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CRM - Ceramic Industries Limited - Cautionary announcement regarding a possible offer to Ceramic shareholders and the subsequent delisting of the Company CERAMIC INDUSTRIES LIMITED (Registration number 1982/008520/06) (Incorporated in the Republic of South Africa) Share code: CRM ISIN: ZAE000008538 ("Ceramic" or "the Company") Cautionary announcement regarding a possible offer to Ceramic shareholders and the subsequent delisting of the Company 1. Introduction Ceramic shareholders ("Shareholders") are advised that the board of Ceramic has received a letter from Italtile Limited ("Italtile") expressing an interest in acquiring a strategic stake in Ceramic. Italtile`s rationale for this proposal is to support its growth strategy by strengthening its relationship with Ceramic, a key supplier of ceramic tiles, sanitaryware and baths to Italtile. 2. Italtile`s conditional offer Italtile hasindicated its intention to make an offer to Shareholders, subject to certain conditions precedent, to acquire between 15% and 20% in the issued share capital of Ceramic. Any such offer will be for a consideration of R130 per share, payable in cash. The conditions that must be satisfied before Italtile will make an offer are: * the successful outcome of a due diligence exercise on Ceramic; * the support of the Ceramic board; * assurance that Ceramic would be able to support Italtile`s growth strategies; * assurance regarding the continued involvement of Ceramic`s management in its business; and * the necessary regulatory and legislative approvals. 3. Ceramic`s continued listing on the JSE Limited ("JSE") The listing of Ceramic on the JSE has served little purpose. Ceramic`s shares are tightly held, minimal capital has been raised from the market and trade in the shares is thin. If an offer is made by Italtile, and succeeds, Ceramic will have a materially reduced free float. Italtile has recognised that under these circumstances Ceramic`s continued listing makes little sense. In terms of theJSE Listing Requirements, a company wishing to delist from the JSE requires a resolution to be passed by a simple majority of disinterested shareholders and an offer, which must be fair (and the board must have obtained an independent fairness opinion confirming this), to be made to all shareholders. Italtile has procured an undertaking from Rallen (Proprietary) Limited ("Rallen"), the holding company of both Italtile and Ceramic, to join Italtile in extending such an offer to all of Ceramic`s shareholders other than Rallen and its associates, as required by the JSE. 4. Meeting of the directors of Ceramic The directors of Ceramic, other than those directors who have an interest in Rallen ("the Independent Board Members"), have met to consider the implications of the conditional offer, and have resolved to: * appoint an independent advisor to provide advice to the Independent Board Members on the valuation of Ceramic shares and the fairness of the conditional offer; * engage with Italtile regarding the conditions to its offer and, in particular, on the scope and timing of the required due diligence investigation; * investigate the ability of and mechanisms for Ceramic to support Italtile`s growth, noting that any such mechanisms would be available to all of Ceramic`s customers; * investigate mechanisms to secure thecontinued involvement of Ceramic`s management if an offer is made to all Shareholders; * engage with the Black Economic Empowerment partners of Ceramic ("BEE Partners") to ensure that an arrangement that is fair to both Ceramic and the BEE Partners is reached if an offer is made to all Shareholders; and * propose to Ceramic shareholders that the Company be delisted if Italtile makes an offer on the terms set out in its letter. 5. Impact of an offer by Italtile on Ceramic`s business Although Italtile is Ceramic`s most significant customer, Ceramic does serve many other wholesalers and retailers in the South African market. Ceramic notes that Italtile has undertaken not to require any board representative on Ceramic or any preferential arrangements that would not be available to other Ceramic customers. The Independent Board Members believe that, given the above undertakings, Ceramic`s business should not be affected if Italtile`s conditional offer is implemented and the Company delisted. 6. Cautionary announcement Shareholders are advised to exercise caution in their dealings in Ceramic shares until a further announcement is made, which is expected to be before the end of June 2012. Vereeniging 28 May 2012 Sponsor One Capital Date: 28/05/2012 08:30:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. 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