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Detailed cautionary related to a proposed R100m partially underwritten rights offer, withdrawal and new cautionary
JOHN DANIEL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: JDH - ISIN: ZAE000136677
("the Company" or "JDH" or "the Group")
DETAILED CAUTIONARY ANNOUNCEMENT RELATING TO A PROPOSED R100 MILLION PARTIALLY
UNDERWRITTEN RIGHTS OFFER, PROPOSED ACQUISITION OF ASSETS, PROPOSED DISPOSAL
OF MANUFACTURING ASSETS (“THE DISPOSAL”) (“TOGETHER THE TRANSACTIONS”),
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT AND NEW CAUTIONARY ANNOUNCEMENT
1. Introduction
The board of JDH is pleased to announce that it has resolved to proceed, inter
alia, with a rights offer of R100 million at an issue price of 14 cents per
share. The rights offer will be partially underwritten by its controlling
shareholder, Escalator Capital (RF) Limited (“Escalator Capital”) through the
capitalisation of its existing and future loan account in JDH expected to
amount to approximately R45 million at the date of the rights offer. In
addition, Escalator Capital has advised of its intention to provide a funding
facility to JDH up to R100 million, less the proceeds of the intended rights
offer. The funding facility will be convertible into ordinary shares in JDH
at the rights offer price, subject to any necessary shareholder approval. The
period of conversion and other salient terms are in the process of being
negotiated.
The Company has decided to expand its financial services business and requires
an injection of capital and loan funding in order to grow the underlying
operations. In addition, the Company is busy with negotiations for the
acquisition of a number of growth businesses from Escalator Capital as well as
other non-related parties. Further announcements will be made when agreements
have been finalised. Certain of the acquisitions may require shareholder
approval and the preparation of fairness opinions from an independent expert.
In line with the above repositioning strategy, the board has decided to
dispose of certain manufacturing interests in the group and has entered into
an agreement, dated 30 October 2013 (“the Disposal Agreement”), in terms of
which it will sell one of the manufacturing businesses and related assets of a
minor subsidiary (the “Sale Assets”), as a going concern (“the Disposal”).
The Disposal Agreement has been entered into with Grapetek Proprietary Limited
(“the Purchaser”) and will become effective on the third business day after
the day on which the Conditions Precedent, set out in paragraph 4 below, are
fulfilled or waived or the 31st day after the publication of the notices
required in terms of Section 34 of the Insolvency Act, No. 24 of 1936 (“the
Insolvency Act”), whichever is the latter (“the Closing Date”).
2. Rationale for the Transactions
The board of directors has agreed to increase the capital and funding base of
the group in order to focus on the growth of the financial services business
of the group, both organically and by way of acquisition. The rights offer
and proposed acquisitions will assist in achieving these objectives. The
manufacturing business/assets to be disposed of are regarded as being non-
strategic to the future growth plans of the group.
3. Terms of the Disposal
The Purchaser will acquire the Sale Assets for R6 million plus the face value
of the business liabilities and the value of stock. The disposal proceeds
will be payable in cash. The proceeds of the Disposal will be applied in line
with the company’s stated strategy.
4. Conditions Precedent
The Disposal is subject to the fulfillment or waiver of the following
conditions precedent:
(i) Approval by the respective boards of directors;
(ii) The completion of a satisfactory due diligence investigation within 20
business days from date of signature of the agreement and notification
to JDH by the Purchaser of its intention to proceed with the Disposal
(“the Due Diligence confirmation”);
(iii) by not later than 10 business days after the Due Diligence
Confirmation:
- the counterparty to the lease has consented in writing to the
assignment of all the Seller’s rights and obligations under the
lease to the purchaser with effect from the Closing Date;
- the key executive of the Business shall have entered into and signed
a service contract with the Purchaser which is substantially similar
to the key executive’s existing contract but on terms and conditions
and in a form acceptable to the Purchaser;
(iv) by not later than 30 business days after the Due Diligence
Confirmation:
- the shareholders of the JDH subsidiary disposing of the Sale Assets
pass all such resolutions as required in terms of Sections 112 and
115 of the Companies Act, 2008; and
- any regulatory approvals that may be required by the Johannesburg
Stock Exchange and/or Takeover Regulation Panel;
(v) by not later than 14 business days after the date on which all the
other conditions precedent have been fulfilled or waived, all of the
statutory notices required in terms of the Insolvency Act have been
published.
5. Pro forma financial effects
The table below sets out the pro forma financial effects of the disposal on
the headline earnings and earnings and net asset value per share of JDH, based
on the published unaudited interim results of the Company for the financial
period ended on 30 June 2013, as if the disposal had been implemented on 1
January 2013. The financial effects are the responsibility of the directors of
the Company, are prepared for illustrative purposes only and, because of their
nature, may not fairly present the financial position of the company, changes
in its equity or the results of its operations or cash flows after the
Disposal.
% Change after
Disposal of Sale disposal of Sale
Before Assets Assets
Attributable earnings per
ordinary share (cents) 0.004 0.587 13 616%
Headline earnings per share
(cents) 0.010 0.242 2 233%
Net asset value per share
(cents) 4.894 5.264 8%
Net tangible asset value
per share (cents) 4.484 5.105 14%
Weighted average shares in
issue (000’s) 444 132 444 132 0%
Ordinary shares in issue at
period end (000's) 444 132 444 132 0%
Notes:
1. The "Before" column is extracted from the Company`s unaudited, published
results for the interim period ended 30 June 2013;
2. For Statement of Financial Position purposes, it has been assumed that
the transactions occurred on 30 June 2013 and for Statement of
Comprehensive Income Statement purposes the transaction has been assumed
to have occurred on 1 January 2013;
3. The Purchaser will acquire the Sale Assets for R6 million plus the face
value of the business liabilities and the value of stock, to be
established within 7 business days after the fulfillment of the
conditions precedent;
4. The proceeds of the transaction will be applied to settle creditors;
5. Surplus proceeds used to partially settle interest bearing debt and
realise interest savings;
6. The financial effects have been adjusted for minority interest;
7. Capital gains tax has been incorporated in taxable income at the capital
gains tax inclusion rate of 66.6%;
8. Normal taxation has been calculated at the corporate rate of 28%;
9. The transaction has no impact on the issued share capital of the company;
10. Transaction costs of R100 000 have been assumed.
The pro forma financial effects of the rights offer and other planned
acquisitions will be announced in due course.
6. Categorisation
The rights offer will require a circular, incorporating revised listings
particulars to be issued in due course. The disposal is categorised as a
Category 2 transaction in terms of the JSE Listings Requirements.
7. Withdrawal of cautionary announcement
Shareholders are referred to the previous cautionary announcement and renewals
thereof as last published on 15th October 2013 and are advised that
negotiations for the reverse listing of Escalator Capital are no longer
proceeding due to the revised approach being adopted as outlined herein.
Accordingly, shareholders are advised that the cautionary announcement is
hereby withdrawn.
8. New cautionary announcement
Shareholders are advised to exercise caution when dealing in their shares
until a full announcement has been published detailing the proposed rights
offer and acquisitions as well as the pro forma financial effects thereof.
Johannesburg
6 November 2013
Sponsor
Arcay Moela Sponsors Proprietary Limited
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