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Proposed Acquisition Of Protech Khuthele Holdings Limited Shares
Eqstra Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/011672/06)
Share code: EQS, EQS1, EQS2, EQS4
ISIN: ZAE000117123
(“Eqstra” or “the Company”)
PROPOSED ACQUISITION OF PROTECH KHUTHELE HOLDINGS LIMITED SHARES
Introduction
Shareholders are referred, inter alia, to the announcement (“Firm Intention
Announcement”) released on SENS by Protech Khuthele Holdings Limited (“Protech”) on
5 December 2012 regarding Eqstra’s firm intention to make a general offer, in terms
of section 117(1)(c)(v) of the Companies Act, 71 of 2008, to Protech shareholders
to acquire all their Protech shares (“the Offer”) and to Eqstra’s response thereto,
released on SENS on 6 December 2012.
The Offer constitutes a Category 2 acquisition for the Company in terms of the
Listings Requirements of the JSE Limited.
Terms of the Offer
Eqstra proposes to acquire all the shares in Protech that it does not already
beneficially hold, being approximately 67.23% of Protech (“Offer Shares”), for a
cash consideration of R0.60 per Offer Share acquired. The maximum aggregate value
of the consideration payable by Eqstra to Protech shareholders in terms of the
Offer is R146 215 054.80, on the assumption that all Protech shareholders accept
the Offer in respect of all of their Protech shares.
Offer Consideration
The Offer Consideration of R0.60 per Offer Share, payable in cash in Rand, will be
adjusted for, inter alia, any changes to the capital structure of Protech between 5
December 2012 and the effective date of the Offer (being the first business day
following the fulfilment or waiver of the Conditions Precedent set out below).
To the extent that the Protech Group incurs additional financial debt that is not
applied towards revenue generating assets and / or working capital movements other
than in the ordinary course of business, then Eqstra reserves its right to reduce
the Offer Consideration by an amount of 1.4c per Offer Share for each full R10 000
000 by which the maximum net debt (all interest bearing debt less cash and cash
equivalents) (“Maximum Net Debt”) of the Company, as at the last day of the
calendar month immediately preceding the Effective Date, is greater than R125 000
000, provided that Eqstra further reserves the right to cancel the Offer if the
Maximum Net Debt as at the last day of the calendar month immediately preceding the
Effective Date is greater than R200 000 000. Any such adjustments will be released
on SENS and published in the press.
The Offer values the entire issued ordinary share capital of Protech (including the
Protech shares held by Eqstra) at R217 500 000, on the basis of a total of 362 500
000 Protech shares in issue.
Description of Protech
Protech is a broad-based civil engineering group offering bulk earthworks, civil
works and services, mining-related infrastructure development and opencast mining,
ground improvement solutions, as well as ready-mix concrete and concrete pumping
services.
The Company is active in the mining, private and public infrastructure sectors, and
its customers range from individuals involved in residential developments to
national and international construction and mining firms.
Rationale for the Offer
Eqstra is of the view that the listing of Protech shares on the JSE has not
delivered shareholder value. This lack of performance is exacerbated by the
volatility in equity markets, coupled with protracted global financial market
instability, which has had a severe impact on small-cap listed entities.
Eqstra believes that the intrinsic value of Protech can be realised through
improved economies of scale and synergistic benefits integrated with the
diversified businesses of Eqstra.
The Offer positions Protech to achieve the required operational and capital
efficiency improvements and resultant cost savings that will improve client
delivery and customer service.
The Offer allows Protech Shareholders to unlock substantial value at a price level
in excess of that likely to be attained by Protech in the medium term. This value
is not reflected in the undisturbed trading price of the Protech Shares on the JSE
prior to the release of the Firm Intention Announcement and, as such, the Offer
reflects full value for the current position and future growth prospects of
Protech.
Conditions Precedent
The Offer is subject to the fulfilment or waiver of the following conditions
precedent, by no later than Wednesday, 31 July 2013:
1. the approval of the Offer by the Competition Authorities and by such other
regulatory bodies as may be required;
2. the completion of confirmatory financial and legal due diligence on Protech, to
Eqstra’s satisfaction;
3. by the date on which each of the above conditions precedent referred has been
fulfilled or waived (as the case may be), a customary material adverse change
event will not have occurred, which material adverse change event will be
triggered if the Company’s annual consolidated EBITDA for the 12-month rolling
period ending on the date on which the above conditions precedent have been
fulfilled or waived (as the case may be) is 10% less than the EBITDA of the
Company for the financial year ending 29 February 2012 on an annualised basis
taking into account the period since 29 February 2012; and
4. the acceptance of the Offer by Protech shareholders holding sufficient Protech
shares, so as to result in Eqstra (together with its existing beneficial
shareholding) beneficially holding not less than 51% of the entire issued share
capital of Protech.
Interests of Parties who have Undertaken to Accept or Reject the Offer
Eqstra has received the following irrevocable undertakings from Shareholders, who
collectively hold 45.1% of the Shares not held beneficially by Eqstra, to accept
the Offer in respect of all of the Shares held by such Shareholders:
Shareholder Number of Shares % of Shares
beneficially
held or controlled
(directly or
indirectly)
(ex-Eqstra)
Protech Khuthele BEE (Pty) Ltd 73 795 552 30.3
Strategy Systems Consulting 15 919 960 6.5
Services (Pty) Ltd
Stonehedge Trust 9 375 000 3.8
The Tumsedi Trust 5 345 943 2.2
Clane Family Trust 4 488 362 1.8
Starling Trust 953 389 0.4
Total 109 878 206 45.1
Pro Forma Financial Effects
The table below sets out the unaudited pro forma financial effects of the Offer on
continuing earnings per share (“EPS”), continuing headline earnings per share
(“HEPS”), net asset value and tangible net asset value per share and continuing
diluted EPS and continuing diluted HEPS based on the audited results of the Company
for the period ended 30 June 2012.
The unaudited pro forma financial effects are the responsibility of the directors
of Eqstra and have been prepared for illustrative purposes only to provide
information about how the Offer may impact shareholders on the relevant reporting
date and, because of their nature, may not fairly present the Company’s financial
position, changes in equity, results of operations or cash flows after
implementation of the Offer or of the Company’s future earnings. Accounting
policies of Eqstra have been employed in calculating the pro forma financial
effects.
Continuing operations per Before the After the Change (%) Notes
Eqstra share transaction transaction
(cents)1 (cents)2
Basic earnings 89.4 86.1 (3.7%) 3,4
Diluted basic earnings 88.0 84.8 (3.7%) 3,4
Headline earnings 77.2 73.9 (4.3%) 3,4
Diluted headline earnings 76.0 72.8 (4.3%) 3,4
Net asset value 691.9 691.9 3
Tangible net asset value 680.0 680.0 3
Number of shares in issue 428.7 428.7
Weighted average number of 419.6 419.6
share in issue (million)
Diluted weighted average 426.1 426.1
number of shares in issue
(million)
Notes to the unaudited pro forma financial effects:
1. The unaudited pro forma financial effects are based on the published audited
financial information of Eqstra for the 12-month period ended 30 June 2012 and
for Protech the last 12 months (“LTM”) unaudited financial information
including the unaudited interim period ended 31 August 2012 and the published
audited financial information for the 6-month period ended 29 February 2012.
2. The financial information in the “After the transaction” column has been
calculated on the basis that Eqstra acquires the remaining 67.23% Protech
shares from Protech shareholders for R146.2 million.
3. The “After the transaction” column is constructed on the basis of a purchase
price of R146.2 million for the remaining Protech shares (assumed fair value of
the acquired assets), being R209.2 million of assets less investment held by
Eqstra in Protech shares as at 30 June 2012 of R63.0 million, is acquired with
effect from 1 July 2011 for earnings per share and with effect from 30 June
2012 for net asset value and tangible net asset value per share purposes.
4. Earnings have been adjusted to include the LTM comprehensive loss from Protech
amounting to R4.9 million and decreased by the net finance income assumed in
respect of the cash settlement of R146.2 million(after taxation of 28%), which
are based on an assumed interest rate of 8.50%. This effect is expected to be
of a continuing nature.
5. Once-off net transaction costs in respect of the specific transaction are
regarded as immaterial and therefore have not been taken into account.
Salient Dates
The salient dates and times relating to the Offer are as follows:
2013
Posting of offer circular to Protech shareholders Thursday, 21 February
Opening Date of Offer at 09:00 on Friday, 22 February
Offeree response circular posted to Protech shareholders Monday, 25 March
on or before1
Payment of Offer Consideration to Offerees who have Friday, 19 July
accepted the Offer expected to commence on
Last Day to Trade in order to be registered on the Closing Friday, 19 July
Date by 17:00 on
Offer Consideration Record Date expected to be Friday, 26 July
Closing Date of the Offer expected to be at 12:00 on Friday, 26 July
Final payment of the Offer Consideration to Offerees who Monday, 29 July
accept the Offer expected to be made on
Results of the Offer released on SENS Monday, 29 July
Results of the Offer published in the press Tuesday, 30 July
Certificated Shareholders who accept the Offer will have the Offer Consideration
posted to them or transferred to them by way of EFT within six Business Days of the
later of the Effective Date or the date on which such Shareholders deliver their
Forms of Acceptance and Documents of Title to the Transfer Secretaries.
Dematerialised Shareholders who accept the Offer will have their accounts at their
CSDP or Broker updated within six Business Days of the later of the Effective Date
or the date on which the CSDPs or Brokers of such Shareholders notify the Transfer
Secretaries of their acceptance of the Offer.
Notes:
1. The independent board of Protech must publish the offeree response circular
within 20 business days of the date of posting of the offer circular. The
independent board may, however, apply to the Takeover Regulation Panel for an
extension of this time period. Shareholders will be notified of the granting
of any such extension.
2. The Offer will terminate unless (i) it has been declared unconditional as to
acceptances on or before midnight on the 45th Business Day after the Opening
Date of the (i.e. Thursday,2 May 2013); or (ii) the independent board consent
to an extension; or (iii) a firm intention of a competing offer has been
announced.
3. The abovementioned dates and times are South African dates and times. All
references to days are to Business Days.
4. The above dates and times are subject to amendment by Eqstra with the prior
approval of the Takeover Regulation Panel. In addition, the above dates and
times are based on information available to Eqstra as at the Last Practicable
Date. Accordingly, these dates and times may change depending on circumstances
arising after the Last Practicable Date. Any such amendment/s and/or change/s
will be released on SENS and published in the press.
Kempton Park
21 February 2013
Merchant bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Legal advisors
Werksmans Attorneys
Communications advisor
CapitalVoice
Date: 21/02/2013 03:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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