| Mon 22 Jan 2007, 17:44 | | JNC - Johnnic - Acquisition Of An Indirect Interes |
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JNC
JNC
JNC - Johnnic - Acquisition Of An Indirect Interest In Montauk Energy
Capital LLC ("MONTAUK") And Withdrawal Of Cautionary
JOHNNIC HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 1889/000429/06)
Share Code : JNC
ISIN : ZAE000024352
("Johnnic")
ACQUISITION OF AN INDIRECT INTEREST IN MONTAUK ENERGY CAPITAL LLC
("MONTAUK") AND WITHDRAWAL OF CAUTIONARY
1. Introduction
Shareholders are referred to:
1.1 Johnnic`s cautionary announcement on SENS dated 15 December 2006 in
which shareholders were advised that Johnnic had acquired the right to a
90% interest in Montauk; and
1.2 to the report of the Chairman and Chief Executive Officer set out in
the audited financial statements of Johnnic for the year ended 31 March
2006 in which shareholders are advised of Johnnic`s intention to expand
its operations into a private equity fund management company (Blue Wolf
Capital Management LLC, a limited liability company incorporated in the
State of Delaware, USA) in respect of which an application is pending
before the South African Reserve Bank for the Exchange Control approval
needed for the investment. Pending such Exchange Control approval, an
investment opportunity in the form of the undermentioned transaction has
been identified by Johnnic and the required Exchange Control approval for
this investment opportunity has been obtained.
2. Transactions
In terms of a series of transactions:
2.1 Johnnic has through the acquisition of a subsidiary, Blue Wolf
Energy Holdings LLC (a limited liability company formed in accordance
with the laws of the State of Delaware, USA) ("Blue Wolf"), acquired
approximately 93.5% of Montauk (a limited liability company formed in
accordance with the laws of the State of Delaware, USA) ("Montauk") from
DQE Financial Corporation and has paid US$61 100 000 in respect of such
transaction ("the acquisition");
2.2 the balance of the equity of Montauk has been acquired by a
financier, Golden Tree Asset Management LP or its affiliates.
3. Business carried on by Montauk
Montauk operates landfill gas to energy sites under long term
contractual arrangements, including electrical production, medium Btu
processing, high Btu pipeline quality production and liquefied natural
gas production.
4. Rationale for the acquisition
The Board is of the view that it is an opportune time to diversify its
operations. To this end Johnnic has identified an opportunity to
invest into a private equity fund management company (Blue Wolf
Capital Management LLC, a limited liability company incorporated in
the State of Delaware, USA) in respect of which an application is
pending before the South African Reserve Bank for the Exchange Control
approval needed for the investment. Pending the required Exchange
Control approval and in line with the stated objective of diversifying
its operations, Johnnic has identified the opportunity to acquire an
approximate 93.5% interest in Montauk.
In the future Johnnic may also be able to apply Montauk`s technology
and technical know-how in South Africa which has approximately 400
viable landfill sites to which the technology can be extended.
5. Management
Subject to all necessary regulatory consents and approvals:
5.1 it is intended that Adam Blumenthal and Josh Wolf Powers in
consideration for the management of Blue Wolf and/or Montauk will receive
the equivalent of a non-voting economic interest in Blue Wolf of
respectively 7.186% and 2.614% after Johnnic has recouped its investment
of US$61 100 000 plus a return thereon of 8% per annum;
5.2 Montauk Management, including Adam Blumenthal and Josh Wolf Powers
have the right to acquire an approximate 2% interest in Montauk for the
same consideration (pro rated) as that which was paid by Blue Wolf for
its interest in Montauk;
5.3 Montauk will also establish an appropriate incentive plan to
incentivise management of Montauk.
Adam Blumenthal is a non-executive director of Johnnic and
accordingly such transactions may be related party transactions in
terms of the Listings Requirements of the JSE Limited ("JSE") and
therefore subject to the requirements of the JSE in relation to
related party transactions;
6. Funding of the acquisition
The acquisition was funded from existing group cash resources and by
raising an amount of R53m of debt funding.
7. Pro forma financial effects of the acquisition
Based on the published consolidated unaudited results of Johnnic for
the 6 months ended 30 September 2006, the pro forma financial effects
of the acquisition on Johnnic`s earnings, headline earnings, net asset
value ("NAV") and net tangible asset value ("NTAV") are set out below.
The pro forma financial information for which the Board of Directors
is responsible has been prepared for illustrative purposes only and
because of its nature may not give a true picture of Johnnic`s
financial position and results of operations.
Per Johnnic ordinary Before (1) After (2) Percentage
share Change
Earnings (cents) 35 32 (3) -9.2%
Headline earnings 35 32 (3) -9.4%
(cents)
NAV ((cents) 799 799 (4) -
NTAV (cents) 795 538 (5) -32,3%
Notes:
1. Based on the published consolidated unaudited results of Johnnic for
the 6 months ended 30 September 2006.
2. Based on the assumption that the acquisition was effected on 1 April
2006 for income statement purposes and on 30 September 2006 for balance
sheet purposes. An average R/$ exchange rate of R6,94 was assumed for
period 1 April 2006 to 30 September 2006, and a closing rate of R7,09/$
was assumed at 30 September 2006.
3. Based on the assumption that the acquisition is funded as stated in
6 above, assuming an average cost of debt of 7,81% p.a and an after tax
return of 6% p.a that would have been earned on the cash resources
utilized to fund the acquisition. SA corporate tax rate of 29% has been
assumed.
4. Based on the assumption that the excess paid over the net book value
of the assets acquired relates to goodwill which is not impaired. Net
assets of US$61,1m were acquired.
5. Goodwill and intangible assets, arising on acquisition, have been
excluded in the calculation of NTAV per Johnnic ordinary share.
8. Articles of new subsidiaries
Johnnic has undertaken to the JSE Limited that, to the extent it is
able to do so, once the proposed transaction has been implemented, it
will amend the Articles of Association of its new offshore
subsidiaries to comply with the provisions of the JSE`s Listings
Requirements.
9. Circular
A Circular relating to the proposed transaction, is being prepared in
accordance with the provisions of the JSE Listings Requirements and
which will be posted to shareholders within 28 days of the publication
of this Announcement.
10. Withdrawal of cautionary
Shareholders are advised that they no longer are required to exercise
caution when dealing in their Johnnic shares.
Dated at Johannesburg on 22 January 2007
SPONSOR AND INVESTMENT BANK ATTORNEYS
Investec Bank Limited Webber Wentzel Bowens
Date: 22/01/2007 17:44:30 Produced by the JSE SENS Department.
