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CULLINAN - ACQUISITION OF KARRIMOR INTERNATIONAL

Release Date: 12/01/1999 17:15:17      Code(s): CUL CULP
CULLINAN HOLDINGS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 01/01808/06)
("CULLINAN")
KARRIMOR
(INCORPORATED IN THE UNITED KINGDOM)
(REGISTRATION NUMBER 506817)
("KARRIMOR INTERNATIONAL" OR "KARRIMOR")
ACQUISITION OF KARRIMOR INTERNATIONAL BASED IN THE UNITED KINGDOM
1.  INTRODUCTION
STANDARD CORPORATE AND MERCHANT BANK IS AUTHORISED TO ANNOUNCE THAT CULLINAN
HAS, SUBJECT TO THE FULFILMENT OF THE CONDITIONS PRECEDENT SET OUT IN PARAGRAPH
7 BELOW, ACQUIRED 83,3% OF KARRIMOR INTERNATIONAL WITH EFFECT FROM 30 NOVEMBER
1998 ("THE ACQUISITION"). THE VENDOR IS 21 INVESTIMENTI SPA, A VENTURE CAPITAL
COMPANY FOR THE BENETTON, BONOMI AND OTHER EUROPEAN INDUSTRIAL INTERESTS. THE
BALANCE OF 16,7% WILL BE ACQUIRED BY MEES PIERSON NOMINEES ACTING ON BEHALF OF
A UNITED KINGDOM ("UK") INVESTOR. 100% OF KARRIMOR INTERNATIONAL HAS NOT BEEN
ACQUIRED DUE TO SOUTH AFRICAN EXCHANGE CONTROL REGULATIONS AND THE NEED FOR A
LOCAL UK PARTNER TO ASSIST WITH THE MANAGEMENT OF KARRIMOR.
SIMULTANEOUSLY, KARRIMOR INTERNATIONAL HAS ENTERED INTO AN AGREEMENT WITH
BECAUSE ITS THERE LIMITED ("BIT"), WHICH IS A RETAILING SUBSIDIARY OF 21
INVESTIMENTI SPA. BIT WILL USE THE BENETTON EXPERTISE IN RETAILING TO EXPAND
EXCLUSIVE KARRIMOR SHOPS INTO UK AND EUROPEAN AIRPORTS (KARRIMOR PRESENTLY
OPERATES A SHOP AT GATWICK AIRPORT) AND OTHER HIGH DENSITY RETAIL OUTLETS.
2. RATIONALE FOR THE ACQUISITION AND FUTURE PROSPECTS
AS STATED IN THE 1997 ANNUAL REPORT, CULLINAN WILL INVEST IN BUSINESSES THAT
ENJOY STRONG BRANDING, ARE OUTDOOR LIVING AND LEISURE ORIENTATED AND HAVE A
STRONG PRESENCE IN THEIR PARTICULAR MARKETS. KARRIMOR INTERNATIONAL MEETS THESE
CRITERIA AND WILL FACILITATE CULLINAN'S EXPANSION INTO THE EUROPEAN AND
INTERNATIONAL OUTDOOR LIVING MARKETS. THE STRUCTURE OF CULLINAN SUBSEQUENT TO
THE IMPLEMENTATION OF THE ACQUISITION WILL BE AS FOLLOWS:
                             CULLINAN
        _________________________|_____________________
       |                         |                     |
OUTDOOR LIFESTYLE                |            LEISURE AND TOURISM
KARRIMOR INTERNATIONAL           |            THOMPSONS TOURS AND TRAVEL GROUP
CADAC GROUP             INDUSTRIAL CULLINAN
AFMIT DIY TOOLS         PRECISION ENGINEERING (CPE)
V LINES / MANEX MARINE  INDUSTRIAL PORCELAIN
KARRIMOR CURRENTLY OPERATES IN 22 COUNTRIES THROUGH DISTRIBUTION OUTLETS WHICH
SERVICE THE OUTDOOR LIVING ENTHUSIAST.  THESE ARE THE SAME CATEGORY OF
DISTRIBUTORS WHO COULD SELL CADAC OUTDOOR PRODUCTS TO THE OUTDOOR CONSUMER.
HENCE THE KARRIMOR INFRASTRUCTURE WILL ASSIST CADAC'S STRATEGY OF INCREASING
EXPORTS INTO THE EUROPEAN MARKETS.
3. BACKGROUND TO KARRIMOR INTERNATIONAL
KARRIMOR INTERNATIONAL IS ONE OF THE LEADING EUROPEAN DESIGNERS AND
DISTRIBUTORS OF TECHNICAL RUCKSACKS, OUTDOOR CLOTHING, FOOTWEAR AND RELATED
ACCESSORIES. IN ITS 52 YEAR HISTORY, KARRIMOR HAS BUILT ITS REPUTATION FOR
EXCELLENCE ON THE BACK OF INNOVATIVE AND GROUND BREAKING PRODUCT DEVELOPMENT.
MUCH OF THE RESEARCH THAT WENT INTO THIS DEVELOPMENT WAS CARRIED OUT ON
HEADLINE MAKING EXPEDITIONS.  THESE INCLUDE A HOST OF EVEREST ASCENTS,
EXPLORATION OF THE WORLD'S DEEPEST CAVES AND LOST WILDERNESSES AND, MOST
RECENTLY, THE "GRAND SLAM" TREK TO THE NORTH POLE, SOUTH POLE AND THE HIGHEST
PEAK ON EACH OF FIVE CONTINENTS.
KARRIMOR INTERNATIONAL WAS FOUNDED IN 1946 AS A MANUFACTURER OF CYCLE BAGS. THE
FIRST KARRIMOR RUCKSACKS WERE LAUNCHED IN 1957 AND A LEGEND WAS BORN. RUCKSACK
SALES CURRENTLY ACCOUNT FOR ALMOST 30% OF KARRIMOR'S BUSINESS AND, THANKS TO
THEIR TECHNOLOGICAL "HALO", THE COMPANY HAS BEEN ABLE TO EXTEND THE BRAND INTO
OTHER CATEGORIES OF OUTDOOR LIVING SUCH AS TENTS, SLEEPING BAGS AND TECHNICAL
OUTERWEAR. THE CLOTHING RANGE EXTENDS FROM THERMAL BASE LAYERS, FLEECE
MID-LAYERS AND WATERPROOF BREATHABLE OUTERWEAR TO FOOTWEAR AND ACCESSORIES.
IN NOVEMBER 1996 THE COMPANY WAS ACQUIRED FROM THE FOUNDING FAMILY BY 21
INVESTIMENTI SPA. THE PRODUCT RANGE HAS BEEN REDESIGNED WITH A STRONG BRAND
IDENTITY, AND A POWERFUL ADVERTISING AND SALES PROMOTION STRATEGY HAS BEEN
LAUNCHED.  A NEW SOURCING STRATEGY HAS BEEN IMPLEMENTED AND MOST OF THE
MANUFACTURING FACILITIES IN THE UK HAVE BEEN CLOSED.
KARRIMOR IS ONE OF THE FEW OUTDOOR BRANDS THAT CARRIES A FULL PRODUCT LINE
RANGING FROM RUCKSACKS TO CLOTHING, FOOTWEAR AND ACCESSORIES.  KARRIMOR ENJOYS
INTERNATIONAL BRAND RECOGNITION AMONG THE OUTDOOR ENTHUSIASTS AND THIS OPENS
INTERNATIONAL EXPANSION OPPORTUNITIES.  KARRIMOR INTERNATIONAL HAS THE MOST
EXTENSIVE RETAIL DISTRIBUTION OF ANY EUROPEAN OUTDOOR COMPANY. ITS PRODUCTS ARE
SOLD IN OVER 450 SHOPS IN THE UK AND EXPORTED TO 22 COUNTRIES.
4. PURCHASE CONSIDERATION
THE PURCHASE CONSIDERATION FOR 100% OF THE SHARE CAPITAL OF KARRIMOR
INTERNATIONAL WILL BE SETTLED BY THE PAYMENT OF GBP5,2 MILLION IN CASH.
CULLINAN WILL PAY 83,3% OF THE PURCHASE CONSIDERATION IN CASH.
5. FINANCIAL EFFECTS
THE HISTORICAL FINANCIAL EFFECTS ON THE EARNINGS PER CULLINAN SHARE ("EPS") AND
NET ASSET VALUE PER CULLINAN SHARE ("NAV") BEFORE AND AFTER THE ACQUISITION,
ARE AS FOLLOWS:
                      12 MONTHS ENDED 30 SEPTEMBER 1998
                      BEFORE (1)     AFTER         PERCENTAGE
                      (CENTS)        (CENTS)       CHANGE
EPS                   3,3            3,4(2)        +3,0
HEADLINE EPS          3,1            3,2(2)        +3,2
NAV                   14,9           14,9(3)       -
NOTES
1. AS PER AUDITED RESULTS FOR 12 MONTHS ENDED 30 SEPTEMBER 1998.
2. ASSUMING THE ACQUISITION WAS EFFECTIVE ON 1 OCTOBER 1997 AND CALCULATED BY
UTILISING THE RESULTS OF KARRIMOR INTERNATIONAL FOR THE 12 MONTHS ENDED 28
FEBRUARY 1998 OF GBP935 000 AND ASSUMING THAT THE PURCHASE CONSIDERATION
ATTRACTED AN INTEREST RATE OF 16% (AVERAGE BETWEEN OVERDRAFT RATE, PREFERENCE
SHARE RATE AND CASH DEPOSIT RATE PERTINENT TO CULLINAN FOR THIS PERIOD).
3. ASSUMING THE ACQUISITION WAS EFFECTIVE ON 30 SEPTEMBER 1998. THE NAV
INCLUDES GOODWILL ARISING ON CONSOLIDATION OF KARRIMOR INTERNATIONAL. KARRIMOR
INTERNATIONAL'S NET ASSET VALUE IS APPROXIMATELY GBP600 000.
THESE FINANCIAL EFFECTS DO NOT SHOW ANY BENEFIT ARISING FROM THE
RATIONALISATION OF THE KARRIMOR AND CADAC INTERNATIONAL SALES FORCES, NOR DO
THEY SHOW THE BENEFITS OF THE EXPECTED KARRIMOR EXPANSION. THEY DO INCLUDE THE
HIGH COSTS OF SOUTH AFRICAN FINANCE, WHICH IS EXPECTED TO DECLINE FROM PRESENT
OVERDRAFT RATES OF 23%.
6. KARRIMOR SOUTH AFRICA
KARRIMOR INTERNATIONAL HAS A LICENCEE IN SOUTH AFRICA OWNED BY I.B. JOFFE
LIMITED.
7. CONDITIONS PRECEDENT
THE AGREEMENT IS, INTER ALIA, CONDITIONAL ON:
- NO MATERIAL FACTOR EMERGING FROM A WARRANTY DISCLOSURE LETTER TO BE GIVEN TO
THE PURCHASER BY THE VENDORS; AND
- THE AUDITED NET ASSET VALUE OF KARRIMOR INTERNATIONAL AT 30 NOVEMBER 1998
MEETING A MINIMUM LEVEL.
THE CONDITIONS PRECEDENT ARE EXPECTED TO BE FULFILLED BY MID FEBRUARY 1999 AT
WHICH POINT A FURTHER ANNOUNCEMENT WILL BE MADE.
8. CIRCULAR
A CIRCULAR CONTAINING FURTHER DETAILS OF THE ACQUISITION WILL BE POSTED TO
SHAREHOLDERS ONCE THE CONDITIONS PRECEDENT HAVE BEEN FULFILLED.
JOHANNESBURG
12 JANUARY 1999
MERCHANT BANK
SCMB
STANDARD CORPORATE AND MERCHANT BANK
(A DIVISION OF THE STANDARD BANK OF SOUTH AFRICA LIMITED)
(REGISTRATION NUMBER 62/00738/06)
INTERNATIONAL LEGAL ADVISER
MAITLAND (UK)
SPONSORING BROKER
STANDARD EQUITIES (PTY) LIMITED
(REGISTRATION NUMBER 72/08305/07)
(MEMBER OF THE JOHANNESBURG STOCK EXCHANGE)



                                        
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