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DAWN - Acquisition of the entire issued share capital of and shareholders loans in DPI and withdrawal of cautionary announcement Distribution and Warehousing Network Limited (Incorporated in the Republic of South Africa) (Registration number 1984/008265/06) Share code: DAW, ISIN code: ZAE000018834 ("DAWN") ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF AND SHAREHOLDERS LOANS IN DPI HOLDINGS (PTY) LTD ("DPI") AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT 1. Introduction Shareholders are advised that DAWN has, subject to the principal suspensive conditions set out below, entered into agreements to acquire the entire issued share capital of and shareholders loans in DPI ("the interest") from Everite (Proprietary) Limited ("Everite") on 10 July 2006 and Sasol Chemical Industries (Pty) Ltd ("SCI") on 12 September 2006 (together referred to as "the acquisition"). 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 Dawn recently increased its shareholding in Incledon (Proprietary) Limited to 100% from 30,4%, resulting in an effective 50% economic benefit in Incledon-DPI (Proprietary) Limited ("IDPI") with DPI holding the remaining 50% economic benefit. The acquisition by Dawn of the DPI Group allows Dawn to consolidate IDPI with the other sales entities in the DPI Group to enhance the product range and service being offered to its customer base through a united national marketing strategy and approach. Furthermore this acquisition also allows Dawn to realign the manufacturing and trading operations of DPI and to unlock value in the coastal DPI trading entities. Dawn will be able to apply a more focused approach in managing the operations of DPI which will not only be to Dawn"s benefit, but will also have a positive impact for DPI"s customer base. The range of products manufactured by DPI will further compliment Dawn"s current product offering. This will in turn assist DPI to achieve economies of scale in relation to manufacturing and optimise transportation and logistical expenses throughout the Dawn group. Further synergies will be gained from DPI"s representation through its subsidiaries and joint ventures in sub-Saharan Africa which supports Dawn"s approach to establish a wider African trading footprint. The increase in infrastructure spending and positive economic outlook, together with additional turnaround initiatives to be implemented, will further enhance the performance of DPI. 3. Description of the business of DPI The DPI Group of companies (which consist of interests in manufacturing operations in South Africa, Botswana, Namibia, Tanzania and Mauritius and trading operations throughout South Africa and sub-Saharan Africa) manufacture and market PVC and polyethylene pipes and injection moulded fittings ("plastic pipes and fittings") for various applications including civil, building, plumbing, industrial, mining and irrigation, in addition to the marketing of various engineering products. The plastic pipes and fittings are further complimented by fabricated products in order to provide the total requirement/solution of the customer. The plastic pipes manufactured by DPI are used for water mains and reticulation, sewer effluent control and water purification. All the products manufactured by DPI in South Africa are manufactured to SABS and internationally accepted standards. 4. Terms of the acquisition DAWN has acquired, subject to certain suspensive conditions, the interest for an aggregate purchase consideration of R95 100 000 in cash. The vendors are: * SCI - 60% economic interest; and * Everite - 40% economic interest. The aggregate purchase consideration payable in terms of the acquisition will be settled as follows: * R 8 000 000 on the effective date; and * R87 100 000 on 1 July 2008. The acquisition is subject to warranties and indemnities normal to a transaction of this nature but carries no profit warranty. 5. Articles of association Dawn has instructed its legal adviser to confirm that the articles of association of DPI comply with Schedule 10 of the JSE Limited"s Listing Requirements and, where they do not comply, to effect 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 annual results for the year ended 30 June 2006. 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: Notes Before After Change Per DAWN share (cents) (cents) (%) Headline earnings 1 75.10 60.05 -20.0 Earnings 1 77.39 62.35 -19.4 Net asset value 2 198.93 198.93 - Net tangible asset value 2 133.38 135.77 1.8 Notes: 1. The amounts in the "Before" column are based on the headline earnings and earnings per Dawn share as reported in the annual results of DAWN for the year ended 30 June 2006. The amounts in the "After" column represent the headline earnings and earnings that would have accrued per DAWN share for the year ended 30 June 2006 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 annual results of DAWN for the year ended 30 June 2006. 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 30 June 2006. 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 tangible assets and liabilities acquired may differ, which could affect the pro forma financial effects presented. 4. The purchase consideration will be funded from both internal cash resources and from external financing. 7. Suspensive conditions The acquisition is subject to the following principal suspensive conditions being fulfilled by no later than 30 September 2006 namely: * The providers of external debt to members of the DPI group agree to continue such funding for such period and on terms as are acceptable to DAWN acting reasonably; * DAWN procures the release of Sasol Limited and Group Five Limited from respective letters of support in favour of The Standard Bank of South Africa Limited; * The receipt of a written unconditional consent from The Standard Bank of South Africa Limited to the respective vendors entering into the transactions constituting the acquisition; 8. Withdrawal of cautionary announcement Shareholders are referred to the cautionary announcements dated 11 July 2006 and 23 August 2006, and are advised that as details of the acquisition have now been presented in this announcement, caution is no longer required to be exercised by the shareholders when dealing in the securities of Dawn. Johannesburg 21 September 2006 Corporate adviser Sponsor Bishop Corporate Finance Deloitte & Touche Sponsor Services Legal adviser Competition Law adviser Werksmans attorneys Webber Wentzel Bowens Date: 21/09/2006 07:02:06 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
