Wrap Text
AFE - AECI LIMITED - Cautionary Announcement relating to the proposed
acquisition by AECI of the KTH consortium`s 25,1% interest in Aeci`s
explosives business in exchange for ordinary shares in Aeci
AECI LIMITED
Incorporated in the Republic of South Africa
(Registration No. 1924/002590/06)
Share code: AFE ISIN No. ZAE000000220
("AECI" or "the Company" or "the Group")
CAUTIONARY ANNOUNCEMENT RELATING TO THE PROPOSED ACQUISITION BY AECI OF
THE KTH CONSORTIUM`S 25,1% INTEREST IN AECI`S EXPLOSIVES BUSINESS IN
EXCHANGE FOR ORDINARY SHARES IN AECI
1. INTRODUCTION
In 2004, AECI concluded the sale of an effective 25,1% interest in AEL
Mining Services, then known as African Explosives Limited, ("AEL") (the
"AEL Empowerment Transaction"), to an empowerment consortium led by the
Tiso Group Limited ("Tiso") ("KTH Consortium"). AEL is a wholly-owned
subsidiary of AEL Holdings Limited ("AELH"). Pursuant to the merger of
Tiso and Kagiso Trust Investments (Proprietary) Limited ("KTI"), to form
Kagiso Tiso Holdings (Proprietary) Limited ("KTH"), which became effective
on 1 July 2011, KTH acquired Tiso`s interests in AELH. The KTH Consortium
holds its 25,1% interest in AELH through a special purpose vehicle, which
is 75% owned by KTH and 25% owned by the AEL Community Development Trust
("CDT").
AECI has reached an in-principle agreement with KTH to acquire the KTH
Consortium`s 25,1% interest in AELH, in exchange for the issue of 4 678
667 ordinary shares in AECI, subject to the fulfillment of the conditions
precedent set out in section 5 below ("KTH Transaction"). In terms of the
KTH Transaction, the KTH Consortium has agreed that the earliest date it
will be entitled to sell its shares in AECI will be 31 December 2015. The
liquidity of the KTH Consortium`s investment will thereby be improved from
that date.
The KTH Transaction is valued at R397 million, based on the volume
weighted average share price of R84,77 per AECI ordinary share on the JSE
Limited ("JSE") for the 30 days up to and including Friday, 22 July 2011.
Post the completion of the KTH Transaction and preceding the
implementation of the new broad-based black economic empowerment
transaction ("New B-BBEE Transaction") announced today, the KTH Consortium
will own 4,18% of the issued ordinary share capital of AECI and AELH will
become a wholly-owned subsidiary of AECI.
2. TRANSACTION RATIONALE
AECI is committed to the implementation and success of broad-based
empowerment throughout the Group in a comprehensive and sustainable
manner. It recognises the social and commercial imperative of achieving
economic transformation in South Africa. As such, AECI has already
implemented a number of initiatives relating to employment equity, skills
development, preferential procurement, enterprise development and
corporate social investment including the initial AEL Empowerment
Transaction which created significant benefits for all stakeholders
concerned. AECI`s commitment to broad-based empowerment has been enhanced
further with the announcement of its proposed New B-BBEE Transaction, the
beneficiaries of which will be the AECI employees and the AECI Community
Education and Development Trust.
The AEL Empowerment Transaction has been a successful B-BBEE transaction
and has created substantial benefits for the business of AEL and the
communities benefiting from the CDT and KTH. The participation of the KTH
Consortium in the business of AEL enhanced AECI`s empowerment initiatives
and helped maintain AEL`s position as a leading mining services company
in the South African, African and selected international mining sectors
and associated service industries.
The KTH Transaction will allow AECI to control 100% of AELH and will
provide AECI with greater flexibility in managing the operations of AEL,
a leading developer, producer and supplier of commercial explosives,
initiating systems and blasting services for mining and infrastructure
markets in Africa and selected international markets. Whereas the AEL
Empowerment Transaction only benefited AEL, the KTH Transaction will
allow the AECI Group as a whole to extract the full benefit from having
KTH as a long-term strategic investor. Post the completion of the KTH
Transaction and the New B-BBEE Transaction, it is anticipated that AECI
will have effective black ownership in excess of 27% in terms of the
Department of Trade and Industry`s Broad-Based Black Economic Empowerment
Codes of Good Practice and the principles relating to mandated
investments and foreign operations defined therein.
KTH is a diversified investment holding company recently created through
the merger of two leading black owned and managed companies, KTI and
Tiso. KTI and Tiso were founded in 1993 and 2001 respectively, with the
goal of achieving true economic empowerment through active operational
involvement in strategic investments, to enable meaningful and lasting
contributions towards the socio-economic development of South Africa.
KTH`s vision is to be a leading African diversified investment holding
company, with interests across a range of sectors including media,
mining, financial services, power, construction, industrial and property.
3. RELATED PARTY TRANSACTION
In terms of the JSE Listings Requirements, the KTH Transaction is
classified as a small related party transaction. AECI is in the process
of appointing an independent expert ("Independent Expert") to provide the
Company with a fairness opinion in respect of the KTH Transaction.
4. FINANCIAL EFFECTS OF THE KTH TRANSACTION
The pro forma financial effects of the KTH Transaction on AECI`s headline
earnings per share and earnings per share for the six months ended 30 June
2011 and net asset value per share and tangible net asset value per share
at 30 June 2011, are not expected to be significant in terms of the JSE
Listings Requirements.
5. CONDITIONS PRECEDENT
The implementation of the KTH Transaction is subject to a number of
conditions precedent, including but not limited to:
* the execution of definitive transaction agreements;
* the approval by the Board of Directors of AECI and KTH;
* the approval by the Board of Trustees of the CDT;
* the approval by the JSE of the relevant documentation;
* the receipt of a positive fairness opinion from the Independent Expert;
and
* to the extent necessary, all other regulatory consents and approvals.
6. CAUTIONARY ANNOUNCEMENT
A further announcement will be published on the Securities Exchange News
Service of the JSE and in the press post the fulfillment of the
conditions precedent relating to the KTH Transaction, which is expected
to take effect by the end of November 2011. Accordingly, shareholders are
advised to exercise caution when dealing in AECI shares until a further
announcement is made.
Woodmead, Sandton
26 July 2011
Investment bank and transaction sponsor to AECI
Standard Bank
Investment Bank to Kagiso Tiso Holdings
Standard Bank
Legal advisors to AECI
Webber Wentzel
Corporate Sponsor to AECI
RMB
Date: 26/07/2011 07:05:16 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.
Sharenet Sites 
