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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
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