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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                                           
AECI LIMITED                                                                    
(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                               
1.   Introduction                                                               
    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         
    2011, respectively.                                                         
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       
    December 2011.                                                              
    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          
    Requirements").                                                             
2.   Rationale                                                                  
    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                
    Transaction.                                                                
    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             
         approvals.                                                             
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        
    Listings Requirements.                                                      
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.    
Woodmead                                                                        
19 December 2011                                                                
Attorneys and tax         Reporting accountants        
Investment bank and       advisers                  and auditors                
transaction sponsor                                                             
                                                                                
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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