aug 2006, 8:30 | | Beige Holdings Limited - Acquisition and withdrawa |
|
BEG
BEG
Beige Holdings Limited - Acquisition and withdrawal of cautionary
Beige Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/006871/06)
("Beige" or "the company")
ISIN Code: ZAE000034161 & Share code: BEG
ACQUISITION OF 50% PLUS ONE SHARE OF QUALITY PRODUCTS (PROPRIETARY) LIMITED
("QUALITY PRODUCTS") INCORPORATING AN EMPOWERMENT TRANSACTION WITH THEBE
HEALTHCARE (PROPRIETARY) LIMITED ("THEBE") AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. Introduction
The directors of Beige are pleased to announce the signing of an
empowerment transaction with Thebe in conjunction with the acquisition
of an additional 50% plus one share in Quality Products. The
agreement, signed on 31 July 2006 and effective from 01 April 2006,
will result in Beige holding a 90% plus one share interest in Quality
Products and Thebe holding a 25% plus one share interest in Beige ("the
transaction"). The consideration for the acquisition is R15 349 456
and will be settled through the issue of 191 868 195 new shares in
Beige.
2. Details of the transaction
On 19 July 2005, Beige announced the acquisition of Quality Products in
conjunction with its partners, Thebe and Mothebe Investments
(Proprietary) Limited ("Mothebe"). The acquisition resulted in Beige
holding a 40% interest in Quality Products, a leading soap, household
products and toiletries manufacturer that provides an exclusive
contract manufacturing and packing service to branded pharmaceutical,
cosmetics, toiletries and home-care markets. As stated in the
announcement of the acquisition of Quality Products, it was the
intention of Beige, Thebe and Mothebe to extend this empowerment
transaction to Beige after a 5-year period, through a share-swap
agreement in respect of Quality Products shares which would result in
Thebe becoming a significant shareholder in Beige. Mothebe"s agreement
provided for an automatic swap up into Beige shares in five years, in
the ratio of 247.5 Beige shares for every one share held in Quality
Products.
As a result of the pleasing performance of Quality Products, the day-to-
day management of which has been under the direction of Beige, Thebe
has elected to swap its shareholding in Quality Products into Beige,
with immediate effect. The share swap will result in Thebe becoming
the recognised empowerment partner in Beige, with an effective holding
of 25% plus one share and the opportunity to increase its shareholding
through the exercise of options, as detailed in paragraph 4 below.
Although Mothebe has expressed an interest in swapping its shares held
in Quality Products into Beige shares at an earlier date than currently
provided for in its agreement, negotiations remain in progress and an
announcement in this regard will be made in due course. In the event
that the earlier swap up is agreed, Quality Products will become a 100%
held subsidiary of Beige.
3. Rationale for the transaction
The transaction will result in Thebe entrenching itself as Beige"s
recognised Black Empowerment Partner, which shareholding is expected to
be to the benefit of both parties. The increased shareholding in
Quality Products will result in Beige being able to consolidate and
strengthen its position in the contract manufacturing industry, whilst
fast tracking its empowerment plans. The location of a subsidiary in
Durban and its operations in Johannesburg will enhance its competitive
ability, improve service levels to customers, improve economies of
scale and increase earnings for shareholders.
4. Granting of options to Thebe to subscribe for additional shares in
Beige
In terms of the agreement, Beige has granted Thebe an American option
to subscribe for an additional 19 066 584 shares in Beige at a price of
8 cents per share. The option is exercisable at any time from 31
August 2006 up to and including 30 September 2007 and through one or
more exercises thereof, subject to the JSE Listings Requirement on
closed periods. The rationale for the granting of the option is to
enable Thebe to maintain a minimum shareholding of 25% plus one share
in Beige should negotiations with Mothebe be successfully concluded and
shareholders approve the granting of share options to executive
directors and other senior staff members, which approval will be sought
in general meeting.
As Beige"s empowerment partner, Thebe has warranted that, between 01
August 2006 and 31 March 2008, it will be in a position to increase the
turnover of Beige by a minimum R25 000 000, at market related gross
margins. In recognition of this, the directors of Beige have elected
to grant Thebe a second American option to subscribe for additional
shares in Beige. The second option enables Thebe to subscribe for an
additional 19 066 584 shares in Beige at a price of 12.5 cents per
share. The option is exercisable at any time from confirmation of
achievement of the warranted turnover, up to and including 30 September
2008 and through one or more exercises thereof, subject to the JSE
Listings Requirements on closed periods.
5. Specific repurchase of shares and issue of shares for cash
As a measure of confidence in the value that Thebe believes it will
bring to Beige, Thebe has granted Beige a claw-back option ("the claw
back option") in terms of which Beige will be able to repurchase at par
value, shares issued to Thebe as part of the empowerment transaction
should Thebe fail to achieve the warranted turnover referred to in
paragraph 4 above. The claw-back option entitles Beige to repurchase 1
165 for every R1 000 of warranted turnover or part thereof, by which
there is a short fall, subject to a maximum repurchase of 15 000 000
shares. The claw-back option is an American-styled option and is
exercisable by Beige within a 12-month period commencing from the date
on which the warranted turnover has been determined.
In the event that Beige elects to exercise the claw back option, Thebe
will have the right, within 30 days of Beige notifying it of such
election, to pay for the shares subject to the claw back option, at a
price of 8.6 cents per share.
6 Adjustment to Quality Products agreements
In order to implement the transaction, the contract manufacturing
agreement and amounts payable to Unilever South Africa Home and
Personal Care (Proprietary) Limited ("USAHPC") have been varied to
substantially reduce the percentage rebates payable to USAHPC on sales
above the R129 000 000 minimum sales per annum guaranteed by USAHPC,
over the next 4 years, in return for the introduction of a fixed
rebate, which will be payable over a 4-year period.
7 Financial Effects of the acquisition
The table below summarises the pro forma financial effects of the
acquisition of an additional 50% plus one share in Quality Products on
the reviewed, published results of Beige for the year ended 31 March
2006, as though the acquisition had been in effect from 01 April 2005,
and is the responsibility of the directors. The pro forma financial
effects have been prepared for illustrative purposes only and due to
their nature, may not give a fair reflection of Beige after the
acquisition.
Fully diluted Published Pro Forma Percentag
information Reviewed Results for e Change
Results for the 13- (%)
the 13- month
month period
period ended 31
ended 31 March 2006
March 2006 after the
Acquisition
of 50% plus
1 share in
Quality
Products
Attributable 0.09 0.83(2) >862%
earnings per share
(cents)
Headline earnings 0.08 0.83(2) 997%
per share (cents)
Net asset value 6.11 6.58(3) 8%
(cents)
Tangible net asset 5.63 2.21(3) -61%
value per share
(cents)
Weighted average 386 390 000 578 258 50%
no. of shares in 195(4)
issue (`000)
Shares in issue at 574 465 000 766 333 33%
year end (`000) 195(4)
Notes:
1. The "before" column is extracted from the reviewed financial
information published by Beige for the 13-month period ended 31 March 2006
2. The "after" column reflects adjustments to the Beige results to
include 90% of Quality Products for the 7 months ended 31 March 2006, after
reversing the income from associate relating to Quality Products that was
included in the Beige results, as though Quality Products was a subsidiary
of Beige for the period commencing 01 September 2006, being the date of
acquisition of Quality Products. In addition, adjustment has been made for
transaction costs, after taxation. In accordance with the accounting
policies of Beige, Goodwill of R10 156 431 arising on the acquisition of
Quality Products has not been amortised.
3. The "after" column reflects adjustments to the Beige balance sheet as
at 31 March 2006 for Quality Products balance sheet at 31 March 2006,
adjusting for minority interest and the effects of the adjustments to the
contract manufacturing agreement and amounts payable to USAHPC;
4. The weighted average shares and shares in issue at period end have
been increased by the number of shares to be issued to Thebe pursuant to
this transaction.
7 Conditions precedent
In addition to the normal conditions precedent that would be applicable
to transactions of this nature, which conditions are indivisible and
include, inter alia, approval by the JSE Limited and any other
regulatory bodies to the extent required, the agreement is subject to
the following conditions precedent:
* the approval by Unilever Home and Personal Care (Proprietary)
Limited of the sale of shares agreement entered into by and
between Unilever and Beige, Thebe & Mothebe; the sale of business
agreement entered into by and between Unilever and Quality
Products, Beige, Thebe and Mothebe; and the contract
manufacturing agreement entered into by and between Unilever and
Quality Products; and
* the approval by shareholders in a general meeting convened for
the purpose, of the resolutions required to implement the
transaction;
8. Appointment to the Board of Directors
In recognition of Thebe"s status as Beige"s recognised empowerment
partner, Thebe will appoint two directors to the board of Beige with
effect from the fulfilment of the conditions precedent set out in
paragraph 7 above.
9. Documentation
A circular containing full details of the proposed options and a notice
of general meeting of Beige shareholders is in the process of being
prepared and will be posted to shareholders within 28 days.
10.Withdrawal of the Cautionary Announcement
Following the above announcement shareholders are advised that the
cautionary announcement dated 31 July 2006 has been withdrawn.
Negotiations with Mothebe are not considered to be price sensitive in
nature.
In accordance with AltX Listings Requirements, shareholders are advised of
the risks of investing in a company listed on AltX and are advised that the
JSE does not guarantee the viability or the success of a company listed on
AltX. In terms of JSE Listings Requirements a Designated Adviser has to be
retained by the company. The Designated Adviser is required to, inter
alia, attend all board meetings held by the company to ensure that all JSE
Listings Requirements and applicable regulations are complied with, approve
the financial director of the company and guide the company in a competent,
professional and impartial manner. If the company fails to retain a
Designated Adviser it must make arrangements to appoint a new Designated
Adviser within 10 business days, failing which the company faces suspension
of trading of its securities. If a Designated Adviser is not appointed
within 30 days of its suspension the company faces the termination of its
listing without an offer to minorities.
Johannesburg
01 August 2006
Designated Advisor
Arcay Corporate Services
Corporate Advisor
Arcay Merchant
Date: 02/08/2006 08:30:15 AM Produced by the JSE SENS Department
