GROUP FIVE LIMITED - Announcement in relation to the disposal of the group's joint venture interest in Group Five Pipe

Announcement in relation to the disposal of the group's joint venture interest in Group Five Pipe

Group Five Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1969/000032/06)
Share code: GRF ISIN: ZAE000027405
("Group Five” or "the Company" or "the Group")

ANNOUNCEMENT IN RELATION TO THE DISPOSAL OF THE GROUP’S JOINT VENTURE
INTEREST IN GROUP FIVE PIPE

1. INTRODUCTION

Shareholders are advised that the Company has entered into a sale of business agreement (“the
Transaction Agreement”) with LB Pipes Proprietary Limited (“LB” or “the Purchaser”), pursuant to
which LB will acquire the Group’s 50% share in its steel pipe business, Group Five Pipe, for a total
cash consideration of R80 million ("the Transaction").

2. THE TRANSACTION

2.1. Rationale for the Transaction

As set out in the announcement released by the Group on the Stock Exchange News Service of
the JSE Limited on 7 November 2017, although the Manufacturing cluster (which includes Group
Five Pipe) remains a strong performer within the Group and contributes solid earnings and cash
flow, it is regarded as a non-core operation and, in light of the Group’s revised strategy, will be
disposed of in due course.

Group Five Pipe manufactures large bore spiral-welded steel pipes for mainly water transport
systems.

LB is owned 51% by a black industrialist, 26% by Marine Civil Proprietary Limited (“Marine Civils”)
and 23% by the Industrial Development Corporation (“IDC”). The disposal sale, at fair value as a
going concern, into a predominantly black owned company retains the engineering skills of Marine
Civils alongside the financial backing of the IDC.

2.2. Salient terms of the Transaction

In terms of the Transaction Agreement, Group Five will dispose of its stake in the Group Five Pipe
Joint Venture (being a 50% share in the unincorporated joint venture with Marine Civils held by
Group Five Construction Pty Ltd (“G5C”)) for a total cash consideration of R80 million. In addition,
the Group will receive a cash distribution of at least R25 million, being its share of the cash
available in the joint venture in excess of the minimum working capital required in terms of the
Transaction Agreement.

The Transaction proceeds will be retained by G5C and applied to that entity as required.

The effective date of the Group Five Pipe transaction is 1 November 2017, with the ownership
transfer effective on the first date after the conditions fulfilment date.

2.3. Conditions precedent

The implementation of the Transaction is subject to the fulfilment by 15 December 2017, or waiver,
as the case may be, of the following remaining material conditions precedent:
    -   resolution by the various parties’ Board of Directors, authoring the conclusion and
        implementation of the Transaction;
    -   Competition Commission Authority approval;
    -   the Purchaser being registered as a VAT vendor;
    -   each counterparty to any contract being executed by the business accepts the change in
        ownership;
    -   completion by the Purchaser of a due diligence; and
    -   proof of the Purchaser’s ability to timeously meet its payment and delivery obligations.

2.4. Net assets and operating profits of the Group’s share in Group Five Pipe

Group Five’s 50% share in the audited net asset value of the Group Five Pipe Joint Venture as at
30 June 2017 was R46,6 million and its share of the audited operating profit for the year ended 30
June 2017 was R13 000. The group’s share of the audited operating profit for the year ended 30
June 2016 was a R5,4 million loss. The audited results were prepared in accordance with the
framework concepts and the recognition and measurement criteria of International Reporting
Standards (IFRS).

3. CATEGORISATION

The Transaction is classified as a Category 2 transaction in terms of the JSE Limited Listings
Requirements, and accordingly no shareholder approval is required.


Johannesburg

22 November 2017


Transaction Sponsor
THE STANDARD BANK OF SOUTH AFRICA LIMITED

Legal Advisor
WERKSMANS ATTORNEYS

Sponsor
NEDBANK CORPORATE AND INVESTMENT BANKING

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