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TBS - Tiger Brands Limited - Acquisition of Davita Trading (Proprietary)
Limited ("Davita") By Tiger Brands
Tiger Brands Limited
(Registration number 1944/017881/06)
(Incorporated in the Republic of South Africa)
Share code: TBS
ISIN: ZAE000071080
("Tiger Brands" or "the Company")
ACQUISITION OF DAVITA TRADING (PROPRIETARY) LIMITED ("DAVITA") BY TIGER BRANDS
INTRODUCTION
Shareholders of Tiger Brands are advised that the Company has entered into an
agreement in terms of which Tiger Brands will acquire the entire issued share
capital of Davita ("the Proposed Acquisition").
NATURE OF BUSINESS OF DAVITA
Davita is a South African manufacturer and exporter of powdered seasonings and
beverage products with a presence in 28 countries across Africa and the Middle
East. Davita sells its products under three brands which are well-known across
the continent, namely Davita (premium powdered beverages), Jolly Jus (mass
market powdered beverage offerings) and Benny (powdered seasonings). Davita
has a very strong presence in many of the markets in which it operates.
Davita achieved an annual turnover of R567 million for the financial year
ended 28 February 2010, of which approximately 99% was from exports. The value
of the net assets of Davita at 28 February 2010 was R505.8 million, before
deducting the value of interest-bearing shareholder loans due by Davita of
R367.7 million.
RATIONALE
As previously reported, Tiger Brands has identified growth on the rest of the
African continent as one of its key strategic thrusts. To this end, a number
of transactions were recently announced which will meaningfully increase the
Company`s footprint on the rest of the continent. The Proposed Acquisition
will further increase Tiger Brands` presence on the continent.
Consistent with its growth strategy, Tiger Brands has been progressively
building its sales and marketing infrastructure to service Africa. This has
resulted in strengthened regional sales and marketing representation across
large parts of the continent, enabling the Company to increase brand awareness
and improve product activation for new products and markets.
Davita has an established distribution footprint on the African continent
which will provide Tiger Brands` export division with new growth vectors by
leveraging off Davita`s solid distributor relationships and penetrating new
geographies as well as deepening market penetration in existing markets. The
existing infrastructure within the Tiger Brands export division will assist in
driving further growth across the expanded product portfolio.
Davita will provide additional synergies as a potential manufacturer of
certain products for Tiger Brands` South African business units.
After implementation of the Proposed Acquisition, it is the intention to
retain Davita as a self-standing entity within the Tiger Brands group. The
relationship with distributors will not be affected as a result of the
Proposed Acquisition.
Davita`s managing director, Mr David Desilets, has agreed to continue his
employment with the Company until 31 December 2011.
PURCHASE CONSIDERATION
The purchase price for the Proposed Acquisition is estimated to be R1.345
billion, based on an enterprise value of R1.625 billion, and will be settled
in cash. The determination of the final purchase price will be dependent upon
Davita`s actual levels of interest bearing debt and working capital on the
Effective Date of the Proposed Acquisition, defined in paragraph 6 below.
CATEGORISATION OF THE TRANSACTION
In terms of the Listings Requirements of the JSE Limited ("Listings
Requirements"), the Proposed Acquisition is categorised below the threshold of
a category 2 transaction. Tiger Brands has, however, elected voluntarily to
provide to its shareholders details of the Proposed Acquisition in the
interest of full disclosure.
DETAILS OF THE PROPOSED ACQUISITION
The effective date of the Proposed Acquisition will be the last day of the
month in which the last of the conditions precedent contemplated in paragraph
7 below is fulfilled, which is not anticipated to be before 1 April 2011
("Effective Date").
The sellers of the entire issued share capital of Davita are Corvest 6
(Proprietary) Limited, RZT Zelpy 4976 (Proprietary) Limited and Mr David
Desilets (collectively "the Sellers").
CONDITIONS PRECEDENT
The Proposed Acquisition is subject to the fulfilment or waiver (where
appropriate) of a number of conditions precedent including the unconditional
approval by the South African competition authorities ("Competition
Authorities") in terms of the Competition Act No. 89 of 1998, as amended, or
the conditional approval by the Competition Authorities on terms and
conditions acceptable to Tiger Brands.
FINANCIAL EFFECTS
Although the Proposed Acquisition is expected to be earnings accretive with
immediate effect, the impact on the earnings and headline earnings per share
of Tiger Brands will not be significant in the short term. The strategic
benefits of the Proposed Acquisition, as mentioned above, are anticipated to
result in an increasing contribution to profits from Tiger Brands` export
business over time. The illustrative pro forma financial effects of the
Proposed Acquisition set out below have been prepared to assist Tiger Brands
shareholders in assessing the impact of the Proposed Acquisition on the net
asset value ("NAV") and tangible net asset value ("TNAV") per share. The
material assumptions are set out in the notes following the table. Due to
their nature, the illustrative pro forma financial effects may not fairly
present the financial position, changes of equity, results of operations or
cash flows of Tiger Brands after the Proposed Acquisition. The pro forma
effects are the responsibility of the directors of Tiger Brands and are
provided for illustrative purposes only.
Before the After the Percentage
Proposed Proposed change (%)
Acquisition(1) Acquisition(1),(2
) & (3)
NAV per Tiger 5 246.7 5 242.9 (0.07)
Brands share
(cents)(4)
TNAV per Tiger 3 993.8 3 052.3 (23.6)
Brands share
(cents)(4)
Notes:
As per Tiger Brands` published audited annual results for the financial year
ended 30 September 2010.
Based on the estimated purchase price for the entire issued share capital of
Davita of R1 345.1 million and Davita`s audited balance sheet as at 28
February 2010.
The effects on NAV and TNAV per share are based on the following principal
assumptions:
the Proposed Acquisition was effective on 30 September 2010; and
the inclusion of transaction costs of R6 million which are once-off in nature.
The calculations of NAV per share and TNAV per share as at 30 September 2010
have been based on 158 497 661 ordinary shares in issue (which excludes the 10
326 758 treasury shares held by a wholly-owned subsidiary of Tiger Brands, as
well as 21 375 586 shares held by various empowerment entities which are
consolidated by Tiger Brands for accounting purposes).
The pro forma financial information has been prepared using the same
accounting policies as those applied in the most recently published annual
financial statements of Tiger Brands.
9. DAVITA`S ARTICLES OF ASSOCIATION
In terms of paragraph 9.16 of the Listings Requirements, Tiger Brands will
confirm in writing to the JSE that Davita`s articles of association will be
amended to conform to the Listings Requirements, if necessary.
Bryanston
15 February 2011
Advisor
Deutsche Securities (SA) (Proprietary) Limited
Legal advisor
Edward Nathan Sonnenbergs Inc.
Sponsor
J.P. Morgan Equities Limited
Date: 15/02/2011 15:13:01 Supplied by www.sharenet.co.za
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