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RLF - Rolfes - Acquisition of Agchem and renewal of cautionary

Release Date: 12/07/2011 07:10:04      Code(s): RLF
RLF - Rolfes - Acquisition of Agchem and renewal of cautionary                  
ROLFES TECHNOLOGY HOLDINGS LIMITED                                              
(Incorporated in the Republic of South Africa)                                  
(Registration Number:  2000/002715/06)                                          
JSE Share Code:  RLF                                                            
ISIN:  ZAE000096202                                                             
("Rolfes" or "the Group")                                                       
RENEWAL OF CAUTIONARY ANNOUNCEMENT                                              
1    Introduction                                                               
    Further to the cautionary announcement first published on 25 February 2011  
and subsequently renewed, the last renewal of which took place on 27 May    
    2011, shareholders are advised that Rolfes has made a firm offer to acquire 
    an initial 70% of the issued ordinary share capital and shareholders loan   
    accounts (if any) in AgChem ("the Acquisition"), which firm offer has been  
duly accepted.                                                              
2    Nature of AgChem`s business                                                
    AgChem is the holding company of a group of companies that procure, produce 
    and distributes high-quality agri-chemical products for the agricultural    
    AgChem was founded in 1998 and began manufacturing its first                
    products during the same year. AgChem`s objective is to develop and         
    manufacture high-value niche products for the agricultural sector.          
The ability to develop these in-house products to service specific needs    
    has served AgChem well over the past number of years.  As AgChem has        
    developed, the product range and markets serviced have expanded and the     
    company has diversified into many other crops and regions.                  
AgChem has historically grown revenues at a healthy rate per year and this  
    is expected to continue for the foreseeable future.  Heavy emphasis on      
    product development, technical support and new market development should    
    maintain this high growth rate. AgChem invests considerable time and effort 
in product development.  The innovative development team makes AgChem`s     
    products and services attractive to suppliers, distribution agents and toll 
    manufacturers alike.  With inputs from dedicated independent registration   
    consultants and its in-house expertise, AgChem has been able to streamline  
its product development to include all types of agricultural remedies,      
    formulations and methods of manufacture.                                    
    The formulation, manufacturing and marketing of agricultural remedies forms 
    the largest part of the business.  In addition to this, AgChem have         
subsidiaries that source chemicals globally to supply raw materials for     
    AgChem`s own manufacturing processes.  Within the AgChem group is also an   
    independent analytical laboratory with the ability to do residue analysis   
    and 5-batch analyses.  The laboratory is ISO accredited and in the process  
of a GLP accreditation.  It is used by a number of agricultural companies   
    and related industry throughout the region for independent analytical       
    services and is also responsible for the quality control of AgChem`s        
    manufacturing facilities.                                                   

    AgChem actively supports and services agrochemical distribution networks on 
    an exclusive basis.  Marketing is aimed at supplying well-researched        
    products to specific markets with a strong technical support back up.       
AgChem`s own branded products are marketed locally, exclusively to a well-  
    trained range of dealerships covering all the geographical regions          
    throughout South Africa.  This enables progressive below-the-line marketing 
    directly to the agent and creates a positive environment for dealers to     
take ownership of products, assisted by a marketing team providing a        
    comprehensive back-up service, which includes product training and maximum  
    market visibility.                                                          
    AgChem`s unique and versatile manufacturing facility enables it to toll     
formulate products for a range of chemical distributors. This client base   
    includes local as well as international companies in agriculture and        
    related fields of business.  With AgChem`s current business primarily in    
    Southern Africa, it has and is busy establishing export channels in rest of 
Africa, Europe, the Middle East and South America.  AgChem has close ties   
    with leading multi-national companies and markets products abroad through   
    joint ventures. The company is committed to excellent service to a range of 
    markets, including assistance in obtaining local product registrations,     
marketing and training.                                                     
3    Rationale for the Acquisition                                              
    The Acquisition provides Rolfes with a unique opportunity to gain an entry  
    into the highly attractive agri-chemicals sector.  The world`s rapidly      
growing population will drive the demand for increased food production thus 
    ensuring a very positive growth outlook for agricultural chemicals.  High   
    barriers to enter further support the motivation for Rolfes concluding the  
The Acquisition adds a totally new range of chemical products to the        
    existing large product basket of the Group.  The Acquisition forms part of  
    the Rolfes long term strategy to offer a complete basket of chemical        
    products to a wide range of industries.  The Acquisition will also assist   
Rolfes in securing more business for its Africa exports unit.               
    Agchem will continue to be managed by its current management team on a      
    stand-alone basis as is the case with other Rolfes subsidiaries.  Rolfes    
    head office will provide, inter alia, long term strategy and business       
acumen, a treasury and finance function and export capabilities to Agchem.  
4    Key salient features of the Acquisition                                    
    Rolfes has made a binding offer to the Pretorius Family Trust, the HAD      
    Family Trust, Tanglewood Private Equity (Proprietary) Limited ("the         
vendors"), and the Naude Family Trust, who in turn have accepted this       
    binding offer, in terms of which Rolfes will acquire:                       
4.1  the entire shareholding of the HAD Family Trust, being 35% of the issued   
    ordinary share capital in AgChem, for a cash consideration or R24,5 million 
payable on the effective date;                                              
4.2  the entire shareholding of Tanglewood Private Equity (Proprietary) Limited,
    being 20% of the issued ordinary share capital in AgChem, for a cash        
    consideration or R14 million payable on the effective date;                 
4.3  15% of the Pretorius Family Trust`s 35% shareholding in the ordinary share 
    capital of AgChem, for:                                                     
    4.3.1     an initial cash consideration of R8,25 million payable on the     
              effective date; and                                               
4.3.2     a subsequent cash payment, following the completion of the audits 
              for AgChem`s 2014 and 2015 financial years, which amount cannot   
              exceed R8,25 million. This payment is calculated on the level of  
              profits achieved for the 2014 and 2015 financial years.           
Therefore, Rolfes will acquire from the Vendors, an initial aggregate           
shareholding of 70% in issued ordinary share capital of AgChem (and shareholders
loans, if any), the aggregate consideration for which will be R46,75 million    
cash payable on the effective date and a maximum of R8,25 million of cash       
payable on the completion of the period envisaged in 4.3.2 above.               
Furthermore, Rolfes has agreed with the remaining shareholders being the        
Pretorius Family Trust and the Naude Family Trust ("the Remaining Shareholders")
that they will not dispose of their remaining shareholding in AgChem before 1   
July 2015 and then only in terms of standard pre-emptive rights to be included  
in a shareholders agreement.  They will after 1 July 2015, negotiate the        
purchase by Rolfes of the remaining shareholders` shareholding in AgChem on     
terms mutually agreeable to both Rolfes and the Remaining Shareholders.  In     
the event that terms mutually agreeable to both Rolfes and the Remaining        
Shareholders cannot be agreed upon by 1 September 2017, the Remaining           
Shareholders will have a put option to sell their shares to Rolfes and Rolfes   
will have a call option to acquire the Remaining Shareholders` shares based on  
a price equal to 5,5 times the average audited after tax profit of AgChem for   
the preceding two completed financial years, subject to Rolfes obtaining the    
approval of its shareholders as required by the JSE Limited ("JSE") Listings    
Requirements ("the Listings Requirements").                                     
The effective date of the transaction will be the date upon which all the       
conditions precedent as set out below has been fulfilled.                       
5    Conditions precedent                                                       
    The Acquisition will be subject to Rolfes and the Vendors entering into     
final written agreements including sale of shares and shareholders          
    agreements incorporating the following principal conditions precedent:      
5.1  AgChem entering into an arm`s length 5-year lease with AgChem Properties   
    (Proprietary) Limited in respect of the properties currently occupied and   
to be occupied by AgChem and its subsidiaries;                              
5.2  the approval by the Rolfes board of the final terms and conditions of the  
    financing to be provided for the Acquisition;                               
5.3  Rolfes being provided with exclusivity in relation to the Acquisition for a
period of 6 months from the date of the binding offer, being 28 June 2011;  
5.4  Rolfes concluding, to its satisfaction, a commercial, legal and financial  
    due diligence on AgChem;                                                    
5.5  Johan Pretorius and Stephan Naude, together with other key members of      
management, entering into minimum 4 year employment and 3 year restraint of 
    trade agreements (commencing from date of resignation) on terms mutually    
    acceptable to all of the respective parties;                                
5.6  Andre Dafel and Andre Schoeman, respectively of the HAD Family Trust and   
Tanglewood Private Equity (Proprietary) Limited, entering into 3 year       
    restraint of trade agreements, to ensure that they do not and will not in   
    future compete materially with the existing business of AgChem, on terms    
    mutually acceptable to all of the respective parties;                       
5.7  Andre Dafel entering into an agreement with AgChem to provide AgChem with  
    future consulting services on terms which will be mutually acceptable to    
    all of the respective parties;                                              
5.8  the transfer of all banking arrangements to Nedbank, excluding fix term    
asset finance arrangements;                                                 
5.9  the unconditional approval of the acquisition by the Competition           
    Commission, as required, and if such approval is conditional, to such       
    conditions being acceptable to the parties concerned;                       
5.10      any other regulatory approvals as may be required, including the      
         approval of the JSE; and                                               
5.11      no material adverse change as would be likely to have a material      
         adverse effect on AgChem or its operations, and or the earnings        
potential of AgChem, having occurred from 1 March 2011 until effective 
6    Renewal of cautionary announcement                                         
    Rolfes will publish a further announcement incorporating the pro forma      
financial effects of the Acquisition and other material terms thereof       
    following the conclusion of final written agreements with the Vendors.      
    Rolfes` shareholders are advised to continue exercising caution when        
    dealing in the Company`s securities until a further announcement is made.   
12 July 2011                                                                    
Corporate Advisor and Designated Advisor:                                       
Grindrod Bank Limited                                                           
Date: 12/07/2011 07:10:03 Supplied by www.sharenet.co.za                     
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