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Dawn - Acquisition Of The Entire Business And Business Assets Of Isca (Pty) Distribution and Warehousing Network Limited (Incorporated in the Republic of South Africa) (Registration number 1984/008265/06) Share code: DAW ISIN: ZAE000018834 ("Dawn") ACQUISITION OF THE ENTIRE BUSINESS AND BUSINESS ASSETS OF ISCA (PTY) LTD ("Isca") AND DORA INVESTMENTS CC ("Dora") AND RENEWAL OF CAUTIONARY ANNOUNCEMENT 1. Introduction Shareholders are advised that Dawn has, subject to the suspensive conditions set out below, entered into an agreement to acquire the entire business and business assets of Isca and fixed property, from which Isca trades, from Dora (together referred to as "the acquisition"). On conclusion of the acquisition, the business and business assets of Isca together with the fixed property will be owned in a new company, Lexshell 30 General Trading (Pty) Ltd ("Lexshell"), which company will be a subsidiary of Dawn. In terms of Section 9 of the JSE Limited"s Listing Requirements, the acquisition is classified as a Category 3 transaction. 2. Rationale for the acquisition Currently Dawn through one of its subsidiaries, trading as Cobra, is involved in the manufacturing of a range of plumbing products. Cobra, together with Isca, has experienced considerable competition from imports. Isca imports the bulk of its components which are finished and assembled locally. The proposed transaction will allow Cobra to supply locally manufactured items to Isca instead of Isca importing components. This will substantially increase Cobra"s production volumes with a consequent reduction in unit costs thereby assisting to reduce the pressure from imports for both entities, particularly when the building and construction cycle turns. Additionally Isca"s customers may benefit from increased access to products through Dawn"s distribution channels. 3. Description of the business of Isca Isca is a manufacturer of brass taps and mixers for the domestic market. The product range is aimed at all sectors from low cost, to the mass-housing sector and to the top end sector. The manufacturing activities are confined to the finishing and assembly of imported components sourced primarily from overseas sub-contractors. 4. Terms of the acquisition Dawn will acquire, subject to certain suspensive conditions, the above business, business assets and fixed property and assume specified business liabilities for a purchase consideration of R95 000 000 in cash. The vendors are: - Business and business assets - Isca; and - Fixed property - Dora. The shareholders/members of Isca and Dora are Messrs Shachar and Jaretzkey. The purchase consideration payable in terms of the acquisition will be settled as follows: - R54 000 000 - seven days after the effective date ("closing date"); - R8 000 000 - on 15 July 2007; - R8 000 000 - on 15 July 2008; and - R25 000 000 - after the audited financial statements for the year ending 30 June 2009 have been approved but subject to the following profit warranty. The final payment of R25 000 000 is subject to the business of Isca achieving a cumulative profit before taxation ("PBT") for the three years from 1 July 2006 to 30 June 2009 of R94 000 000. Should this cumulative PBT not be achieved then the final payment shall be reduced proportionately in the ratio that the actual cumulative PBT bears to R94 000 000. Other than the payment due on the closing date which shall not bear interest, interest shall be paid on all outstanding balances from the effective date up to the date of payment at the rate of 7.5% per annum compounded. The acquisition is subject to a net asset value warranty of no less than R47 000 000 as at the effective date and other warranties and indemnities normal to a transaction of this nature. 5. Articles of Association Dawn has instructed its legal adviser to confirm that the articles of association of Lexshell, which shall as a consequence of the acquisition be re-named Isca (Pty) Ltd, shall comply with Schedule 10 of the JSE Limited"s Listing Requirements and, where they do not comply, to affect such changes thereto so that they do comply with the said schedule. 6. Pro forma financial effects The unaudited pro forma financial effects provided below are the responsibility of the directors of Dawn and are disclosed in order to provide shareholders with information on the impact of the acquisition on the interim results for the six months ended 31 December 2005. The unaudited pro forma financial effects have been prepared for illustrative purposes only and, because of their nature, may not fairly present the financial position of Dawn, changes in its equity or results of its operations or cash flows subsequent to the implementation of the acquisition. The unaudited pro forma financial effects of the acquisition on the headline earnings, earnings, net asset value and tangible net asset value per DAWN share, before and after the acquisition, are set out below: Per Dawn share Notes Before After Change
(cents) (cents) (%) Headline earnings 1 35.09 40.21 14.6 Earnings 1 35.09 40.21 14.6 Net asset value 2 164.07 164.07 - Net tangible asset value 2 139.66 109.29 (21.7) Notes: 1. The amounts in the "Before" column are based on the headline earnings and earnings per Dawn share as reported in the interim results of Dawn for the six months ended 31 December 2005. The amounts in the "After" column represent the headline earnings and earnings that would have accrued per Dawn share for the six months ended 31 December 2005 had the acquisition been effective from 1 July 2005. 2. The amounts in the "Before" column are based on the net asset value and net tangible asset value per Dawn share as reported in the interim financial results of Dawn for the six months ended 31 December 2005. The amounts in the "After" column represent the net asset value and tangible net asset value per Dawn share had the acquisition been effective from 31 December 2005. 3. A purchase price allocation ("PPA") exercise in terms of IFRS 3: Business Combinations has not yet been performed. For purposes of the pro forma financial effects, the difference between the fair value of the purchase consideration and the book values of the net assets acquired has been attributed to goodwill. Following the PPA exercise, the values attributed to the assets and liabilities acquired may differ, which could affect the pro forma financial effects presented. 7. Suspensive conditions The acquisition is subject to the following principal suspensive conditions being fulfilled by no later than 31 August 2006, namely: -approval of the acquisition by the Dawn board of directors; - service, confidentiality and restraint agreements being concluded with Messrs Shachar and Jaretzkey; and - unconditional Competition Commission approval. 8. Renewal of cautionary announcement Shareholders are referred to the cautionary announcement published on 8 May 2006. Shareholders are advised that Dawn is still in negotiations unrelated to this announcement which if successfully concluded may have an effect on the company"s securities. Accordingly, shareholders are advised to continue to exercise caution when dealing in the company"s securities until a further announcement is made. Johannesburg 16 May 2006 Corporate adviser BISHOP CORPORATE FINANCE (PTY) LTD (Registration number 2000/012695/07) Sponsor Deloitte & Touche Sponsor Services (Pty) Ltd (Incorporated in the Republic of South Africa) (Registration number 1996/000034/07) Legal adviser to Dawn WERKSMANS INCORPORATED (Reg. No. 1990/007215/21) Legal adviser to Isca Nathanson, Bowman and Nathan Competition law adviser WEBBER WENTZEL BOWENS Date: 16/05/2006 05:59:38 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
