| Wed 21 Feb 2007, 8:00 | | BEG - Beige - Revised terms and pro forma financia |
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BEG
BEG
BEG - Beige - Revised terms and pro forma financial effects of the proposed
Acquisition and withdrawal of cautionary announcement
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
REVISED TERMS AND PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION BY
BEIGE OF ALL THE ORDINARY SHARES IN CRYSTAL PACK (PROPRIETARY) LIMITED ("CRYSTAL
PACK"), PROPOSED DISTRIBUTION TO EXISTING BEIGE SHAREHOLDERS AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the detailed cautionary announcement published on SENS on 19
October 2006 ("19 October announcement") and the renewal of cautionary
announcements dated 28 November 2006 and 27 December 2006, regarding the
proposed acquisition by Beige of the entire issued share capital of Crystal
Pack ("the Acquisition") from the existing shareholders of Crystal Pack
("the Vendors") with effect from 01 January 2007, the directors of Beige
are pleased to announce the satisfactory conclusion of the reciprocal due
diligence investigations and the resultant pro forma financial effects of
the Acquisition.
2. Purchase consideration, earnings warranties and purchase price adjustments
Following the completion of reciprocal due diligence investigations, the
consideration for the Acquisition ("the Purchase Consideration") has been
amended as follows:
a. the number of Beige shares to be issued has been reduced from that
set out in the 19 October announcement by the number of treasury shares
held by Zizmax Investments (Pty) Ltd, a wholly-owned subsidiary of Beige.
The new number of shares to be issued to the Vendors is 781 064 976 shares
at an issue price of 10 cents per share ("the Consideration Shares"), being
an effective payment of R78 106 497.00.
b. the options initially offered to the Vendors entitling them to
subscribe for a maximum additional 48 066 732 shares in the event that
Thebe Medicare (Pty) Ltd ("Thebe") and the directors and senior executive
management of Beige exercise the options granted to them and approved by
shareholders at a general meeting held on 13 November 2006, have been
cancelled in full; and
c. the amount of the distribution in specie referred to in paragraph 3
below has been increased from the 19 October announcement stated maximum of
R14 000 000 to R15 000 000.
Shareholders are, however, reminded that the Purchase Consideration is
subject to earnings warranties provided by both the Vendors and Beige. In
terms of these warranties, the Vendors have warranted that for the 12
months ending 31 March 2008, Crystal Pack will achieve earnings before
interest and tax ("EBIT") of R13 million and Beige has warranted that for
the same period, it will achieve 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 ("the Escrow Shares") will be
conditionally allotted and issued and will be held in trust by Fluxmans
Attorneys. Failure by Crystal Pack to achieve the 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 Vendors in Beige
proportionately to the actual EBIT achieved by Crystal Pack. The downward
adjustment to the Purchase Consideration is, however, limited such that,
after the implementation of such adjustment and the specific issue of
shares for cash to Thebe ("the Thebe Issue") referred to in paragraph 4
below and after eliminating the treasury shares as per paragraph 2(a)
above, the Vendors will not own less than 33% of the issued share capital
of Beige.
In the event that Beige fails to achieve its warranted EBIT, the company
will be required to issue so many new ordinary shares to the Vendors as
will proportionately reflect the actual EBIT achieved by Beige. This upward
adjustment is subject to a maximum increase in the Purchase Consideration,
such that after the implementation of such adjustment and the Thebe Issue
and after eliminating the treasury shares as per paragraph 2(a) above, the
Vendors will not own more than 53% of the issued share capital of Beige.
3. Special distribution in specie ("the Capitalisation Issue")
Subject to the fulfilment or waiver of the conditions precedent set out in
paragraph 5 below, Beige will proceed with a Capitalisation Issue to the
benefit of shareholders registered as such in the Beige share register at a
record date to be determined, but to the exclusion of the Vendors. The
amount of the Capitalisation Issue will be R15 million and will be in the
form of a cumulative non-participating, convertible, redeemable preference
share with an annual coupon rate of 8%. The final terms of the proposed
Capitalisation Issue are still being determined and a further announcement
with regard to the number and face value thereof, the ratio of entitlement
and the future conversion rate will be published on SENS in due course.
4. Specific issue of shares for cash to a related party
During November 2006, shareholders approved a transaction which resulted in
Thebe becoming Beige`s recognised empowerment partner, with a 25% holding
in the company. In order for Beige to maintain its empowered status and,
as an integral part of the Acquisition, Thebe has been given the right to
subscribe for an additional 264 885 725 shares in Beige at a subscription
price equal to the price at which the Consideration Shares will be issued,
being 10 cents per share. In the event that Thebe does not take up the
shares, an empowerment entity nominated by the Vendors will be invited to
take up the Thebe Issue, failing which, the board will identify other
empowerment partners for Beige at a negotiated discount to the ruling share
price at the time.
5. Conditions Precedent
The Capitalisation Issue, Acquisition and Thebe Issue ("the Transaction")
remain subject to conditions precedent usually associated with a
transaction of this nature including the approval of the requisite
regulatory authorities, including the JSE Limited ("the JSE"), the
Securities Regulation Panel ("SRP") and the Competition Commission; and the
approval of the requisite majority of Beige shareholders, at a meeting
convened for the purpose, of resolutions relating to, inter alia, the
Capitalisation Issue, the Acquisition and the Thebe Issue.
6. Appointment of directors to the Board
It is intended that the board of directors will be reconstituted following
the approval of the Transaction in order to reflect the Vendors
shareholding as well as to provide for independent external representation
on the board.
7. Financial effects of the Transaction
The table below summarises the pro forma financial effects of the
Transaction on the published unaudited interim results of Beige for the six
months ended 30 September 2006, as though the Transaction had been in
effect from 01 April 2006 for income statement purposes and at 30 September
2006 for balance sheet purposes.
The Crystal Pack business comprises two divisions of similar sizes - a
contract manufacturing business and a plastics manufacturing business.
Crystal Pack entered into a number of 5-year contract manufacturing
agreements during 2006 for the manufacture of various personal care
products. The contract manufacture of these products will be integrated
into Beige`s existing manufacturing infrastructure in Durban and Chloorkop.
These contracts envisage a substantially higher turnover and profitability
going forward, which is not reflected in the pro forma financial effects,
although the financial impact thereof is included in the Crystal Pack
earnings warranty referred to in paragraph 2 above.
The pro forma financial effects, which are the responsibility of the
directors, have been prepared for illustrative purposes only. Due to their
nature, they may not fairly present Beige`s financial position, changes in
equity, result of operations or cash flows.
Un-audited Pro Forma % After Pro Forma
results after "A" after the
("Before") Capitalisation Acquisition
(1) Issue ("A") ("B")
(2)
Earnings per share 0.77 0.69 -9.95% 0.43
(cents)
Headline earnings 0.77 0.69 -9.95% 0.43
per share (cents)
Fully diluted 0.71 0.64 -9.95% 0.41
earnings and
headline earnings
per share (cents)
Net asset value 7.49 7.49 -9.95% 8.74 (3)
per share (cents)
Net tangible asset 1.80 1.80 0% 2.17 (3)
value per share
(cents)
Fully diluted net 6.90 6.90 0% 8.38
asset value per
share (cents)
Fully diluted net 1.66 1.66 0% 2.08
tangible asset
value per share
(cents)
Weighted average 785 382 785 382 0% 1 566 447 (6)
number of ordinary
shares in issue
(`000)
Ordinary number of 785 382 785 382 0% 1 566 447 (6)
shares in issue at
period end (`000)
Fully diluted 852 515 852 515 0% 1 633 580
number of shares
in issue (`000)
(Continued)
% after "A" Pro Forma % after "A",
and "B" after Thebe "B", "C"
Issue ("C") See Note *
Earnings per share -43.61% 0.50 -35.04%
(cents)
Headline earnings -43.61% 0.50 -35.04%
per share (cents)
Fully diluted -41.31% 0.48 -31.98%
earnings and
headline earnings
per share (cents)
Net asset value 16.73% 8.92 (8) 19.16.7%
per share (cents)
Net tangible asset 20.82.7% 3.30 (8) 83.82%
value per share
(cents)
Fully diluted net 21.50% 8.61 24.77%
asset value per
share (cents)
Fully diluted net 25.76% 3.19 92.48%
tangible asset
value per share
(cents)
Weighted average 99.45% 1 831 333 133.18%
number of ordinary
shares in issue
(`000)
Ordinary number of 99.45% 1 831 333 133.18%
shares in issue at
period end (`000)
Fully diluted 91.62% 1 898 466 122.69%
number of shares
in issue (`000)
Notes:
The pro forma financial effects are based on the following assumptions:
The published unaudited results for Beige for the six months ended 30
September 2006.
Beige proceeding with a Capitalisation Issue of preference shares in the
amount of R15 million to existing shareholders prior to the issue of the
Consideration Shares to give effect to the Acquisition.
The unaudited balance sheet of Crystal Pack at 31 January 2007 as extracted
from the company`s management accounts.
The unaudited income statement of Crystal Pack as extracted from the
company`s management accounts up to and including 31 January 2007 and pro
rated for six months.
The Crystal Pack financial information has not been prepared in accordance
with International Financial Reporting Standards ("IFRS"). Revised pro
forma information based on financial information prepared in accordance
with IFRS will be included in the circular to be sent to shareholders as
detailed in paragraph 10 below.
The issue of 781 064 976 consideration shares at 10 cents per share in
settlement of the Purchase Consideration
The adjustments in respect of the income statement were based on the
assumptions that:
- the Crystal Pack acquisition was effective on 01 April 2006 and that
the Purchase Consideration was settled on this date;
- there were no additional costs incurred relating to the Transaction as
such costs were written off against share premium; and
- there was no impairment of the goodwill of R58 million arising from
the Acquisition.
The cash generated from the Thebe Issue was applied to reduce borrowings
which, in turn, resulted in an interest saving on borrowing of 12.5% before
tax.
The adjustment to income tax was based on an assumed effective tax rate of
29%.
Note * Crystal Pack entered into a number of 5-year contract
manufacturing agreements during 2006 for the manufacture of various
personal care products. These contracts are not reflected in the pro forma
financial effects, although the acquisition cost is recognised in the pro
forma financial effects
8. Change of control and waiver of mandatory offer
Approval and implementation of the Transaction will result in the Vendors
collectively owning more than 35% of the issued shares in Beige. However,
no one Vendor will own more than 35% of Beige and no voting pool
arrangements have been entered into by the Vendors. 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 with the obligation to make
a mandatory offer in terms of Rule 8.7 of the Code.
9. Irrevocable Undertakings
Directors and shareholders of the company holding a combined 46% beneficial
interest in the issued share capital in Beige have signed irrevocable
undertakings to vote in favour of the resolutions required to implement the
Transaction.
10. Documentation
In terms of the JSE Listings Requirements, the proposed Transaction
constitutes a category one transaction for Beige. A circular containing
full details of the proposed Transaction and incorporating notice of a
general meeting of shareholders will be posted to Beige shareholders, as
soon as the Crystal Pack results for the year ending 28 February 2007 have
been audited in accordance with IFRS.
11. Withdrawal of Cautionary Announcement
Following the publication of this announcement, the cautionary announcement
has been withdrawn and shareholders need no longer exercise caution when
dealing in the company`s securities on the JSE.
Johannesburg
21 February 2007
Corporate Advisor to Designated Advisor Legal Advisors to Beige
Beige Arcay Moela Sponsors Fluxmans Attorneys
Arcay Corporate
Finance
Corporate Advisor
and Legal Advisor to
Crystal Pack
Java Capital
Date: 21/02/2007 08:00:00 Produced by the JSE SENS Department.
