| Thu 14 Dec 2006, 13:03 | | PSV -Unwinding of the acquisition of the subsidiar |
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PSV
PSV
PSV -Unwinding of the acquisition of the subsidiaries of Colvic and
further cautionary announcement
PSV HOLDINGS LIMITED
(Formerly Elexir Technology Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1998/004365/06)
JSE Share code: PSV & ISIN: ZAE000078705
("PSV" or the "Company")
UNWINDING OF THE ACQUISITION OF THREE OF THE SUBSIDIARIES OF COLVIC PETROLEUM
PRODUCTS (PROPRIETARY) LIMITED, FINAL PAYMENT TO PSV VENDORS AND FURTHER
CAUTIONARY
1. INTRODUCTION
Shareholders are referred to the cautionary announcement dated 5 December
2006.
Shareholders are advised that PSV has signed an agreement with the vendors
of three of the subsidiaries of Colvic Petroleum Products (Pty) Limited
("Colvic") to cancel their acquisition, except in relation to Petrologic
(Pty) Limited, which will remain part of the PSV group, and to settle all
outstanding matters between the parties.
In addition PSV has reached an agreement with the vendors of the original
PSV business regarding a final payment.
2. UNWINDING OF THE ACQUISITION OF THREE OF THE COLVIC SUBSIDIARIES
PSV focuses on the provision of flow control products, services and
electromechanical solutions to the mining, petrochemical and water and
waste management sectors in South Africa as well as Africa.
PSV`s product offering extends from providing pumps and valves to its
customers, to implementing larger projects that meet customers`
requirements. The Company has also established an in-house capability for
the manufacturing and refurbishment of pumps, fuel handling systems and
other components, a highly lucrative business with substantial profit
margins.
PSV acquired Petrologic (Pty) Limited ("Petrologic"), PCS Foundry (Pty) Ltd
("PCS"), Tseba Construction (Pty) Ltd ("Tseba"), and Colvic Marketing &
Engineering (Pty) Ltd ("CME"), during September 2005 ("the Sale
Agreement"). These companies became wholly owned subsidiaries of the wholly
owned subsidiary, Colvic. This acquisition extended PSV`s offering to the
petrochemical industry in terms of the manufacturing, supply, installation
and maintenance of fuel handling systems at service station forecourts and
fuel depots.
The parties to the Sale Agreement have agreed to cancel the Sale Agreement,
except in relation to Petrologic, which will remain part of the PSV group,
and to settle all outstanding matters between the parties ("the Colvic
unwinding").
2.1 RATIONALE
The initial synergies expected between the original PSV businesses and
Colvic`s subsidiaries have unfortunately not materialised. The logical
solution was to cancel the Sale Agreement, with the original owners
retaining Colvic and three of the wholly owned subsidiaries namely PCS,
Tseba and CME.
PSV will retain Petrologic as the company has a very strong brand, an
experienced management team and will enable PSV to retain a footprint in
the petrochemical industry - a sector with good growth prospects.
2.2 TERMS AND CONDITIONS OF THE COLVIC UNWINDING
Silvarob Investment Holdings Limited ("Silvarob") is a wholly owned
subsidiary of PSV. Colvic is, in turn, a wholly owned subsidiary of
Silvarob.
PSV and the former shareholders of Petrologic, PCS, Tseba and CME ("the
Former Shareholders") have, on 4 December 2006, entered into an agreement
("the Agreement") to cancel the Sale Agreement, except in relation to the
issued shares in and claims on loan account against Petrologic, and to
settle all outstanding matters between them.
The salient features of the Agreement are as follows:
* Colvic will sell all the issued shares in and its claims on loan
account against Petrologic to Silvarob for R20 704 160, of which R17
454 160 will be set off against a claim, which Silvarob has against
Colvic. The balance will be payable in cash instalments and by
offsetting amounts owed by Colvic and its remaining subsidiaries;
* Silvarob will sell all the issued shares in and its claims on loan
account against Colvic to the Former Shareholders for an amount of R16
551 441 in consideration for which the Former Shareholders undertake
to transfer their 22 931 493 shares in PSV to Silvarob;
* Silvarob cedes its right to the said PSV shares to PSV for a
consideration of R16 551 441 pursuant to which PSV will cancel the
said issued shares of PSV;
* service contracts between Colvic and Messrs GM Mahioodin and A Ahlers
will be cancelled, and Petrologic will enter into new service
contracts with Messrs GM Mahioodin and A Ahlers;
* the Former Shareholders have signed restraint undertakings for five
years in favour of PSV, with no additional payment in respect of these
restraint undertakings;
* PSV, Silvarob and Petrologic have signed restraint undertakings for
five years in favour of Colvic and its subsidiaries, with no
additional payment in respect of these restraint undertakings;
* Messrs Ren Lubbinge and Vic Hall have resigned as directors of PSV
with effect from 5 December 2006;
* all outstanding matters between the parties are settled;
* the Agreement will be effective from 1 November 2006.
2.3 CONDITIONS PRECEDENT TO THE COLVIC UNWINDING
The Agreement was subject to a number of conditions precedent, all of which
have been fulfilled.
3. FINAL PAYMENT TO PSV VENDORS
3.1 TERMS OF THE FINAL PAYMENT AGREEMENT AND RATIONALE
In terms of the sale of shares agreement dated 6 February 2006 and the
amendment agreement dated 2 March 2006 between PSV, Silvarob and the PSV
vendors (being AJD Da Silva, P Robinson and AR Dreisenstock) the purchase
consideration for Silvarob was R 150 million and the purchase consideration
was to be settled as follows:
* 114 000 000 new no par value ordinary shares at an issue price of
R1.00 per share which were issued on listing;
* not more than 18 000 000 new ordinary shares of no par value to be
issued at an issue price of R1.00 per share on completion of the 28
February 2006 PSV audit, and subject to a profit after tax ("PAT") of
R10.5 million being achieved; and
* not more than 18 000 000 new ordinary shares of no par value to be
issued at an issue price of R1.00 per share on completion of the 28
February 2007 PSV audit, and subject to a PAT of R12.6 million being
achieved.
Based on the audited PAT at 28 February 2006 the PSV vendors were entitled
to 16 273 481 number of PSV shares, but such shares have not been issued
yet.
PSV and the PSV vendors have on 13 December 2006, entered into an addendum
to the sale of shares and cession of claims agreement ("the final payment
agreement") in which it was agreed that the purchase consideration for
Silvarob was reduced to R 129 million and that the outstanding amount of
the purchase consideration of R 15 million will be paid by the issue of 15
000 000 ordinary shares to the PSV vendors by no later than 30 January
2007. In addition, the PSV vendors have agreed among themselves that AR
Dreisenstock will transfer 1 million shares for no consideration to AJD da
Silva and P Robinson to facilitate the final payment agreement.
The rationale for this final payment agreement is to finalise the
acquisition cost of Silvarob and to give investors certainty in respect of
the number of shares to be issued for the acquisition.
4. PRO FORMA FINANCIAL EFFECTS OF THE COLVIC UNWINDING AND THE FINAL PAYMENT
TO PSV VENDORS
The table below sets out the unaudited pro forma financial effects of the
Colvic unwinding and the final payment to PSV vendors on the earnings,
headline earnings and the net asset value and tangible net asset value per
PSV share, based on the assumption that:
4.1 For the purpose of calculating the earnings and headline earnings per share
as if the Colvic unwinding and the final payment was implemented on 1 March
2006.
4.2 For the purpose of calculating the net asset value and net tangible asset
value per share, the Colvic unwinding and the final payment was effected on
31 August 2006.
Before After the Change After Change After the Change
(cents) Colvic (%) the (%) Colvic (%)
(1) unwinding final unwinding
payment and the
final
payment
Earnings per 4.21 4.282 1.66% 4.234 0.48% 4.316 2.38%
share (cents)
Headline 4.21 4.282 1.66% 4.234 0.48% 4.316 2.38%
earnings per
share (cents)
Net asset 88.36 88.953 0.67% 88.905 0.61% 89.577 1.37%
value per
share (cents)
Net tangible 21.20 17.463 (17.64)% 21.335 0.61% 17.587 (17.07)%
asset value
per share
(cents)
Weighted 211 108 188 176 209 834 186 903
average shares
in issue
(`000)
Shares in 208 779 185 848 207 506 184 574
issue at
period end
(`000)
Notes:
1. The "Before" financial information has been extracted from the
published reviewed interim results of PSV for the six months ended 31
August 2006.
2. The "After the Colvic unwinding" earnings and headline earnings per
share have been adjusted to exclude the income and expenditure
relating to PCS, Tsebe and CME for the six months ended 31 August 2006
and the 22 931 493 shares being returned to PSV and to include the
additional interest payable, at an average interest rate of 11%, in
respect of the loan raised to fund the cash portion of the purchase
consideration.
3. The "After the Colvic unwinding" net asset value and net tangible
asset value per share have been adjusted to reflect the payment of the
cash portion of the purchase price out of loan funding, the raising of
the goodwill arising as a result of the additional payment in the
amount of R250 000 and the off-setting of the various intercompany
loans as a result of the transaction, to exclude the assets and
liabilities of PCS, Tseba, CME and Colvic and the 22 931 493 shares
returned to PSV and to include the transaction costs which have been
written off against the stated share premium.
4. The "After the final payment" earnings and headline earnings per share
have been adjusted to exclude 1 273 481 unissued shares previously
included in the weighted average number of shares that have been
cancelled as a result of the final payment agreement.
5. The "After the final payment" net asset value and net tangible asset
value per share have been adjusted to exclude 1 273 481 unissued
shares previously included in the number of shares that have been
cancelled as a result of the final payment agreement.
6. The "After the Colvic unwinding and final payment" earnings and
headline earnings per share have been adjusted as for notes 2 and 4.
7. The "After the Colvic unwinding and final payment" net asset value and
net tangible asset value per share have been adjusted as for notes 3
and 5.
4.3 The unaudited pro forma financial effects contained in table 3.2.2 above
have been prepared for illustrative purposes only and because of their
nature may not give a fair reflection of PSV`s results, financial position
and changes in equity after the transaction. The directors of PSV are
responsible for the unaudited pro forma financial effects.
4.4 The auditors, KPMG Inc. have performed a limited assurance engagement with
regards to the unaudited pro forma financial effects and their limited
assurance report is available for inspection at the registered office of
the company.
5. REVISED PROFIT FORECAST FOR THE YEAR ENDING 28 FEBRUARY 2007
The Company is in the process of revising its profit forecast for the
year ending 28 February 2007 taking into account the effect of the
Colvic unwinding and the final payment to PSV vendors. The revised
profit forecast will be published in a subsequent announcement before
the end of January 2007.
6. FURTHER CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement referred to in 1 above, shareholders
are advised to continue exercising caution when dealing in the company`s
securities until the revised profit forecast has been announced.
Johannesburg
14 December 2006
Designated adviser Exchange Sponsors
Auditors KPMG Inc.
Attorneys Fluxmans Inc.
Warning: The listing of ordinary shares in the company is on ALTx.
Investors are advised of the risks of investing in a company listed on
ALTx. Investors are advised that the JSE does not guarantee the viability
or the success of a company listed on ALTx. In terms of the Listings
Requirements, the company is obliged to appoint and retain a Designated
Adviser, which is required to, inter alia, attend all board meetings held
by the company to ensure that all the 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 the prospect of an
appropriate offer to minority shareholders.
Date: 14/12/2006 13:03:09 Produced by the JSE SENS Department.
