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AFT - Afrimat Limited - Acquisition by Afrimat of the Clinker Group and withdrawal of cautionary announcement Afrimat Limited Incorporated in the Republic of South Africa (Registration number: 2006/022534/06) Share code: AFT ISIN: ZAE000086302 ("Afrimat" or "the Company") ACQUISITION BY AFRIMAT OF THE CLINKER GROUP AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT 1. INTRODUCTION The directors of Afrimat are pleased to announce that the Company has entered into an agreement to acquire 100% of the issued ordinary share capital of SA Block (Pty) Limited and its 100% owned subsidiary Clinker Supplies (Pty) Limited (jointly referred to as the "Clinker Group" or "Group"), for an amount of R123.5 million (one hundred and twenty three million, five hundred thousand rand) ("the Purchase Price") from Aureos Southern Africa Fund LLC, Hans-Elisabeth Pfeffer No.1 Trust, Hans-Elisabeth Pfeffer No.2 Trust, Hans-Elisabeth Pfeffer No.3 Trust, S.A. Block Employees Trust and Karl-Anton Pfeffer (collectively, "the Sellers"). 2. CLINKER GROUP - BRIEF PROFILE The Clinker Group, is the pioneer and leading processor of clinker for supply mainly to the concrete manufacturing industry. The group also manufactures its own concrete products from clinker material. The Group`s activities include the extraction of clinker raw material from various stock piles and the processing thereof into products of various specifications primarily for use in the concrete manufacturing and civil construction industries. Key operations are located close to Vereeniging and Sasolburg with support services based in Alrode. It is situated close to the recently acquired and highly successful Glen Douglas Mine, creating exciting opportunities for synergy. The processing and manufacturing plants are well established and maintained. The Clinker Group supplies customers in the wider Gauteng market and adjacent northern provinces. Based on current sales volumes, sufficient clinker raw material resources have been secured under contract for the next ten years - despite a shorter life than that of the average aggregate mine, the expected financial returns of this investment are attractive. The concept of utilising clinker in concrete manufactured products was developed by the late Mr. J.B. Pfeffer in the 1950`s. The Clinker Group is currently managed by his son Karl Pfeffer, supported by a strong and loyal management team and workforce. 3. SALIENT FEATURES OF THE TRANSACTION The Clinker Group currently returns profit after tax of approximately R30.0 million per annum which would equate to a return on equity on Afrimat`s R123.5 million investment of approximately 24% per annum. The effective date of the acquisition will be the last day of the month in which all conditions precedent are met. The Purchase Price will be settled by a combination of cash in the amount of R95 million and Afrimat ordinary shares, currently held as treasury shares to the value of R28.5 million. The number of Afrimat ordinary shares will be determined with reference to the 30 trading days Volume Weighted Average Price of Afrimat`s ordinary shares on 9 December 2011 being R4,35 per share. The purchase price may be adjusted in the event that the Clinker Group`s minimum cash holding is below the value of R10 million at 31 December 2011 and its net asset value at 30 December 2011 is below the comparable figure as at 28 February 2011. 4. RATIONALE OF THE TRANSACTION The parties to the transaction recognise the scale of potential opportunity of the acquisition, with Afrimat and the Clinker Group having complementary and supplementary strengths. Leveraging these combined strengths will result in new revenue opportunities as well as increased profitability, specifically through product development and a focused marketing strategy. Clinker, the main product supplied by the Clinker Group has unique advantages to manufacturers of concrete products which are difficult to substitute. This competitive advantage has rendered the Group resistant to the volatile cyclicality associated with the construction materials industry. The acquisition will enable Afrimat to gain a foothold in the northern provinces` clinker supply market and concrete manufacturing industry without creating more capacity in the industry. 5. CONDITIONS PRECEDENT The Acquisition is subject to the following conditions precedent: 5.1 Compliance by the Clinker Group and Afrimat with matters of an administrative nature; 5.2 Approval by the Board of Directors of Afrimat; 5.3 Approval by the Shareholders of the Clinker Group; 5.4 Obtaining all required regulatory approvals or clearances. Items 5.2 and 5.3 have been completed and the submission to the Competition Commission, in terms of Chapter 3 of the Competition Act 1998, is in progress. 6. FINANCIAL EFFECTS OF THE ACQUISITION The unaudited pro forma financial effects of Afrimat before and after the acquisition are based on the Reviewed Condensed Consolidated Interim Financial Statements of Afrimat for the six months ended 31 August 2011. The financial information utilised for the Clinker Group was extracted from the unaudited management accounts of the Clinker Group as at 31 August 2011, Afrimat`s directors are satisfied with the quality of the management accounts utilised in preparing these financial effect. The unaudited financial effects are presented for illustrative purposes only, to provide information on how the acquisition may have impacted on the results and financial position of Afrimat. The unaudited pro forma financial effects are the responsibility of Afrimat`s directors. Due to the nature of the unaudited pro forma financial effects, they may not fairly present Afrimat`s financial position and the results of its operations after the acquisition. It has been assumed for the purpose of the financial effects that the acquisition took place with effect from 1 March 2011. The financial effects do not purport to be indicative of what the financial results would have been, had the acquisition been implemented on a different date. The unaudited pro forma financial
