| Wed 7 Feb 2007, 14:28 | | AFT - Afrimat - Acquisition of Malans Quarries |
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AFT
AFT
AFT - Afrimat - Acquisition of Malans Quarries
Afrimat Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/022534/06)
Share code: AFT & ISIN: ZAE000086302
("Afrimat" or "the company")
ACQUISITION OF MALANS QUARRIES
1. Introduction
Further to the cautionary announcement dated 12 December 2006, shareholders are
advised that Afrimat has concluded an agreement dated 2 February 2007 with the
Malans Holding Trust ("the seller") to acquire the entire Malans business ("the
acquisition") with effect from 1 March 2007 ("the effective date").
2. Details of the acquisition
2.1 Nature of the acquisition
Afrimat will acquire the shares and claims in Malans Quarries (Pty) Limited,
Olympic Sand (Pty) Limited, Propateez 66 (Pty) Limited, Malric Properties (Pty)
Limited, Brickrush (Pty) Limited, Melani Materials (Pty) Limited, Jeffrey`s Bay
Crushers CC and Denver Quarries (Pty) Limited ("the Malans business") from the
seller, subject to the fulfilment of the conditions precedent set out below.
The articles of association of the aformentioned companies will be amended to
conform to Schedule 10 of the JSE Listings Requirements.
The Malans business comprises 4 quarry operations and a number of sand mines in
the Western Cape peninsula, Jeffrey`s Bay area and in Port Elizabeth, as well
as mobile crushing operations.
2.2 Acquisition consideration
Afrimat will acquire the Malans business from the seller for an amount of R125
million ("the acquisition consideration"), payable on the closing date, being
the last business day of the month in which the conditions precedent are
fulfilled ("the closing date"). The acquisition consideration will be settled
as follows:
R102.5 million in cash ("the cash portion"), to be funded out of available
cash resources and a vendor consideration placing of R60 million ("the vendor
placing"). The cash portion of the acquisition consideration will attract
interest at the prime rate from 1 April 2007 to the date of payment; and
the balance by the issue of 2 941 176 new Afrimat shares to the seller, which
shares are subject to a 3-year lock-in period.
2.3 The vendor placing
As mentioned above, a portion of the cash portion of the acquisition
consideration is to be funded by means of the vendor placing. The company has
secured commitments from various financial institutions to place a total 6 521
739 Afrimat shares at a price of 920 cents per share with various financial
institutions.
2.4 Conditions precedent
The acquisition is subject to the fulfilment of the following conditions
precedent:
approval by the Competition Authorities and any other regulatory approvals,
as may be required;
conversion of Jeffrey`s Bay Crushers CC into a company;
conclusion of a sale agreement between the seller and the members of
Jeffrey`s Bay Crushers CC for the acquisition by the seller of all the shares
in and claims against Jeffrey`s Bay Crushers (Pty) Limited; and
the conclusion of the vendor placing by Afrimat on or before
the closing date.
2.5 Other salient features of the acquisition
2.5.1 BEE status
The seller undertakes to place 25.1% of the Afrimat shares received in terms of
the settlement of the acquisition consideration with a BEE party/ies, to ensure
the maintenance of Afrimat`s BEE status. The aforementioned shares will be
subject to a 7 year lock-in period from the date of listing of Afrimat on the
JSE, 7 November 2006.
2.5.2 Right of pre-emption
Afrimat has a right of pre-emption over the Afrimat shares delivered to the
seller in terms of the acquisition consideration where the value of the shares
disposed of exceeds R1 million in any 12 month rolling period. The value will
be based on the 30 day volume weighted average price of Afrimat shares on the
JSE calculated at the date of disposal.
2.5.3 Warranties
Warranties normal for a transaction of this nature have been given, including,
inter alia:
- the seller has warranted a minimum net asset value of R65 million for the
Malans business at the effective date; and
- the seller has warranted a minimum net profit after tax of R10 million for
the Malans business for the year ending 28 February 2007.
Should the abovementioned warranties not be met, the acquisition consideration
will be adjusted on a Rand-for-Rand basis.
3. Rationale for the acquisition
The acquisition is in line with Afrimat`s expansion strategy highlighted on
listing in November last year. The earnings-enhancing acquisition adds
strategically located quarries and sand mines to Afrimat`s portfolio, further
boosting the group`s entrenched 44-year presence in the region.
As mentioned above the Malans business comprises 4 quarry operations and a
number of sand mines in the Western Cape peninsula, Jeffrey`s Bay area and in
Port Elizabeth, as well as mobile crushing operations. This adds to Afrimat`s
existing 18 quarries, 13 ready-mix plants, 8 pre-cast factories and 4 mobile
crushing plants.
In addition to benefiting from Malans` 40% share of the western Cape sand
market, the new operations complement Afrimat`s existing product ranges,
particularly in sand and rubble crushing, providing clear synergies to boost
future organic growth. Sand accounts for 40% of turnover at the Malans
operations, with quarries and mobile crushing accounting for around 26% and 19%
respectively.
The Denver Quarries element of the acquisition enhances the group`s presence in
the Eastern Cape and its close proximity to Afrimat`s Patcor Quarry provides
opportunity to capitalise on synergies.
4. Pro forma financial effects of the acquisition
In terms of the JSE Listings Requirements, set out in the table below are the
unaudited pro forma financial effects of the acquisition based on Afrimat`s pro
forma financial information published in the prospectus dated 30 October 2006.
The unaudited pro forma financial effects are presented for illustrative
purposes only, to provide information about how the acquisition may have
impacted on the company`s financial position and results had the acquisition
been effective on 1 March 2005 for income statement purposes and 28 February
2006 for balance sheet purposes. The unaudited pro forma financial effects are
the responsibility of the company`s directors. Due to the nature of the
unaudited pro forma financial effects, they may not give a fair presentation of
the company`s financial position and the results of its operations after the
acquisition.
Note Before the After the Percentage
acquisition1 acquisition change
(%)
Earnings per share (cents) 2 40.6 52.1 28.5
Headline earnings per share (cents) 2 41.1 52.6 28.1
Net asset value per share (cents) 3 196.6 244.4 24.3
Net tangible asset value per share
(cents) 3 150.0 139.7 (6.9)
Notes:
1. The "Before the acquisition" financial information has been extracted from
the pro forma financial information contained in Annexure 4 of the
prospectus dated 30 October 2006.
2. Earnings and headline earnings per share as based on the following
assumptions:
the acquisition was effective 1 March 2005;
the acquisition consideration of R125 million was funded in cash as to R102.5
million and the issue of 2 941 176 new Afrimat shares;
the cash portion was funded from available cash resources and the vendor
placing of 6 521 739 new Afrimat shares at 920 cents per share;
interest on the cash portion of the acquisition consideration foregone,
calculated at an after tax rate of 5% per annum; and
earnings from the Malans business for the 12 months ended 28 February 2006,
extracted from unaudited management accounts, which the directors are satisfied
as to the quality thereof.
3. Net asset value and net tangible asset value per share are based on the
following assumptions:
the acquisition was effective 28 February 2006;
the acquisition consideration of R125 million was funded in cash as to R102.5
million and the issue of 2 941 176 new Afrimat shares;
the cash portion was funded from available cash resources and the vendor
placing of 6 521 739 new Afrimat shares at 920 cents per share;
and
a net asset value for the Malans business at 28 February 2006 of R43 million.
Johannesburg
7 February 2007
Sponsor and corporate advisor
BRIDGE CAPITAL
Date: 07/02/2007 14:28:01 Produced by the JSE SENS Department.
