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RLF - Rolfes - Acquisition of Agchem and renewal of cautionary

Release Date: 12/07/2011 07:10
Code(s): RLF
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RLF - Rolfes - Acquisition of Agchem and renewal of cautionary ROLFES TECHNOLOGY HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration Number: 2000/002715/06) JSE Share Code: RLF ISIN: ZAE000096202 ("Rolfes" or "the Group") ACQUISITION BY ROLFES OF AGCHEM HOLDINGS (PROPRIETARY) LIMITED ("AGCHEM") AND RENEWAL OF CAUTIONARY ANNOUNCEMENT 1 Introduction Further to the cautionary announcement first published on 25 February 2011 and subsequently renewed, the last renewal of which took place on 27 May 2011, shareholders are advised that Rolfes has made a firm offer to acquire an initial 70% of the issued ordinary share capital and shareholders loan accounts (if any) in AgChem ("the Acquisition"), which firm offer has been duly accepted. 2 Nature of AgChem`s business AgChem is the holding company of a group of companies that procure, produce and distributes high-quality agri-chemical products for the agricultural sector. AgChem was founded in 1998 and began manufacturing its first products during the same year. AgChem`s objective is to develop and manufacture high-value niche products for the agricultural sector. The ability to develop these in-house products to service specific needs has served AgChem well over the past number of years. As AgChem has developed, the product range and markets serviced have expanded and the company has diversified into many other crops and regions. AgChem has historically grown revenues at a healthy rate per year and this is expected to continue for the foreseeable future. Heavy emphasis on product development, technical support and new market development should maintain this high growth rate. AgChem invests considerable time and effort in product development. The innovative development team makes AgChem`s products and services attractive to suppliers, distribution agents and toll manufacturers alike. With inputs from dedicated independent registration consultants and its in-house expertise, AgChem has been able to streamline its product development to include all types of agricultural remedies, formulations and methods of manufacture. The formulation, manufacturing and marketing of agricultural remedies forms the largest part of the business. In addition to this, AgChem have subsidiaries that source chemicals globally to supply raw materials for AgChem`s own manufacturing processes. Within the AgChem group is also an independent analytical laboratory with the ability to do residue analysis and 5-batch analyses. The laboratory is ISO accredited and in the process of a GLP accreditation. It is used by a number of agricultural companies and related industry throughout the region for independent analytical services and is also responsible for the quality control of AgChem`s manufacturing facilities.
AgChem actively supports and services agrochemical distribution networks on an exclusive basis. Marketing is aimed at supplying well-researched products to specific markets with a strong technical support back up. AgChem`s own branded products are marketed locally, exclusively to a well- trained range of dealerships covering all the geographical regions throughout South Africa. This enables progressive below-the-line marketing directly to the agent and creates a positive environment for dealers to take ownership of products, assisted by a marketing team providing a comprehensive back-up service, which includes product training and maximum market visibility. AgChem`s unique and versatile manufacturing facility enables it to toll formulate products for a range of chemical distributors. This client base includes local as well as international companies in agriculture and related fields of business. With AgChem`s current business primarily in Southern Africa, it has and is busy establishing export channels in rest of Africa, Europe, the Middle East and South America. AgChem has close ties with leading multi-national companies and markets products abroad through joint ventures. The company is committed to excellent service to a range of markets, including assistance in obtaining local product registrations, marketing and training. 3 Rationale for the Acquisition The Acquisition provides Rolfes with a unique opportunity to gain an entry into the highly attractive agri-chemicals sector. The world`s rapidly growing population will drive the demand for increased food production thus ensuring a very positive growth outlook for agricultural chemicals. High barriers to enter further support the motivation for Rolfes concluding the Acquisition. The Acquisition adds a totally new range of chemical products to the existing large product basket of the Group. The Acquisition forms part of the Rolfes long term strategy to offer a complete basket of chemical products to a wide range of industries. The Acquisition will also assist Rolfes in securing more business for its Africa exports unit. Agchem will continue to be managed by its current management team on a stand-alone basis as is the case with other Rolfes subsidiaries. Rolfes head office will provide, inter alia, long term strategy and business acumen, a treasury and finance function and export capabilities to Agchem. 4 Key salient features of the Acquisition Rolfes has made a binding offer to the Pretorius Family Trust, the HAD Family Trust, Tanglewood Private Equity (Proprietary) Limited ("the vendors"), and the Naude Family Trust, who in turn have accepted this binding offer, in terms of which Rolfes will acquire: 4.1 the entire shareholding of the HAD Family Trust, being 35% of the issued ordinary share capital in AgChem, for a cash consideration or R24,5 million payable on the effective date; 4.2 the entire shareholding of Tanglewood Private Equity (Proprietary) Limited, being 20% of the issued ordinary share capital in AgChem, for a cash consideration or R14 million payable on the effective date; 4.3 15% of the Pretorius Family Trust`s 35% shareholding in the ordinary share capital of AgChem, for: 4.3.1 an initial cash consideration of R8,25 million payable on the effective date; and 4.3.2 a subsequent cash payment, following the completion of the audits for AgChem`s 2014 and 2015 financial years, which amount cannot exceed R8,25 million. This payment is calculated on the level of profits achieved for the 2014 and 2015 financial years. Therefore, Rolfes will acquire from the Vendors, an initial aggregate shareholding of 70% in issued ordinary share capital of AgChem (and shareholders loans, if any), the aggregate consideration for which will be R46,75 million cash payable on the effective date and a maximum of R8,25 million of cash payable on the completion of the period envisaged in 4.3.2 above. Furthermore, Rolfes has agreed with the remaining shareholders being the Pretorius Family Trust and the Naude Family Trust ("the Remaining Shareholders") that they will not dispose of their remaining shareholding in AgChem before 1 July 2015 and then only in terms of standard pre-emptive rights to be included in a shareholders agreement. They will after 1 July 2015, negotiate the purchase by Rolfes of the remaining shareholders` shareholding in AgChem on terms mutually agreeable to both Rolfes and the Remaining Shareholders. In the event that terms mutually agreeable to both Rolfes and the Remaining Shareholders cannot be agreed upon by 1 September 2017, the Remaining Shareholders will have a put option to sell their shares to Rolfes and Rolfes will have a call option to acquire the Remaining Shareholders` shares based on a price equal to 5,5 times the average audited after tax profit of AgChem for the preceding two completed financial years, subject to Rolfes obtaining the approval of its shareholders as required by the JSE Limited ("JSE") Listings Requirements ("the Listings Requirements"). The effective date of the transaction will be the date upon which all the conditions precedent as set out below has been fulfilled. 5 Conditions precedent The Acquisition will be subject to Rolfes and the Vendors entering into final written agreements including sale of shares and shareholders agreements incorporating the following principal conditions precedent: 5.1 AgChem entering into an arm`s length 5-year lease with AgChem Properties (Proprietary) Limited in respect of the properties currently occupied and to be occupied by AgChem and its subsidiaries; 5.2 the approval by the Rolfes board of the final terms and conditions of the financing to be provided for the Acquisition; 5.3 Rolfes being provided with exclusivity in relation to the Acquisition for a period of 6 months from the date of the binding offer, being 28 June 2011; 5.4 Rolfes concluding, to its satisfaction, a commercial, legal and financial due diligence on AgChem; 5.5 Johan Pretorius and Stephan Naude, together with other key members of management, entering into minimum 4 year employment and 3 year restraint of trade agreements (commencing from date of resignation) on terms mutually acceptable to all of the respective parties; 5.6 Andre Dafel and Andre Schoeman, respectively of the HAD Family Trust and Tanglewood Private Equity (Proprietary) Limited, entering into 3 year restraint of trade agreements, to ensure that they do not and will not in future compete materially with the existing business of AgChem, on terms mutually acceptable to all of the respective parties; 5.7 Andre Dafel entering into an agreement with AgChem to provide AgChem with future consulting services on terms which will be mutually acceptable to all of the respective parties; 5.8 the transfer of all banking arrangements to Nedbank, excluding fix term asset finance arrangements; 5.9 the unconditional approval of the acquisition by the Competition Commission, as required, and if such approval is conditional, to such conditions being acceptable to the parties concerned; 5.10 any other regulatory approvals as may be required, including the approval of the JSE; and 5.11 no material adverse change as would be likely to have a material adverse effect on AgChem or its operations, and or the earnings potential of AgChem, having occurred from 1 March 2011 until effective date. 6 Renewal of cautionary announcement Rolfes will publish a further announcement incorporating the pro forma financial effects of the Acquisition and other material terms thereof following the conclusion of final written agreements with the Vendors. Rolfes` shareholders are advised to continue exercising caution when dealing in the Company`s securities until a further announcement is made. Johannesburg 12 July 2011 Corporate Advisor and Designated Advisor: Grindrod Bank Limited Date: 12/07/2011 07:10:03 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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