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Announcement regarding the renewal of a lease agreement with a related party
HUDACO INDUSTRIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1985/004617/06)
Share code: HDC & ISIN: ZAE000003273
(“Hudaco” or the “Company”)
ANNOUNCEMENT REGARDING THE RENEWAL OF A LEASE AGREEMENT WITH A RELATED PARTY
1. INTRODUCTION
Shareholders are advised that Dosco Precision Hydraulics, a division of Hudaco Trading (Pty) Limited,
which is an 85% held subsidiary of Hudaco, has renewed its lease agreement (“Lease Agreement”) with
Dufomo Investments Proprietary Limited (“Dufomo”) for a further period of five years, in terms of which
Dosco Precision Hydraulics will continue to lease premises located at 6 Impangela Road, Sebenza Ext 6,
Edenvale (“the Premises”) from Dufomo as set out in paragraph 3 below (the "Lease Renewal”).
Mr GR Dunford, the chief executive officer of Hudaco, is an 82% shareholder of Dufomo, which owns the
Premises.
2. RATIONALE FOR THE LEASE RENEWAL
The rationale for the Lease Renewal is to provide continuity to Dosco Precision Hydraulics, which has
been renting these premises from Dufomo for over 18 years. The buildings and structures on the Premises
are well suited to the requirements of the business and the business already occupied the Premises
before being acquired by Hudaco during 2013.
3. DETAILS AND TERMS OF THE LEASE RENEWAL
In terms of the Lease Agreement, Dosco Precision Hydraulics will lease the Premises for a further period
of five years from the commencement date of 1 May 2022. The monthly rentals payable in respect of the
Premises, which includes escalations of 7% in May 2023 and May 2024 and 8% in May 2025 and May
2026, are set out in the table below:
Period Monthly rental* Monthly rental per m2
(excluding VAT) (excluding VAT)
(R) (R)
1 May 2022 to 30 April 2023 168 000.00 70.00
1 May 2023 to 30 April 2024 179 760.00 74.90
1 May 2024 to 30 April 2025 192 343.20 80.14
1 May 2025 to 30 April 2026 207 730.66 86.55
1 May 2026 to 30 April 2027 224 349.11 93.48
* Monthly rental is inclusive of rates and taxes, insurance, exterior maintenance and covered and open
parking.
Dosco Precision Hydraulics is a supplier and repairer of hydraulic pumps and motors to the mining,
industrial, mobile, marine and forestry industries. The Premises, which are split into two units, comprise
515m2 of offices and 1 885m2 of warehouse space (including mezzanine of 153m2). The Premises further
include five 1-tonne gantry cranes, two 750kg gantry cranes, a 1-tonne hoist, a 2-tonne hoist, a pulley
lift and an oil sump drainage system, all of which belong to the landlord.
There are no outstanding conditions precedent relating to the Lease Renewal.
4. FINANCIAL INFORMATION
Hudaco incurs lease expenses of the amount set out in paragraph 3 above. The rental payable is
deductible for tax purposes. Except for a right-of-use asset to be determined in terms of IFRS 16, there
are no assets attributable to the Lease Renewal.
5. CATEGORISATION AND SMALL RELATED PARTY TRANSACTION
The entering into of the Lease Renewal is considered a “small related party transaction” in terms of
paragraph 10.7 of the JSE Listings Requirements as Hudaco will be transacting with a “related party”,
being Dufomo and accordingly no shareholder approval is required provided that an independent expert
has confirmed that the terms of the Lease Renewal are fair insofar as Hudaco shareholders are concerned.
The board of directors of Hudaco appointed Merchantec Capital (the “Independent Expert”) to provide
an independent fairness opinion on the Lease Renewal (the “Fairness Opinion”) in compliance with
paragraph 10.7(b) of the JSE Listings Requirements. The Independent Expert has considered the terms
and conditions of the Lease Renewal and is of the opinion that the Lease Renewal is fair insofar as Hudaco
shareholders are concerned. The Fairness Opinion is available for inspection at the registered office of
the Company, Building 9, Greenstone Hill Office Park, Emerald Boulevard, Greenstone Hill, Edenvale, for
a period of 28 days from the date of this announcement and may be obtained on request from Hudaco’s
Company Secretary at natashad@acorim.co.za
Johannesburg
6 September 2022
Corporate advisor and Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank Limited
Independent Expert
Merchantec Capital
Date: 06-09-2022 01:40:00
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