| Tue 20 Mar 2007, 13:00 | | SAN - Sanyati Holdings Limited - Acquisition Withd |
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SAN
SAN
SAN - Sanyati Holdings Limited - Acquisition Withdrawal Of Cautionary
SANYATI HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1988/002538/06)
(JSE code: SAN ISIN: ZAE000081055)
("Sanyati" or "the company")
* ACQUISITION OF RUTHCON CIVIL CONTRACTORS (PTY) LIMITED AND GEM EARTHWORKS
(PTY) LIMITED
* WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the cautionary announcements dated 22 December
2006 and 5 February 2007.
Sanyati has, subject to the conditions precedent set out below, purchased
all the issued shares in and claims on loan account against Ruthcon Civil
Contractors (Pty) Limited ("Ruthcon") from Crowie Holdings (Pty) Limited,
Trevor Bruce Cabot Ahier and Archibald James Rutherford ("the Ruthcon
vendors") ("the Ruthcon acquisition"). In addition Sanyati has also,
subject to the conditions precedent set out below, purchased all the issued
shares in and designated claims against Gem Earthworks (Pty) Limited
("Gem") from DAC Investment Trust ("the Gem vendor") ("the Gem
acquisition").
In terms of the Listings Requirements of the JSE Limited ("JSE") the
proposed acquisitions are classified as category 3 transactions.
2. THE RUTHCON ACQUISITION
2.1 RATIONALE FOR RUTHCON ACQUISITION
Sanyati is one of the larger black empowered civil engineering and
construction companies in KwaZulu-Natal (`KZN`). The company executes
projects for a number of private clients, parastatals and government
departments. Large infrastructure projects are tendered for and undertaken
by Sanyati as main contractor and/or in partnership with larger private or
listed construction companies. Ruthcon is a civil engineering company that
serves the construction market in the Gauteng region.
The Ruthcon acquisition will achieve Sanyati`s long-term objective of
regional expansion outside its KZN area of operations. Ruthcon`s customer
base of private developers and local government will enhance Sanyati`s
customer profile, with its empowerment profile supporting Sanyati`s
empowerment credentials.
2.2 DESCRIPTION OF RUTHCON`S BUSINESS
Ruthcon is a civil engineering company specialising in the provision of
roadworks, township services and bulk earthworks. In addition Ruthcon has
a concrete division, specialising in concrete structures and slip-form
construction, which complements the civil engineering division. Ruthcon`s
clients include developers of residential developments, shopping malls and
townships.
2.3 TERMS AND CONDITIONS OF THE RUTHCON ACQUISITION
2.3.1 On 14 March 2007 Sanyati entered into an agreement, subject to the
fulfilment of the conditions precedent in 2.4 below to purchase, with
effect from 1 March 2007, all the issued share capital in and claims
on loan account against Ruthcon. The purchase consideration is a
maximum of R 150 million and is subject to profit warranties.
2.3.2 The purchase price is payable as follows:
2.3.2.1 Initial Payment
An amount of R 80 million on the Ruthcon acquisition becoming
unconditional, payable as to R 50 million in cash and the remaining R
30 million in Sanyati ordinary shares at an issue price of 180 cents
per share, being 16,66 million Sanyati ordinary shares.
2.3.2.2 Second Payment
The second payment will be determined by multiplying the actual net
profit after tax of Ruthcon for the year ending 31 December 2007 by a
PE ratio of 8,0 and deducting from this amount the initial payment per
2.3.2.1.
The second payment will be paid as follows:
* 50% by the issue of Sanyati ordinary shares at an issue price of
180 cents per share;
* 50% at the election of the Sellers either in cash or by the issue
of Sanyati ordinary shares at an issue price of 180 cents per
share.
2.3.2.3 Third Payment
The third payment will be determined by multiplying the actual net
profit after tax of Ruthcon for the year ending 31 December 2008 by a
PE ratio of 7,5 and deducting from this amount the initial payment per
2.3.2.1 and second payment per 2.3.2.2 above, subject to a maximum
total payment of R 150 m.
The third payment will be paid as follows:
- 50% by the issue of Sanyati ordinary shares at an issue price of
180 cents per share;
- 50% at the election of the Sellers either in cash or by the issue
of Sanyati ordinary shares at an issue price of 180 cents per
share.
2.3.3 Sanyati has completed a due diligence investigation on Ruthcon to its
satisfaction.
2.3.4 Archie Rutherford, the Chief Executive Officer of Ruthcon, and Ian
Ferguson, the Chief Operating Officer of Ruthcon, have signed three year service
agreements with Ruthcon. All the vendors have signed restraint undertakings in
favour of Ruthcon and Sanyati.
2.3.5 Upon the Ruthcon acquisition becoming unconditional Archie Rutherford,
Trevor Ahier, Clinton Crowie, Rowan Crowie and another non-executive director
nominated by the Ruthcon vendors will be appointed to the Sanyati board of
directors.
2.4 CONDITIONS PRECEDENT TO THE RUTHCON ACQUISITION
The Ruthcon acquisition is subject to the fulfilment of the following
conditions precedent:
2.4.1 Confirmation that Sanyati has raised R 50m for the purpose of
effecting the first payment;
2.4.2 Obtaining approval from the Competition Commission.
3. THE GEM ACQUISITION
3.1 RATIONALE FOR GEM ACQUISITION
The Gem acquisition is in line with Sanyati`s long-term objective of
regional expansion outside its KZN area of operations. Gem`s regional
footprint in the Mpumalanga and Eastern Cape regions will enhance
Sanyati`s capabilities to complete current projects and tender for
infrastructure projects in these regions.
3.2 DESCRIPTION OF GEM`S BUSINESS
Gem is a general civil engineering company specialising in the provision
of earthworks, road works, plant hire and concrete works. Gem`s clients
include municipalities and the local government of the Mpumalanga and
Eastern Cape Provinces.
3.3 TERMS AND CONDITIONS OF THE GEM ACQUISITION
3.3.1 On 14 March 2007 Sanyati entered into an agreement, subject to the
fulfilment of the conditions precedent in 3.4 below, to purchase all
the issued share capital in and designated claims against Gem, with
effect from 1 March 2007.
3.3.2 The purchase price will be determined by multiplying the actual
net profit after tax of Gem for the year ending 29 February 2008 by a
PE ratio of 7 and deducting from this amount R 15 million, being the
advance detailed in 3.3.3, with a maximum purchase price of R 45
million. The purchase price will be paid by the issue of Sanyati
ordinary shares at an issue price of 210 per share.
3.3.3 On the closing date, Sanyati shall lend and advance to Gem an
amount of R 15 million, which Gem shall use to purchase plant and
equipment from an associated company.
3.3.4 Gerhard Van Schalkwyk, the Chief Executive Officer of Gem, the senior
managers of Gem and the Gem vendor have signed restraint undertakings
in favour of Gem and Sanyati.
3.4 CONDITIONS PRECEDENT TO THE GEM ACQUISITION
The proposed acquisition is subject to the fulfilment of the following
conditions precedent:
3.4.1 Completion of a due diligence on Gem by Sanyati to its satisfaction;
3.4.2 Obtaining approval from the Competition Commission.
4 UNAUDITED PRO FORMA FINANCIAL EFFECTS OF BOTH ACQUISITIONS
The unaudited pro forma financial effects set out below are provided for
illustrative purposes only to provide information about how the Ruthcon
acquisition and the Gem acquisition may have impacted on Sanyati`s results and
financial position. Due to the nature of the unaudited pro forma financial
information, it may not give a fair presentation of the company`s results and
financial position after the acquisitions. The unaudited pro forma financial
effects are based on the reviewed interim financial information of Sanyati at 31
August 2006. The directors of Sanyati are responsible for the preparation of the
unaudited pro forma financial effects.
Before the Pro forma Change Pro forma Change
acquisitions After the After the
reviewed Ruthcon Gem
interim acquisition acquisition
31 August unaudited unaudited
2006 31 August 31 August
2006 2006
Earnings per 5.73 6.83 19% 7.28 27%
share (cents)
Headline 5.73 6.83 19% 7.28 27%
earnings per
share (cents)
Net asset 34.34 57.11 66% 40.64 18%
value per
share (cents)
Net tangible 31.95 8.36 -74% 21.66 -32%
asset value
per share
(cents)
Weighted 197 310 213 977 197 310
average shares
in issue
(`000)
Shares in 215 000 287 222 236 429
issue at
period end
(`000)
Notes:
(1) The unaudited pro forma financial effects on the results were prepared on
the basis that both the Ruthcon and Gem acquisitions were completed on 1 March
2006.
(2) The "Before the acquisitions" column has been extracted without adjustment,
from the reviewed interim results of Sanyati for the six months ended 31 August
2006.
(3) The "After the Ruthcon acquisition" earnings and headline earnings per
share have been based on 50% of the Ruthcon`s audited results for the year
ending 31 December 2006 and an additional 16 666 666 shares in issue for the
period, as well as R 50 m in debt to fund the acquisition, accumulating interest
at 12.5% per annum.
(4) The "After the Ruthcon acquisition" net asset value and net tangible asset
value per share have been adjusted to include the assets of Ruthcon and the
estimated transaction costs have been written off against share premium. It was
assumed that profit targets will be met and the Ruthcon vendors will elect the
shares option, resulting in an additional 55 555 556 shares issued to the
Ruthcon vendors on 1 March 2006.
(5) The "After the Gem acquisition" earnings and headline earnings per share
have been based on the unaudited interim results for the six months ending 31
August 2006 and a R 15 m debt raised to fund the acquisition, accumulating
interest at 12.5% per annum.
(6) The "After the Gem acquisition" net asset value and net tangible asset
value per share have been adjusted to include the assets of Gem and the
estimated transaction costs have been written off against share premium. It was
assumed that profit targets will be met and an additional 21 428 571 shares
issued to the Gem vendor on 1 March 2006.
(7) Goodwill of approximately R135 million will arise on the Ruthcon
acquisition, while goodwill of approximately R38.9 million will arise on the Gem
acquisition.
5. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Caution is no longer required to be exercised by shareholders when dealing
in their securities.
6. FURTHER ANNOUNCEMENT
Shareholders will be notified once the Ruthcon and Gem acquisitions have
become unconditional.
Johannesburg
20 March 2007
Designated adviser Exchange Sponsors
Auditors PKF Chartered Accountants
Attorneys to Sanyati for Ruthcon acquisition Fluxmans Attorneys
Attorneys to Ruthcon Cliffe Dekker Attorneys
Competition Commission attorneys Deneys Reitz Attorneys
Attorneys to Sanyati for GEM acquisition Deneys Reitz Attorneys
Date: 20/03/2007 13:00:03 Produced by the JSE SENS Department.
