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ITALTILE LIMITED
(REGISTRATION NUMBER 55/00558/06)
("ITALTILE")
* ACQUISITION BY ITALTILE OF PEPKOR LIMITED'S ("PEPKOR") ENTIRE SHAREHOLDING
IN, AND ITS ELECTION TO ACQUIRE ALL OF PEPKOR'S CLAIMS AGAINST, CASHBUILD
LIMITED ("CASHBUILD"); AND
* A CONDITIONAL OFFER TO THE REMAINING SHAREHOLDERS OF CASHBUILD.
1. INTRODUCTION
FURTHER TO THE CAUTIONARY ANNOUNCEMENT BY ITALTILE DATED 11 JUNE 1999,
SHAREHOLDERS ARE ADVISED THAT, SUBJECT TO THE FULFILMENT OF THE CONDITIONS SET
OUT IN 7 BELOW, AGREEMENT HAS BEEN REACHED FOR:
* THE ACQUISITION BY ITALTILE OF PEPKOR'S ENTIRE SHAREHOLDING IN CASHBUILD,
BEING AT LEAST 13,2 MILLION ORDINARY SHARES (REPRESENTING A 56,8% INTEREST IN
THE ISSUED ORDINARY SHARE CAPITAL OF CASHBUILD) ("THE SALE SHARES"); AND
* THE ACQUISITION BY ITALTILE OF ALL CLAIMS BY PEPKOR AGAINST CASHBUILD ON LOAN
ACCOUNT, AT THE FACE VALUE THEREOF (UP TO A MAXIMUM OF R50 MILLION) ("THE SALE
CLAIMS") OR, AT ITALTILE'S ELECTION, THE RIGHT TO SETTLE THE SALE CLAIMS ON
BEHALF OF CASHBUILD.
(COLLECTIVELY, "THE ACQUISITION")
THE ACQUISITION WILL BE EFFECTIVE FROM 1 JULY 1999 ("THE EFFECTIVE DATE").
2. NATURE OF BUSINESS OF CASHBUILD
CASHBUILD IS A MASS RETAILER OF BUILDING MATERIALS AND ASSOCIATED PRODUCTS. IT
OPERATES THROUGH 94 STORES IN THE RURAL AND URBAN AREAS OF SOUTH AFRICA,
NAMIBIA, LESOTHO, BOTSWANA AND SWAZILAND. CASHBUILD, WHICH DISPOSED OF
CREDITBUILD (PROPRIETARY) LIMITED, ITS CREDIT RETAILING ARM, ON
1 MARCH 1998, TRADES EXCLUSIVELY ON A CASH AND CARRY BASIS. THE GROUP EMPLOYS
SOME 1 600 PEOPLE.
3. RATIONALE FOR THE ACQUISITION
ITALTILE IS THE LEADING SOUTH AFRICAN RETAILER OF CERAMIC TILES AND
SANITARYWARE. IT HAS ACHIEVED SUSTAINED REAL GROWTH IN EARNINGS FOR ITS
SHAREHOLDERS THROUGH FOCUSING ON OPERATIONAL EFFICIENCY, BY EMPLOYING SOUND
BUYING PRACTICES AND THROUGH ITS ABILITY TO KEEP AT THE FOREFRONT OF WORLDWIDE
DEVELOPMENTS IN THE SPECIALIST RETAIL NICHES WITHIN WHICH IT OPERATES. THROUGH
ITS CTM OUTLETS ITALTILE HAS OVER THE LAST FEW YEARS SUCCESSFULLY PIONEERED THE
CONCEPT OF VALUE DRIVEN MASS RETAILING OF CERAMIC PRODUCTS USING A CASH AND
CARRY FORMAT.
CASHBUILD OPERATES IN SIMILAR, BUT COMPLEMENTARY MARKETS TO THOSE OF ITALTILE.
CASHBUILD'S OPERATIONS WILL DERIVE CONSIDERABLE BENEFIT FROM ITALTILE'S
MANAGEMENT EXPERTISE, SYSTEMS AND BUYING POWER. LONGER TERM BENEFITS SHOULD
ARISE FROM THE RATIONALISING OF GROUP OVERHEADS. THE ACQUISITION PRESENTS
ITALTILE WITH THE OPPORTUNITY TO SUSTAIN ITS HISTORIC LEVELS OF GROWTH OVER THE
NEXT FEW YEARS.
4. TERMS OF THE ACQUISITION
4.1 SALE SHARES
THE PURCHASE CONSIDERATION IN RESPECT OF THE SALE SHARES AMOUNTS TO R40,9
MILLION IN TOTAL, WHICH IS THE EQUIVALENT OF 310 CENTS PER CASHBUILD SHARE,
EXCLUDING THE FINAL DIVIDEND TO BE DECLARED BY CASHBUILD IN RESPECT OF THE
FINANCIAL YEAR ENDING 30 JUNE 1999 ("THE FINAL DIVIDEND"). THE FINAL DIVIDEND
WILL NOT EXCEED ONE THIRD OF CASHBUILD'S CONSOLIDATED PROFITS AFTER TAX,
ATTRIBUTABLE TO ITS ORDINARY SHAREHOLDERS.
THE PURCHASE CONSIDERATION WILL BE SETTLED IN CASH WITH AN OPTION TO ELECT THE
ISSUE OF NEW ITALTILE SHARES AT 2 250 CENTS PER SHARE. PEPKOR HAS ELECTED TO
RECEIVE CASH.
PEPKOR HAS WARRANTED TO ITALTILE THAT THE TANGIBLE CONSOLIDATED NET ASSET VALUE
PER CASHBUILD SHARE AS AT THE EFFECTIVE DATE ("NAV PER CASHBUILD SHARE") WILL,
SUBJECT TO 4.2 BELOW, NOT BE LESS THAN 290 CENTS PER CASHBUILD SHARE.
4.2 ADJUSTMENT TO THE PURCHASE CONSIDERATION IN RESPECT OF THE SALE SHARES
IF THE NAV PER CASHBUILD SHARE AS AT THE EFFECTIVE DATE IS LESS THAN:
* 325 CENTS, THEN THE PRICE PAYABLE PER CASHBUILD SHARE WILL BE REDUCED BY SUCH
AMOUNT AS BEARS THE SAME RELATION TO 310 CENTS AS THE SHORTFALL IN NAV PER
CASHBUILD SHARE BEARS TO 325 CENTS, PROVIDED SUCH PRICE REDUCTION SHALL NOT
EXCEED 33 CENTS PER CASHBUILD SHARE ("THE PRICE REDUCTION");
* 290 CENTS, THEN IN ADDITION TO THE PRICE REDUCTION, AND AT THE ELECTION OF
ITALTILE, ITALTILE SHALL BE ENTITLED EITHER:
* TO OBLIGE PEPKOR TO INJECT ASSETS (ACCEPTABLE TO ITALTILE AS TO COMPOSITION
AND VALUE) OR CASH, OF SUCH VALUE AS WILL RAISE THE NAV PER CASHBUILD SHARE TO
290 CENTS; OR
* TO TERMINATE THE ACQUISITION.
(COLLECTIVELY, "THE NAV CONDITION")
4.3 SALE CLAIMS
PEPKOR HAS, FROM TIME TO TIME, ACTED AS FINANCIER TO CASHBUILD WITH THE RESULT
THAT IT HAS CERTAIN CLAIMS AGAINST CASHBUILD ON LOAN ACCOUNT. ITALTILE WILL, AT
ITS ELECTION, EITHER ACQUIRE THE SALE CLAIMS FROM PEPKOR, WITH EFFECT FROM THE
CLOSING DATE (DEFINED IN 4.4 BELOW), AT THEIR FACE VALUE (WHICH WILL NOT EXCEED
AN AMOUNT OF R50 MILLION), OR ITALTILE WILL PROCURE THAT THE SALE CLAIMS ARE
SETTLED BY CASHBUILD.
4.4 PAYMENT DATE
ITALTILE SHALL PAY THE PURCHASE CONSIDERATION IN RESPECT OF THE SALE SHARES AND
THE SALE CLAIMS ON THE LATER OF 6 AUGUST 1999, OR THE FOURTH BUSINESS DAY
FOLLOWING, IN TURN, THE LATER OF RECEIPT BY ITALTILE OF THE AUDITED FINANCIAL
STATEMENTS OF CASHBUILD FOR THE YEAR ENDING 30 JUNE 1999 AND THE FULFILMENT OF
THE CONDITIONS SET OUT IN 7 ("THE CLOSING DATE").
5. CONDITIONAL OFFER TO MINORITIES
IN ACCORDANCE WITH THE REGULATIONS OF THE SECURITIES REGULATION CODE ON
TAKEOVER AND MERGERS, THE ACQUISITION WILL BE REGARDED AS "AN AFFECTED
TRANSACTION". CONSEQUENTLY, SUBJECT TO THE CONDITIONS SET OUT IN 7 BELOW,
ITALTILE WILL EXTEND AN OFFER, TO THE REMAINING SHAREHOLDERS OF CASHBUILD ON
SUCH TERMS AND CONDITIONS AS MAY BY REQUIRED BY THE SECURITIES REGULATION PANEL
("THE SRP") ("THE MINORITY OFFER").
BRAIT MERCHANT BANK LIMITED HAS CONFIRMED TO THE SRP THAT ITALTILE HAS
SUFFICIENT RESOURCES TO SATISFY ITS FULL OBLIGATIONS IN TERMS OF THE MINORITY
OFFER.
IN THE EVENT THAT THERE IS AT LEAST A 90% ACCEPTANCE OF THE MINORITY OFFER,
ITALTILE INTENDS TO INVOKE SECTION 440K OF THE COMPANIES ACT, 1973 (ACT 61 OF
1973), AS AMENDED, IN TERMS OF WHICH IT MAY REQUIRE THE REMAINING MINORITY
SHAREHOLDERS IN CASHBUILD TO DISPOSE OF THEIR SHARES TO IT ON THE SAME TERMS
AND CONDITIONS AS THE MINORITY OFFER.
SUBJECT TO THE OUTCOME OF THE ACQUISITION AND THE MINORITY OFFER, ITALTILE
INTENDS TO APPLY TO THE JOHANNESBURG STOCK EXCHANGE ("THE JSE") TO DELIST
CASHBUILD FROM THE JSE.
6. FINANCIAL EFFECTS OF THE ACQUISITION ON ITALTILE
THE FINANCIAL EFFECTS OF THE ACQUISITION ON ITALTILE'S HEADLINE EARNINGS PER
SHARE, EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE ARE SET OUT IN THE
TABLE BELOW.
THE TABLE BELOW REFLECTS THE IMPACT OF THE ACQUISITION ON HEADLINE EARNINGS AND
EARNINGS PER ITALTILE SHARE FOR THE 12 MONTHS ENDED
31 DECEMBER 1998 ON THE ASSUMPTION THAT THE ACQUISITION WAS EFFECTIVE FOR THE
PERIOD 1 JANUARY 1998 TO 31 DECEMBER 1998, AND ON THE NET ASSET VALUE PER
ITALTILE SHARE AT 31 DECEMBER 1998 ON THE ASSUMPTION THAT THE ACQUISITION WAS
IMPLEMENTED ON THAT DATE.
THE FIGURES IN THE TABLE HAVE BEEN CALCULATED ON THE FOLLOWING ASSUMPTIONS:
* THE COLUMN HEADED "BEFORE" REFLECTS THE RESULTS OF ITALTILE FOR THE 12 MONTH
ENDED 31 DECEMBER 1998, AS EXTRACTED FROM THE AUDITED RESULTS FOR THE YEAR
ENDED 30 JUNE 1998 AND THE UNAUDITED RESULTS OF ITALTILE FOR THE SIX-MONTH
PERIOD ENDED 31 DECEMBER 1998; AND
* THE COLUMN HEADED "AFTER" REFLECTS THE RESULTS OF ITALTILE FOR THE 12 MONTHS
ENDED 31 DECEMBER 1998 ON THE BASIS THE ACQUISITION HAD BEEN IN PLACE FOR SUCH
12 MONTHS.
BEFORE AFTER % CHANGE
HEADLINE EARNINGS PER SHARE (CENTS) 143,7 158,5 10,3
EARNINGS PER SHARE (CENTS) 144,4 159,2 10,2
NET ASSET VALUE PER SHARE (CENTS) 701,2 844,7 20,5
7. CONDITIONS
THE ACQUISITION IS SUBJECT TO THE FOLLOWING CONDITIONS:
* THE NAV CONDITION;
* THE UNCONDITIONAL APPROVAL OF THE ACQUISITION BY THE BOARDS OF ITALTILE AND
PEPKOR; AND
* THE APPROVAL OF THE JSE, THE SRP, THE COMPETITION BOARD AND OTHER REGULATORY
AUTHORITIES INSOFAR AS SUCH APPROVAL IS REQUIRED.
JOHANNESBURG
22 JUNE 1999
MERCHANT BANK
BRAIT MERCHANT BANK LIMITED
(REGISTRATION NUMBER 60/03893/06)
ATTORNEYS
RABIN, VAN DEN BERG & PELKOWITZ
MALLINICKS ATTORNEYS
SPONSORING BROKER
BRAIT SECURITIES (PROPRIETARY) LIMITED
(MEMBER THE JOHANNESBURG STOCK EXCHANGE)
(REGISTRATION NUMBER 87/01383/07)
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