ROLFES HOLDINGS LIMITED - Acquisition by Rolfes of PWM Group Businesses and Withdrawal of Cautionary AnnouncementRelease Date: 25/03/2013 07:05:00 Code(s): RLF
ROLFES HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2000/002715/06)
Share Code: RLF & ISIN: ZAE000159836
ACQUISITION BY ROLFES OF PWM GROUP BUSINESSES AND WITHDRAWAL OF
Further to the cautionary announcement first published on 11 January 2013 and subsequently
renewed on 25 February 2013, Rolfes shareholders are advised that Rolfes has entered into an
agreement in terms of which it will acquire:
? the businesses of water purification and treatment conducted by PWM Group Proprietary
Limited and its subsidiary companies (?PWM Group?)(?the PWM Group Acquisition?);
? the business of water purification and treatment conducted by Professional Water
Management Anticor (?PWM Anticor?)(?the PWM Anticor Acquisition?);
? the business of manufacturing chemicals to be used in water treatment products and
services conducted by Goschem Proprietary Limited (?Goschem?) (?the Goschem
? 70% of the shares and shareholders? loans in Tetralon Chemical Consultancy Proprietary
Limited (?Tetralon?), which imports chemicals and equipment for supply into the water
treatment, home care and personal care markets in South Africa (?the Tetralon Acquisition?);
(collectively ?PWM and its Associated Companies? and ?PWM Acquisition?).
2. Nature of the businesses of PWM and its Associated Companies
2.1. PWM Group provides specialist services in water purification and water treatment in South
Africa, supplying process and water treatment solutions and applications for, amongst others,
potable water, raw and waste water and cooling and steam generation processes.
2.2. PWM Anticor provides the same specialist services as PWM Group but to clients in Botswana.
2.3. Goschem manufactures and blends water treatment products mainly for PWM and its Associated
2.4. Tetralon imports chemicals and equipment for supply into the water treatment, home care and
personal care markets in South Africa.
2.5. The client base to whom these process and water treatment solutions, applications and
equipment are supplied represents a cross section of industry users and includes municipalities,
government, commercial property owners, the mining sector and the plastics, poultry, automotive
and food industries.
3. Rationale for the Acquisition
The PWM Acquisition provides Rolfes with a unique opportunity to gain an entry into the water
chemicals and treatment sector and adds a new range of chemical products and associated
services to the large existing product basket of the Rolfes group. The PWM Acquisition forms
part of Rolfes long term strategy to offer a complete basket of chemical products to a wide range
of industries and will also assist Rolfes in securing more business for its African exports.
The businesses of PWM and its Associated Companies will, for at least 3 more years, continue
to be managed by certain key members ofthe current management team on a stand-alone basis,
as is the case with other Rolfes subsidiaries. Rolfes will through the business acumen of group
management, determine the long term strategy of these Rolfes subsidiaries, and, inter alia,
provide them with treasury, HR, IT, legal and finance support functions and export capabilities.
4. Salient features of the PWM Acquisition
4.1. In terms of the PWM Group Acquisition, a Rolfes subsidiary company (?Rolfes Newco?) will
acquire the businesses of PWM Groupfor a total consideration of R20.8 million. 70% of such
consideration will be settled in cash and the balance by the issue of shares in Rolfes Newco.
Certain business related liabilities will also be settled by the Rolfes subsidiary company. Current
Management will, following the PWM Acquisition, continue in that role in respect of all
businesses acquired in terms of the PWM acquisition and it is intended that management will
increase their current interest in the business so as to hold the remaining 30% shareholding in
Rolfes Newco through intermediate vehicles.
4.2. In terms of the PWM Anticor Acquisition, a newly formed Rolfes subsidiary company in Botswana
will acquire the business of PWM Anticor for a total consideration of R11.1 million. 70% of such
consideration will be settled in cash and the balance by the issue of shares in the Rolfes
Botswana subsidiary. Certain business related liabilities will also be settled by the Rolfes
subsidiary company. Current management will, following the PWM Anticor Acquisition, continue
to manage the Botswana operations. It is intended that management will acquire consideration
shares and hold a 30% shareholding through intermediate vehicles in the Rolfes Botswana
4.3. In terms of the Goschem Acquisition, Rolfes Newco will acquire the businesses of Goschem for a
total consideration of R2.1 million, of which 70% will be settled in cash and the balance by the
issue of shares in Rolfes Newco. Certain business related liabilities will also be settled by Rolfes
Newco. It is intended that management will increase their current interest in the business so as
to hold the remaining 30% shareholding in Rolfes Newco through intermediary vehicles.
4.4. The total consideration in respect of the Tetralon Acquisition will be R14 million, which is to be
settled in cash.The vendors are Purity Services Limited, Tompkinsville Holdings Limited, the
Golding Family Trust and the Vassili Trust. Management will increase their holdings in Tetralon
4.5. Risk and reward in respect of the PWM Acquisition will effectively pass to the Rolfes subsidiaries
making the acquisitions on the third day of the month following the month in which the last of the
conditions precedent are fulfilled or waived. The PWM Anticor Acquisition may however be
delinked from the remainder of the PWM Acquisition, should certain conditions precedent as
relating thereto still be outstanding when the conditions precedent relating to the PWM Group
Acquisition, the Goschem Acquisition and the Tetralon Acquisition have been met, and be
implemented later when such outstanding conditions have also been met.
4.6. The PWM Acquisition is subject to terms and conditions and includes warranties that are
considered typical for a transaction of this nature.
4.7. The transactions have been structured such that key members of the current management team,
will continue to manage the businesses of PWM and its Associated Companies.
4.8. The total consideration in respect of the PWM Acquisition amounts to R54.1 million.In the light
thereof that certain aspects of the valuations taken into account in the determination of the
purchase consideration relate to historic figures, the R37.8 million cash component of the total
consideration will be adjusted upwards by an amount determined as being equal to 8,5% thereof,
compounded monthly in arrears, calculated on and with effect from 1 January 2013 up to and
including the day preceding the implementation of the PWM Acquisitions (?Additional
4.9. The cash component of the PWM Acquisition consideration will be funded by Rolfes? utilisation of
existing cash resources, and an issue by Rolfes of shares for cash in terms of the general
authority to issue shares for cash granted to it by Rolfes shareholders at the most recent annual
general meeting of Rolfes.
5. Pro forma financial effects
The unaudited pro forma financial effects, for which the directors are responsible, are provided
for illustrative purposes only to show the effect of the PWM Acquisition on the earnings, headline
earnings, diluted earnings and diluted headline earnings per share as if the PWM Acquisition had
taken effect on 1 July 2012 and on the net asset value and net tangible asset value per share as
if the PWM Acquisition had taken effect on 31 December 2012. Because of their nature, the
unaudited pro forma financial effects may not give a fair presentation of the financial position and
performance of the Rolfes group. The unaudited pro forma financial effects have been compiled
from the unaudited financial statements of PWM and its Associated Companies and are
presented in a manner consistent with the format and accounting policies adopted by Rolfes and
have been adjusted as described in the notes.
Before the PWM fter the PWM Change
Acquisition Acquisition (%)
Earnings and diluted earnings per
share (cents) 21.1 21.7 2.9%
Headline and diluted headline
earnings per share (cents) 21.1 21.7 2.9%
Net asset value per share (cents) 228.8 243.4 6.4%
Tangible net asset value per share 161.9 153.9 (4.9%)
Weighted average number of
shares in issue (?000) 102968 107 968 -
Shares in issue (?000) 103 609 108 609 -
1. The "Before the PWM Acquisition" column reflects the unaudited results of Rolfes for the six
months ended 31 December 2012.
2. The "After the PWM Acquisition" column reflects what the results would have been had the
PWM Acquisition been effective for the full six month period, for income statement purposes
and as at 31 December 2012 for balance sheet purposes.
3. Adjustments have been made using the management accounts for the six months ended 31
December 2012 for each of the entities that comprise the vendors in respect of the PWM
Group Acquisition and the Goschem Acquisition, the management accounts for the six
months ended 31 August 2012 for the PWM Anticor Acquisition and the management
accounts of Tetralon for the six months ended 31 December 2012 in respect of the Tetralon
Acquisition. Rolfes has satisfied itself with the quality of these management accounts.
4. Prior to the PWM Acquisition taking effect, all agreements in respect of intellectual property
and related royalty arrangements and other rights in place between PWM and its Associated
Companies and a licensor, will have been terminated and the intellectual property will be
acquired as part of the PWM Acquisition. Accordingly, adjustments have been made to
reverse royalties and related costs previously expensed in the respective management
5. An amount of R 1.1 millionhas, for balance sheet purposes, been taken into account in
respect of the Additional Consideration. This was calculated using the rate of 8, 5% p.a. for
a period of 4 months.
6. The PWM Acquisition, inclusive of the Additional Consideration, will in part be funded
through existing cash resources and the issue, in terms of the general authority to issue
shares for cash referred to in paragraph 4.9, of 5 million new Rolfes shares at an issue price
of 425 cents per share to a new BEE investor.
7. To the extent that the PWM Acquisition will be funded from existing cash resources, it is
assumed that these cash resources are currently attracting interest at a rate of 4% p.a. and
that this interest will be foregone.
8. Once off transaction costs in respect of the PWM Acquisition of approximately R1.3 million
have been provided for in the PWM accounts.
9. Based on the management accounts referred to in Note 3 above, the net assets as at 31
December 2012 that are the subject of the PWM Acquisition amount to R 20.3 million and
the attributable earnings after tax for the 6 months to 31 December 2012 amount to R 3.0
6. Conditions precedent
The PWM Acquisition will be subject to the fulfilment of, inter alia, the following key conditions
? obtaining the unconditional approval to the PWM Anticor Acquisition in terms of the
Botswana Competition Act.
? the requisite Exchange Control approval for the PWM Anticor Acquisition;
? the conclusion of an agreement on terms and conditions acceptable to Rolfes, whereby a
Rolfes Botswana subsidiary acquires the right to develop an industrial property in Gaborone
to be occupied by the Botswana business; and
? Employment and restraint of trade agreements signed with key management.
Rolfes? shareholders will be advised as and when all of these conditions have been fulfilled.
7. Withdrawal of cautionary announcement
Rolfes shareholders are advised that the cautionary announcement is hereby withdrawn.
25 March 2013
Corporate Advisor and Sponsor to Rolfes
Grindrod Bank Limited
Legal Advisor to Rolfes
Edward Nathan Sonnenbergs Inc.
Corporate Advisor to PWM Professional Water Management
Bowden & Company (Pty) Limited
Legal Advisor to PWM Professional Water Management
Date: 25/03/2013 07:05:00 Supplied by www.sharenet.co.za
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