AFE/AFEP - AECI Limited - Announcement relating to the KTH transaction and Release Date: 19/12/2011 13:31:01 Code(s): AFE AFEP
AFE/AFEP - AECI Limited - Announcement relating to the KTH transaction and
withdrawal of cautionary announcement
(Incorporated in the Republic of South Africa)
(Registration number 1924/002590/06)
JSE ordinary share code: AFE
JSE preference share code: AFEP
JSE ordinary share ISIN: ZAE000000220
JSE preference share ISIN: ZAE000000238
("AECI" or "the Group" or "the Company")
ANNOUNCEMENT RELATING TO THE ACQUISITION BY AECI OF THE KTH CONSORTIUM`S
25,1% INTEREST IN AECI`S EXPLOSIVES BUSINESS IN EXCHANGE FOR ORDINARY SHARES
IN AECI AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
AECI shareholders ("Shareholders") are referred to the cautionary
announcement dated Tuesday, 26 July 2011 ("First Cautionary
Announcement") and the further cautionary announcements dated Tuesday, 6
September 2011, Thursday, 13 October 2011 and Thursday, 24 November
As indicated in the First Cautionary Announcement, in 2004 AECI
concluded the sale of an effective 25,1% interest in AEL Mining Services
Limited ("AEL MS"), then known as African Explosives Limited ("the AEL
Empowerment Transaction"), to an empowerment consortium led by the Tiso
Group Proprietary Limited ("Tiso", subsequently the "KTH Consortium").
AEL MS is a wholly-owned subsidiary of AEL Holdco ("AELH"). Pursuant to
the merger of Tiso and Kagiso Trust Investments Proprietary Limited to
form Kagiso Tiso Holdings Proprietary Limited (RF) ("KTH") with effect
from 1 July 2011, KTH acquired Tiso`s interests in AELH. The KTH
Consortium holds its 25,1% interest in AELH through a special purpose
vehicle, Business Venture Investments No. 851 Proprietary Limited ("BVI
851") of which 75% is owned by Business Venture Investments No. 884
Proprietary Limited ("BVI 884"), a wholly owned subsidiary of KTH and
25% is owned by the Tiso AEL Development Trust ("the AEL Trust").
Shareholders are advised that AECI entered into an agreement with KTH,
AELH, the trustees for the time being of the AEL Trust, BVI 851 and BVI
884 on Thursday, 15 December 2011 in terms of which AECI will acquire
75% of the issued share capital of BVI 851 from KTH in exchange for 3
509 000 ordinary shares in AECI ("the KTH Consideration") and 25% of the
issued share capital of BVI 851 from the AEL Trust in exchange for 1 169
667 ordinary shares in AECI ("the AEL Trust Consideration")
(collectively "the KTH Transaction").
The KTH Transaction is valued at R370 million, based on the volume
weighted average share price of R79,07 per AECI ordinary share on the
JSE Limited ("JSE") for the 30 days up to and including Wednesday, 14
Post the completion of the KTH Transaction and preceding the
implementation of the new Broad-based Black Economic Empowerment
transaction ("New B-BBEE Transaction") of which details were announced
on Thursday, 13 October 2011 and Monday, 19 December 2011, the KTH
Consortium will own 4,18% of the enlarged issued ordinary share capital
of AECI excluding treasury shares and AELH will become a wholly-owned
subsidiary of AECI.
AELH`s Memorandum of Incorporation will be amended to conform to
Schedule 10 of the Listings Requirements of the JSE ("the Listings
AECI is committed to the implementation and success of broad-based
empowerment throughout the Group in a comprehensive and sustainable
manner. It recognises the social and commercial imperative of achieving
economic transformation in South Africa. As such, AECI has already
implemented a number of initiatives relating to employment equity,
skills development, preferential procurement, enterprise development and
corporate social investment including the initial AEL Empowerment
Transaction which created significant benefits for all stakeholders.
AECI`s commitment to broad-based empowerment has been enhanced further
with the announcement of its proposed New B-BBEE Transaction.
The KTH Transaction will give AECI full control of AELH, giving the
Company greater flexibility in managing the operations of AEL MS. The
latter is a leading developer, producer and supplier of commercial
explosives, initiating systems and blasting services for mining and
infrastructure markets in Africa and selected international markets.
Whereas the AEL Empowerment Transaction only benefited AEL MS, the KTH
Transaction will allow the Group as a whole to extract the full benefit
of having KTH as a long-term strategic investor. Post the completion of
the KTH Transaction and the New B-BBEE Transaction, it is expected that
AECI will have effective Black equity ownership of 27,4% in terms of the
Department of Trade and Industry`s Broad-Based Black Economic
Empowerment Codes of Good Practice and the principles relating to
mandated investments and foreign operations defined therein.
3. Related party transaction
In terms of the Listings Requirements, the KTH Transaction is a small
related party transaction. AECI appointed Ernst & Young Advisory
Services Limited ("E&Y") as Independent Expert to provide the Board of
Directors of AECI with an opinion on the fairness of the KTH
E&Y has concluded that the KTH Transaction is fair to Shareholders.
E&Y`s opinion is available for inspection at AECI`s registered office
being First Floor, AECI Place, The Woodlands, Woodlands Drive, Woodmead,
Sandton for a period of 28 days from the date of this announcement.
Shareholders are therefore advised that paragraph 10.7 of the Listings
Requirements, relating to the requirements for small related party
transactions, has been complied with.
4. Suspensive conditions
The implementation of the KTH Transaction is subject to the fulfillment
or waiver of the following suspensive conditions:
- issuance of a compliance or exemption certificate by the Take-over
and Regulations Panel; and
- to the extent necessary, all other regulatory consents and
5. Unaudited pro forma financial effects
The pro forma financial effects of the KTH Transaction on AECI`s
earnings per share and headline earnings per share for the six months
ended 30 June 2011, and net asset value per share and tangible net asset
value per share at 30 June 2011, are not significant in terms of the
6. Withdrawal of cautionary announcement
Shareholders are advised that as a result of the full terms of the KTH
Transaction having now been released, Shareholders no longer need to
exercise caution, in this regard, when dealing in their AECI securities.
19 December 2011
Attorneys and tax Reporting accountants
Investment bank and advisers and auditors
The Standard Bank of KPMG Inc.
South Africa Limited Webber Wentzel
Independent expert Corporate sponsor
Rand Merchant Bank (a
Ernst & Young Advisory division of FirstRand
Services Limited Bank Limited)
Date: 19/12/2011 13:31:00 Supplied by www.sharenet.co.za
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