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KAP - KAP International Holdings Limited - Proposed acquisition by KAP of
Steinhoff International Holdings Limited`s industrial assets
KAP INTERNATIONAL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration Number 1978/000181/06)
Share code: KAP
ISIN: ZAE000059564
("KAP")
PROPOSED ACQUISITION BY KAP OF STEINHOFF INTERNATIONAL HOLDINGS LIMITED`S
INDUSTRIAL ASSETS
1. Introduction
The board of directors of KAP announces that in-principle agreement has
been reached between KAP and Steinhoff International Holdings Limited
("Steinhoff"), in terms of which KAP will, subject to the fulfillment of
the conditions precedent set out in paragraph 3.4 below, acquire from
Steinhoff the entire issued ordinary share capital of and all claims on
loan account against PG Bison Holdings (Proprietary) Limited ("PG Bison")
and Unitrans Holdings (Proprietary) Limited ("Unitrans"), and Steinhoff`s
raw materials subsidiaries and/or businesses ("Steinhoff Raw Materials")
(together the "Steinhoff Industrial Assets"), in exchange for KAP shares
and the crediting of a loan account in favour of Steinhoff, as detailed
below (the "Transaction").
2. Rationale for the Transaction
The Transaction represents an opportunity for KAP to acquire leading
industrial assets in southern Africa to complement KAP`s existing portfolio
of industrial assets and to establish KAP as one of the largest listed
industrial portfolios in southern Africa. As a focused industrial group,
KAP will be better positioned to capitalise on numerous growth
opportunities inherent on the southern African continent. In addition, the
enlarged diversified industrial business is expected to be better placed to
access capital, both in the debt and equity markets at competitive rates
and pricing.
Furthermore, Steinhoff, as the controlling shareholder of KAP, will provide
strategic assistance to ensure the success and continued growth of KAP
within the southern Africa markets.
3. The Transaction
3.1 Nature of the Steinhoff Industrial Assets
3.1.1 PG Bison
PG Bison manufactures and distributes sawn timber, poles, wood-
based panel products, decorative laminates and solid surfacing
materials through its comprehensive national footprint.
PG Bison`s integrated timber operations comprise forestry
plantations, timber beneficiation processes and sawmills,
particle board and decorative laminate plants. PG Bison`s
products are ultimately distributed to a diverse customer base in
southern Africa.
3.1.2 Unitrans
Unitrans comprises a specialist supply chain business that
designs, implements and manages supply chains and logistics for a
diverse customer base on a long term contractual basis. Services
include comprehensive warehouse-, logistics- and related supply
chain solutions for customers in southern Africa.
In addition to the industrial supply chain solutions, Unitrans
Passenger provides comprehensive passenger transport solutions to
various sectors, which include, inter alia, contractual commuter
and personnel transport services, intercity transport services,
tourism services, as well as management and operations relating
to the Gautrain fleet of commuter buses.
3.1.3 Steinhoff Raw Materials
Steinhoff Raw Materials manufactures various products as
highlighted below:
Steinhoff Raw Materials includes:
- Vitafoam, a flexible polyurethane foam producer active in
the furniture, packaging, insulation and cleaning industries
in South Africa and Namibia;
- BCM, a manufacturer of components predominantly used in
bedding products; and
- DesleeMattex, a technologically advanced supplier of woven
jacquard and knitted textiles to bedding and related
industries.
3.2 Terms of the Transaction
Subject to the fulfillment of the conditions precedent set out in
paragraph 3.4 below, KAP will acquire the Steinhoff Industrial Assets
at an enterprise value of R8 921 million (the "Purchase
Consideration").
The Purchase Consideration will be settled by way of a fresh issue of
1 912.8 million KAP shares at R2.50 per share ("the Consideration
Shares"), representing a premium of 2.5% to KAP`s 30 day VWAP up to
and including 14 October 2011, and by KAP crediting a loan account in
favour of Steinhoff in an amount of approximately R4 139 million ("the
Claims").
As a result of the Transaction, Steinhoff will increase its
shareholding in KAP from 34% to 88% and will therefore be required to
make a mandatory offer to the remaining KAP shareholders (the "KAP
Minorities"). Steinhoff will, at its election, either extend a cash
offer to the KAP Minorities at R2.50 per KAP share, or, as a condition
precedent to the implementation of the Transaction, request that the
requirement to make a mandatory offer be waived by the KAP Minorities
at the general meeting of KAP shareholders to be convened to consider
and, if deemed appropriate, to pass all resolutions required in order
to approve and implement the Transaction (the "KAP General Meeting").
Further details in respect of Steinhoff`s election to make a mandatory
offer or to require the waiver of such offer, will be contained in the
circular to KAP shareholders in respect of the Transaction (the
"Circular").
3.3 Effective date of the Transaction
The effective date of the Transaction will be the first day of the
month following the date of fulfillment or waiver, as the case may be,
of the last of the conditions precedent, set out in paragraph 3.4
below.
3.4 Conditions precedent
3.4.1 Conditions precedent to the posting of the Circular
The posting of the Circular is subject to the fulfillment or
waiver (where applicable) of, inter alia, the following
conditions precedent:
3.4.1.1 PricewaterhouseCoopers Corporate Finance (Proprietary) Limited,
which has been appointed as the independent expert (the
"Independent Expert") by the independent directors of KAP (the
"Independent Board") as required in terms of the Takeover
Regulations and the Listings Requirements (the "Listings
Requirements") of the JSE Limited (the "JSE"), providing a
positive fair and reasonable / fairness opinion in respect of the
Transaction to the Independent Board;
3.4.1.2 a formal sale agreement being entered into between KAP and
Steinhoff recording the in-principle agreement reached between
them and such other terms and conditions as normally apply to a
transaction similar to the Transaction;
3.4.1.3 the requisite approvals being received from the JSE and the
Takeover Regulation Panel (the "TRP") for the posting of the
Circular (which will include a notice of the KAP General Meeting)
to KAP shareholders; and
3.4.1.4 the JSE granting KAP a listing of the Consideration Shares.
3.4.2 Conditions precedent to the Transaction
The Transaction is subject to the fulfillment or waiver (where
applicable) of, inter alia, the following conditions precedent by
no later than 31 January 2012, or such later date as Steinhoff
and KAP may agree in writing:
3.4.2.1 the approval at the KAP General Meeting, by the requisite
majority of KAP shareholders, of all of the resolutions required
to give effect to the Transaction, including, if required , the
waiver of the requirement that Steinhoff makes a mandatory offer
to the KAP Minorities;
3.4.2.2 the issue of a compliance certificate in respect of the
Transaction by the TRP in terms of the Companies Act, No. 71 of
2008; and
3.4.2.3 all required regulatory approvals being obtained, including the
unconditional approval of the Transaction by the Competition
Authorities in terms of the Competition Act, No. 89 of 1998.
3.5 Financial effects of the Transaction
The unaudited pro forma financial effects set out in the table below
have been prepared to assist KAP shareholders assess the impact of the
Transaction on the earnings and headline earnings per share for the
year ended 30 June 2011, and the net asset value per share ("NAV") at
30 June 2011. The pro forma financial effects set out below have been
prepared for illustrative purposes only and because of their nature,
may not fairly present KAP`s financial position at 30 June 2011.
The preparation of the financial effects of the Transaction on KAP is
the responsibility of the directors of KAP.
Per KAP share (cents) Before(1) After(2,3) Change
Earnings (2) 30.9 22.9 (25.9)
Headline earnings (2) 24.7 28.4 15.0
Headline earnings - continuing operations 32.7 29.8 (8.8)
(2)
NAV (3) 336.8 225.3 (33.1)
Number of shares in issue (`000) 424.5 2 337.3 451
Weighted number of shares (`000) 424.5 2 337.3 451
Notes and assumptions:
1. The KAP financial information reflected in the "Before" column
has been extracted from the most recently published audited
results of KAP (year ended 30 June 2011) which were prepared
using accounting policies that comply with International
Financial Reporting Standards.
2. The pro forma adjustments to the audited condensed consolidated
statement of comprehensive income have been calculated on the
assumption that the Transaction was implemented on 1 July 2010
and have taken into account the pro forma interest expenditure on
the Claims.
3. The pro forma adjustments to the audited condensed consolidated
statement of financial position have been calculated on the
assumption that the Transaction was implemented on 30 June 2011
and in compliance with the reverse acquisition provisions
contained in IFRS 3 business combinations provisions.
3.6 Reverse take-over and requisite documentation
The implementation of the Transaction will result in a reverse take-
over in terms of the Listings Requirements. As a result, the Circular
to be issued to KAP shareholders will incorporate revised listing
particulars, in addition to details of the Transaction, a fair and
reasonable / fairness opinion and a notice of the KAP General Meeting,
which Circular will be posted in due course, subject to JSE and TRP
approval.
Furthermore, the JSE will only permit KAP to retain its listing,
following the reverse take-over, should the JSE be satisfied that KAP
will, within a reasonable period of time after the implementation of
the Transaction, satisfy the spread requirements in terms of paragraph
4.28(e) of the Listings Requirements, and continue to qualify for a
JSE listing in terms of the Listings Requirements.
3.7 JSE Category 1 and related party transaction
The Transaction will be categorised as a Category 1 transaction for
KAP in terms of the Listings Requirements (the "Listings
Requirements") of the JSE Limited (the "JSE"). Steinhoff will be
precluded and will recuse itself from voting on those resolutions
directly related to the Transaction at the KAP General Meeting.
Steinhoff currently holds 144 million KAP shares, representing
approximately 34% of the issued KAP shares. In terms of the Listings
Requirements, Steinhoff is a material KAP shareholder and a related
party to KAP and the Transaction is a related party transaction for
KAP. The Independent Board (which excludes any directors from
Steinhoff as well as other directors with possible conflicts, who have
recused themselves from the KAP Board meeting to consider the
transaction) will request the Independent Expert to provide an opinion
on the fairness of the Transaction to KAP shareholders in terms of the
Listings Requirements.
3.8 Shareholder undertakings
KAP has received irrevocable undertakings from KAP shareholders
holding sufficient KAP shares to vote in favour of all resolutions
required to implement the Transaction at the KAP General Meeting.
3.9 Recommendation and fairness opinion
The Independent Board will make a recommendation to KAP shareholders
as to how they should vote in respect of the resolutions to be
proposed at the KAP General Meeting, which recommendation will be
based, inter alia, on the fair and reasonable / fairness opinion from
the Independent Expert.
The substance of the external advice received from the Independent
Expert and the views of the Independent Board will be detailed in the
Circular.
4. KAP directors and management
Full details of the composition of KAP`s board of directors and management
structures subsequent to the implementation of the Transaction, will also
be set out in the Circular.
5. KAP responsibility statement
The Independent Board accepts responsibility for the information contained
in this announcement. To the best of its knowledge and belief, the
information contained in this announcement is true and nothing has been
omitted which is likely to affect the importance of the information.
18 October 2011
Paarl
Corporate Adviser and Transaction Sponsor to KAP
PSG Capital (Proprietary) Limited
Independent Expert
PricewaterhouseCoopers
Date: 18/10/2011 12:27:40 Supplied by www.sharenet.co.za
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