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DON - The Don Group Limited - Disposal of Ikapa Tours & Travel (Proprietary)
Limited
THE DON GROUP LIMITED
Incorporated in the Republic of South Africa
(Registration number 1946/023123/06)
Share code: DON ISIN: ZAE000008462
("The Don")
DISPOSAL OF IKAPA TOURS & TRAVEL (PROPRIETARY) LIMITED
1. INTRODUCTION
The board of directors of The Don ("the Board") is pleased to advise
shareholders that Ikapa Tours & Travel (Proprietary) Limited ("Ikapa"),
a 56.66% subsidiary of The Don has successfully concluded an agreement
("the business disposal agreement") with Cullinan Holdings Limited
("Cullinan"), for the sale to Cullinan of the entire business of Ikapa
as a going concern, excluding liabilities ("the business disposal").
In a separate agreement entered into between The Don and Ikapa ("the
equity disposal agreement"), The Don shall sell its entire shareholding
in Ikapa to Ikapa for a total cash consideration of R1, be indemnified
against all future liabilities of Ikapa and shall receive R6 000 000
from the proceeds of the sale of the business of Ikapa to Cullinan, as
detailed in the business disposal agreement ("the equity disposal").
2. THE DISPOSAL
2.1 Nature of Ikapa and rationale for the disposal
The Don acquired a 51.00% shareholding in Ikapa, an inbound tour
operator based in Cape Town, in 2009, and a further 5.66% in 2011.
Ikapa facilitates all aspects of its clients` travel requirements,
including flights, accommodation, car hire and long distance tours
throughout South Africa as well as Botswana, Namibia, Zambia and to the
Victoria Falls in Zimbabwe. At the time, the Board believed that The
Don would obtain marketing exposure, especially from domestic and
international tour groups, which would facilitate an increase in
occupancy rates. However, the purpose for which Ikapa was originally
acquired as stated above, is no longer consistent with The Don`s long-
term strategy of diversifying away from the hotel and leisure sector,
hence the disposal.
2.2 Purchase consideration
In a separate agreement entered into between The Don and Ikapa, The Don
shall sell its entire shareholding in Ikapa to Ikapa for a total cash
consideration of R1, be indemnified against all future liabilities of
Ikapa and shall receive R6 000 000 from the proceeds of the sale of the
business of Ikapa to Cullinan, as detailed in the business disposal
agreement. The proceeds from the sale of Ikapa will be used for working
capital purposes and settlement of existing liabilites.
2.3 Effective date
The effective date of the disposal is 1 November 2011.
2.4 Insolvency Act Provisions
Ikapa and Cullinan have agreed in the business disposal agreement that
notice of this transaction will not be published as contemplated in
Section 34 of the Insolvency Act 24 of 1936, as amended. Ikapa
indemnifies Cullinan against all loss, liability, damage and expense of
every nature whatsoever which Cullinan may suffer as a result of this
disposal not being published.
2.5 Warranties
Warranties as are normal in transactions of this nature have been
provided for in the business disposal agreement.
2.6 Conditions Precedent
There are no outstanding conditions precedents in either the business
disposal agreement or the equity disposal agreement.
3. PRO FORMA FINANCIAL EFFECTS OF THE DISPOSAL
The table below sets out the unaudited pro forma financial effects of
the equity disposal, on The Don`s earnings per share, headline earnings
per share, net asset value per share and tangible net asset value per
share.
The unaudited pro forma financial effects have been prepared to
illustrate the impact of the equity disposal on the reported financial
information of The Don for the year ended 30 June 2011, had the equity
disposal occurred on 1 July 2010 for income statement purposes and on
30 June 2011 for balance sheet purposes.
The unaudited pro forma financial effects have been prepared using
accounting policies that comply with International Financial Reporting
Standards and that are consistent with those applied in the reviewed
list of investments includes:
* Pure Ocean Aquaculture: Food shortages driven by a growing population,
changing lifestyles towards healthier eating and dwindling wild marine
stock are among the reasons for this choice of investment. There is clearly
a demand for farmed fish and the challenges in long-term supply points to
aquaculture as the solution. Pure Ocean is a vertically integrated
aquaculture company in the development phase of setting up various sites in
Southern Africa. A land-based re-circulating plant on the east coast of
South Africa is under development and a cage-based project in the Lesotho
Highlands already has fish in the water.
* Avalloy: Avalloy is a South African company operating in a niche market
segment, which is experiencing substantial growth. The Avalloy facility has
world class technology and processes producing super-alloys (high-
performance alloys) for the aerospace, power generation, petroleum and
automobile industries. Avalloy, which is partnered with Rolls-Royce, has
developed to the stage that it has obtained its necessary accreditations
and customer approvals and is now entering its next phase of development.
* TOR Holdings: Tor Construction is a road construction company based in the
Southern Cape, which has recently increased its order book to more than
twice the contract value in the previous year and the highest ever
achieved. Tor Oil Infrastructure is an oil storage and related
infrastructure construction company focused on developing projects
throughout Southern Africa.
Julian Williams added, "Significantly, as the first principal investor, we
invest our own capital into our portfolio; this strategy, together with our
robust investment processes ensures that we select only the best opportunities
we review for inclusion. Basileus` business philosophy is firmly focused on
developmental capital projects that have the potential to become significant
businesses in their own right. Our business model focuses on reducing business
risk through rigorous research and hands-on operational management. We believe
this active management focus on ensuring that the underlying business is
successful will translate into meaningful returns".
Terry Brunton, the CEO of Kwanda Capital, stated that "Our mandate is to
represent the interests of those third party investors participating in various
projects and businesses through investment into BK One. Our working knowledge
and experience of the Basileus investment processes, people and deal pipeline is
a key advantage to ensuring that, when combined with our own independent
investment process, an additional level of investment decision making is
created, which provides investors with a greater level of comfort and optimism".
For further information please contact:
Dean Richards, BK One, 082 809 9996
Julian Williams, Basileus Capital, 083 708 2642
Terry Brunton, Kwanda Capital, 082 905 2822
Johannesburg
8 December 2011
Investment bank and debt sponsor
Nedbank Capital
Communication advisor