| Thu 19 Oct 2006, 15:46 | | Beige - Detailed Cautionary in respect of the Prop |
|
BEG
BEG
Beige - Detailed Cautionary in respect of the Proposed
Acquisition of Crystal Pack
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
DETAILED CAUTIONARY ANNOUNCEMENT IN RESPECT OF THE PROPOSED ACQUISITION BY
BEIGE OF ALL THE ORDINARY SHARES IN CRYSTAL PACK (PROPRIETARY) LIMITED
("CRYSTAL PACK")
1. Introduction
Further to the cautionary announcement dated 14 September 2006, the
board of Directors of Beige are pleased to announce the entering into
of an agreement with Candur Active Value Investments (Proprietary)
Limited ("CAVI" or "the Vendor") on 18 October 2006, in terms of which
it will acquire all of the issued share capital of Crystal Pack ("the
Acquisition"), with effect from 01 January 2007, subject to the
fulfilment of the conditions precedent set out in paragraph 9 below.
The initial consideration for the Acquisition is R78 538 164.00 ("the
Purchase Consideration"), to be settled by the issue of 785 381 643
shares in Beige to the Vendor at an issue price of 10 cents per share
("the Consideration Shares"). Shareholders are, however, advised that
the Purchase Consideration is subject to certain earnings warranties
provided by both the Vendor and Beige, non-fulfilment of which may
result in either an upward or downward adjustment to the Purchase
Consideration. Details of the earnings warranties are set out in
paragraph 4 below.
2. History and nature of business of Crystal Pack
The Crystal Pack business comprises two divisions of similar sizes - a
contract manufacturing business and a plastics manufacturing business.
Crystal Pack"s contract manufacturing infrastructure is situated in
Pietermaritzburg, where it services local and export customers. The
business has developed a wide innovation and manufacturing capacity,
and provides customers with an integrated sourcing and manufacturing
capability. On 19 September 2006, Crystal Pack entered into a 5-year
contract manufacturing agreement ("the CMA") with Incolabs
(Proprietary) Limited ("Incolabs"), a supplier of branded personal care
products to multi-national companies.
The plastics manufacturing business manufactures injection moulded,
injection stretch blow moulded and blow moulded rigid bottle containers
and closures for the personal care, beverage and allied industries.
The rigid bottle division of Crystal Pack manufactures PET, HPDE and
PVC rigid bottles in a state of the art clean room manufacturing
infrastructure situated in Klipriver, Johannesburg.
During 2005, CAVI took a strategic interest in Crystal Pack and in 2006
CAVI joined forces with Greg Anderson, a senior industry executive with
twenty years experience in factory management, supply chain
optimisation, and logistics administration with both Tiger Brands and
Unilever. It is through this strategic association that CAVI has been
authorised by the owners of Crystal Pack to sell and transfer ownership
of Crystal Pack to Beige.
3. Rationale for the Acquisition
The Acquisition will enable Beige to, inter alia:
- accelerate its ambition to be a leader in the consolidation of the
contract manufacturing and packing industry;
- diversify its product portfolio through the inclusion of the
plastics manufacturing business of Crystal Pack through a backward
integration strategy;
- gainfully and profitably employ the spare manufacturing capacity
at the Midrand and Durban factories at an accelerated rate;
- increase economies of scale;
- strengthen the management and leadership in the business;
- substantially grow and diversify its customer base;
- position itself to provide a complete manufacturing and packaging
solution for its customers; and
- acquire a potential competitor in the market;
4. Earnings warranties and purchase price adjustments
The Vendor has warranted that for the 12 months ending 31 March 2008,
Crystal Pack will achieve earnings before tax and interest ("EBIT") of
R14 million and Beige has warranted that for the same period, it will
achieve an EBIT of R16 million. The failure of either party to achieve
its warranted EBIT will result in an adjustment to the Purchase
Consideration. In order to provide for the possibility of such an
adjustment in favour of Beige, 33.3% of the Consideration Shares will
be conditionally allotted and issued and will be held in trust by
Fluxmans Attorneys ("the Escrow Shares").
Failure by Crystal Pack to achieve its warranted EBIT will result in
termination of the allotment and issue of all or a portion of the
Escrow Shares so as to adjust the shareholding of the Vendor in Beige
proportionately to the actual EBIT achieved by Crystal Pack. The
adjustment to the Purchase Consideration is, however, limited to 20%,
such that, after the implementation of such adjustment, the Vendor will
not own less than 40% of the issued share capital of Beige.
Failure by Beige to achieve its warranted EBIT will result in Beige
being required to issue so many new ordinary shares to the Vendor as
will proportionately reflect the actual EBIT achieved by Beige. This
adjustment is subject to a maximum increase of 20%, such that, after
the adjustment, the Vendor will not own more than 60% of the issued
share capital of Beige.
5. Special distribution in cash or in specie ("the special distribution")
Subject to the fulfilment or waiver of the conditions precedent set out
in paragraph 9 below and, more particularly, the results of the
reciprocal due diligence investigations referred to therein and in
order to provide for the merger of Beige and Crystal Pack, Beige will
make a special distribution to the shareholders registered as such in
the Beige share register at a record date to be determined, but prior
to the issue of the shares to the Vendor. The amount of the special
distribution will depend on the results of the reciprocal due diligence
investigations, but is not expected to be less than R4 million or
greater than R14 million. The special distribution will be made within
six months of the fulfilment of the conditions precedent, but not
before 31 March 2007. Payment of the special distribution may be in
cash or in specie in the form of a cumulative non-participating
preference share bearing a market related coupon and structured as a
payment in reduction of share premium.
7. Financial effects of the Acquisition
The financial effects of the Acquisition and a profit forecast will be
announced simultaneously with the conclusion of the reciprocal due
diligence proceedings referred to in paragraph 9 below.
8. Change of control and waiver of mandatory offer
Approval and implementation of the transaction will result in CAVI
owning more than 35% and possibly more than 50% of the issued shares in
Beige. At the general meeting to approve the transaction referred to
below, Beige shareholders shall be asked to waive the requirement of a
mandatory offer that would otherwise apply in terms of Rule 8 of the
Securities Regulation Code and Rules of the Securities Regulation
Panel. Application will then be made to the Securities Regulation
Panel for it to dispense in terms of Rule 8.7 of the Code with the
obligation to make a mandatory offer.
9. Conditions Precedent
The Acquisition is subject to, inter alia, the following conditions
precedent:
- the approval by the shareholders of Beige of the acquisition by
Beige of an additional 50% plus one share shareholding in Quality
Products (Proprietary) Limited from Thebe Health Care
(Proprietary) Limited ("Thebe"), which approval is to be sought at
a general meeting to be held on or about Wednesday, 15 November
2006;
- the completion of reciprocal due diligence investigations by both
the company and the vendors by Friday, 17 November 2006.
- receipt on or before 25 October 2006 of irrevocable undertakings
to vote in favour of the transaction by Beige shareholders
representing no less than 40% of the issued share capital of
Beige;
- the conclusion of agreements with Thebe and Mothebe Investments
(Proprietary) Limited in respect of the Black Economic Empowered
status of Beige;
- approval of the Acquisition by the requisite regulatory
authorities, including the JSE Limited ("the JSE"), the SRP and
the Competition Commission to the extent required; and
- the approval by the requisite majority of Beige shareholders at a
general meeting convened for the purpose, of resolutions relating,
inter alia to:
- the Beige special payment; and
- the Acquisition, including the issue of shares to the Vendor.
10. Documentation
In terms of the JSE Listings Requirements, the proposed Acquisition
constitutes a category one transaction for Beige. A circular
containing full details of the proposed Acquisition and incorporating
notice of a general meeting of shareholders will be posted to Beige
shareholders within 28 days of the conclusion of the reciprocal due
diligence investigations referred to in paragraph 9 above.
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
19 October 2006
Designated Advisor Corporate Advisor to Legal Advisors to
Arcay Corporate Services Beige Beige
Arcay Corporate Finance Fluxmans Attorneys
Corporate Advisor and
Legal Advisor to Candur
Active Value Investment
Java Capital
Date: 19/10/2006 03:46:29 PM Produced by the JSE SENS Department
