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Rolfes Holdings Limited - Acquisition By Rolfes Of Bragan Chemicals, Specific Issue Of Shares, Changes To Board And Withdrawal Of Cautionary

Release Date: 15/07/2015 10:55:00      Code(s): RLF     
ROLFES HOLDINGS LIMITED
Registration number 2000/002715/06
Share Code: RLF
ISIN Code: ZAE000159836
(?Rolfes? or ?the Group? or ?the Company?)


ACQUISITION BY ROLFES OF 100% OF THE EQUITY IN BRAGAN CHEMICALS PROPRIETARY LIMITED
(?BRAGAN CHEMICALS?), CAPITAL RAISING VIA A SPECIFIC ISSUE OF SHARES FOR CASH, CHANGES
TO THE BOARD OF DIRECTORS AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT


1.       INTRODUCTION


     Rolfes shareholders are referred to the group strategy and cautionary announcement published on SENS on
     7 May 2015 and the acquisition, disposal and renewal of cautionary announcement published on SENS on
     4 June 2015, wherein they were advised, inter alia, that the Company was involved in negotiations relating to
     further expansion into specialty chemicals.


     Shareholders are accordingly advised that Rolfes has entered into an agreement to acquire the entire issued
     share capital in, and all the shareholders? loans against, Bragan Chemicals (?the Acquisition?) for a total
     purchase consideration of R213.1 million.


     In addition, shareholders are advised that Rolfes will issue:

     -     45 million new Rolfes shares to a 100% held subsidiary of existing Rolfes shareholder, Masimong
           Group Holdings Proprietary Limited (?Masimong Group?), which is an associate of non-executive
           director Michael Teke; and
     -     3.333 million new Rolfes shares to Eziko Investments (Proprietary) Limited (?Eziko Investments?), an
           associate of non-executive director Dinga Mncube,

     at an issue price of R3 per share, thereby raising R145 million (?the Share Placement?).

     Following the Share Placement, Masimong Group, via its subsidiary, will become an anchor shareholder and
     add strong Black Economic Empowerment (?BEE?) credentials to the Company which is of important strategic
     benefit to Rolfes in its drive to:

     -    build a substantial black-controlled industrial group;
     -    strengthen organic growth;
     -    enhance its future acquisition strategy; and
     -    maximise shareholder value.


2.       ABOUT BRAGAN CHEMICALS


         Bragan Chemicals is an importer and distributor of chemicals used in the food, beverage, bakery, dairy,
         pharmaceutical and cosmetics industries. The business is headquartered in Johannesburg and has branches
         in Durban and Cape Town. The business was founded in 2008 by Craig and Julie Taylor (?the Vendors?), both
         of whom have many years of experience in the industry. Since then they have grown Bragan Chemicals to
         be a major industry player supplying a customer base in excess of 200 companies, including major local and
         multinational food manufacturers.



3.    RATIONALE FOR THE ACQUISITION AND THE SHARE PLACEMENT


      The Group?s strategy is built on the global need for food, agriculture, water, industrial products and
      infrastructure development in domestic and foreign emerging markets. The Group, as a competitive JSE-listed
      company, is positioning itself to provide specialised chemicals and related products and solutions to support
      these needs through its water, agri, food and industrial chemicals divisions. Additionally, it will provide value-
      add through the deployment of intellectual capital and technological innovation in its chosen industries. The
      growth strategy will be achieved through 1) organic growth by extending the product basket and range of
      services offered and fostering ongoing development of strategic distribution partnerships in Africa and other
      strategic target markets, and 2) a continuation of the acquisition drive into the chemicals and related products
      markets.


      The Acquisition provides Rolfes with an unique opportunity to acquire a major player within the food, beverage,
      bakery, dairy, pharmaceutical and cosmetics chemicals sectors. The Acquisition of well-respected and
      established industry player Bragan Chemicals, will allow Rolfes to dramatically increase its exposure to these
      industry segments - which Rolfes believes has strong fundamentals and growth prospects. The Acquisition
      forms part of Rolfes? long term strategy to offer a complete range of chemical products to a wide range of
      industries. The Acquisition will grow and diversify Rolfes? earnings base and will also assist Rolfes in its
      strategy of growing its business into Africa and other attractive foreign markets.


      Rolfes intends to finance the Acquisition through an equal combination of debt and equity funding. The Share
      Placement will be utilised, in conjunction with debt facilities, to fund the purchase consideration in respect of
      the Acquisition as well as the acquisition of certain other smaller acquisitions being undertaken by the
      Company, whilst achieving a debt to equity ratio which the directors of Rolfes consider appropriate.


      The Share Placement will result in a material increase in Rolfes? BEE shareholding which is expected to
      increase from approximately 27% to approximately 49.6% post the Share Placement. Masimong Group is a
      black shareholder and currently owns 7 million Rolfes shares. Following the Share Placement Masimong
      Group will control 52.479 million Rolfes shares, equivalent to 33.6% of Rolfes.



4. SALIENT TERMS OF THE ACQUISITION


     The salient features of the Acquisition are as follows:
      -   The consideration in respect of the Acquisition amounts to R213.1 million. 90% of the consideration will
          be settled in cash on implementation on the 3rd business day after the Effective Date. The remaining
          10% of the consideration will be held in escrow for a period of one year and will be released thereafter
          provided Craig Taylor, one of the two Vendors of Bragan Chemicals, remains in the service of Bragan
          Chemicals during this one year period.
      -   The effective date of the Acquisition will be the first business day of the month following the month during
          which the last of the conditions precedent to the Acquisition were fulfilled, or waived, as the case may
          be (the ?Effective Date?). This is expected to be on or about 1 October 2015.
      -   The Acquisition is subject to terms and conditions and warranty provisions that are considered typical
          for a transaction of this nature. The Vendors have, for instance, warranted the book debts of Bragan
          Chemicals.
      -   Rolfes will acquire the shares and shareholders? loans in Bragan Chemicals after the distribution of
          R36.9 million of cash which is considered to be surplus to the requirements of Bragan Chemicals.
      -   Craig and Julie Taylor have both entered into fixed term employment agreements with Bragan
          Chemicals for periods of 2 years and 18 months respectively, and, as Vendors, restraint of trade
          agreements for a period of 5 years from the effective date of the Acquisition.
      -   The Acquisition is subject to the following key conditions precedent (to be met on various dates, the last
          of which is expected to be 30 September 2015):
            -   obtaining the unconditional approval of the Acquisition by the South African Competition
                Commission;
            -   the approval from the JSE Limited (?JSE?) of the circular to be sent to the shareholders of Rolfes;
            -   Rolfes shareholder approval of the Acquisition and the Share Placement;
            -   the requisite unconditional approval from Nedbank Limited (?Nedbank?) to the change of control of
                Bragan Chemicals and release by Nedbank of the first covering mortgage bonds given over the
                Vendors immovable properties; and
            -   no material adverse changes (as further envisaged in the Acquisition Agreement) occurring up to
                the date upon which the last of the other conditions precedent to the Acquisition are fulfilled, or
                waived, as the case may be.
      -   The net asset value and net after tax profit of Bragan Chemicals, based on the unaudited results of
          Bragan Chemicals for the six months ended 31 December 2014, amounted to R116.3 million and R19.4
          million respectively (net after tax profit for the 12 months ended 30 June 2014 amounted to R43.9
          million). Given the aforementioned profitability of Bragan Chemicals, the purchase consideration in
          respect of the Acquisition and Rolfes? intended funding of the Acquisition through a combination of debt
          and equity, the Acquisition is expected to have a positive impact on Rolfe?s future earnings. Pro forma
          financial effects of the Acquisition will be included in the circular to be sent to Rolfes shareholders as
          detailed in paragraph 6 below.


5.   SALIENT TERMS OF THE SHARE PLACEMENT


     Rolfes has entered into subscription agreements, inter alia, with Masimong Group and Eziko Investments, in
     terms of which a subsidiary of Masimong Group will subscribe for 45 million and Eziko Investments for 3.333
     million new Rolfes ordinary shares respectively, at an issue price of R3 per share for a total subscription
     consideration of R145 million. The issue price of R3 per share is equal to the 30-day volume weighted average
     price up to 12 June 2015, being the date on which the issue price of R3 per share was agreed in writing
     between Rolfes and Masimong Group and Rolfes and Eziko Investments, respectively.


     In terms of the relevant subscription agreement, the subsidiary of Masimong Group will have the right to
     nominate 2 directors for appointment to the board of directors of Rolfes (?Board?), one of which is Michael
     Teke who is already appointed to the Board. In addition, Masimong Group (through another wholly owned
     subsidiary) will provide strategic related services to Rolfes for an amount of R750 000 per annum (excluding
     VAT) subject to termination by either party upon six calendar months' prior written notice which may be given
     after the first 24 months from the services taking effect.


     Masimong Group and Eziko Investments are both considered to be non-public shareholders and related
     parties in terms of the Listings Requirements of the JSE. Michael Teke, who is a non-executive director of
     Rolfes, is the controlling shareholder of Masimong Group. Eziko Investments is an associate company of
     Dinga Mncube, who is a non-executive director of Rolfes. The Share Placement is conditional upon, inter alia,
     the following key conditions precedent:


     -   the Acquisition becoming unconditional in all respects;
     -   the requisite approvals of Rolfes shareholders to the Share Placement; and
     -   the listing of the Rolfes shares issued in terms of the Share Placement on the JSE.



6.   CATEGORISATION OF THE ACQUISITION AND THE SHARE PLACEMENT


     In terms of the Listings Requirements of the JSE, the Acquisition is categorised as a category 1 transaction
     and the Share Placement is deemed to be a specific issue of shares for cash. Accordingly, a circular regarding
     the Acquisition and the Share Placement will be sent to Rolfes shareholders in due course together with a
     notice of general meeting at which shareholder approval will be sought from Rolfes shareholders for both the
     Acquisition and the Share Placement.



7.   CHANGES TO THE BOARD OF DIRECTORS


     In accordance with paragraph 3.59 of the Listings Requirements of the JSE, shareholders are advised of the
     following changes to the Board with immediate effect:


     Erhard van Der Merwe, Chief Executive of Rolfes Group since 2007 has requested the Board to relinquish
     his role as CEO after more than 8 years at the helm, to primarily focus on implementing the above-mentioned
     acquisition strategy and drive of Rolfes going forward. He will therefore continue as a director in an executive
     role responsible for corporate finance activities and special projects.


     Lizette Lynch, Rolfes Group Finance Director since 2008, and formerly Chief Operating Officer, has been
     appointed by the Board as Chief Executive Officer. She brings, not only extensive company knowledge and
     financial insight with her to the Chief Executive role, but also a wealth of experience from other executive
     roles which include SA Oil Mills and Dawn.


     Furthermore, the Board is pleased to announce that Siegfried Alfred Sergel CA (SA) has been appointed as
     Finance Director. He joins Rolfes from Nedbank Business Banking, where he was a ?Specialised Finance
     Senior Transactor? in leveraged debt transactions, M&A and unsecured cash lending. Prior to this, he worked
     at Nedbank Capital for over six years, mainly in treasury and was involved in various strategic internal
     projects, as well as working at a number of audit firms and UK corporates where he gained international
     experience.
     The Board is delighted to announce these key appointments and wish Erhard, Lizette and Siegfried well in
     their new roles. Through these three key role players, the Company not only retains the strategic skills and
     corporate knowledge built up over many years, but also optimising an effective management structure across
     the Group. Furthermore, a seamless transition of executive functions and advisory roles is ensured as the
     Company builds on the momentum of its growth strategy.



8.   WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT


     Shareholders are advised that the cautionary announcements dated 7 May 2015 and 4 June 2015 are hereby
     withdrawn.


Johannesburg
15 July 2015


Corporate Advisor and Sponsor to Rolfes: Grindrod Bank Limited


Legal Advisor to Rolfes: ENSAfrica

Date: 15/07/2015 10:55:00 Supplied by www.sharenet.co.za                     
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