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BAW/BAWP - Barloworld Limited - Proposed Acquisition and Withdrawal of
Cautionary
Barloworld Limited
(Incorporated in the Republic of South Africa)
(Registration number 1918/000095/06)
(Income Tax Registration number 9000/051/71/5)
(Share code: BAW)
(JSE ISIN: ZAE000026639)
(Share code: BAWP)
(JSE ISIN: ZAE000026647)
(Bond issuer code: BIBAW)
("Barloworld" or "the Company")
ANNOUNCEMENT REGARDING THE PROPOSED ACQUISITION BY BARLOWORLD AND ITS
SUBSIDIARIES OF BUCYRUS DISTRIBUTION AND SUPPORT BUSINESSES FROM CATERPILLAR
GLOBAL MINING AND EQSTRA AND WITHDRAWAL OF CAUTIONARY
1. Introduction
Further to the cautionary announcement dated 18 May 2012, shareholders
are advised that Barloworld and its subsidiaries, Barloworld South
Africa Proprietary Limited ("Barloworld South Africa"), Barloworld
Equipment Botswana (Proprietary) Limited ("Barloworld Botswana") and
Barloworld Equipment UK Limited ("BE UK") ("Barloworld Subsidiaries"),
entered into agreements on 29 May 2012 with Caterpillar Global Mining
LLC ("CGM") and its subsidiaries, Bucyrus Africa Underground Proprietary
Limited ("Bucyrus South Africa") and Bucyrus Botswana (Proprietary)
Limited ("Bucyrus Botswana") ("CGM Subsidiaries"), for the purchase by
the Barloworld Subsidiaries of the mining equipment businesses referred
to in paragraph 3 below.
2. Rationale
`In July 2011 Caterpillar Inc acquired all the shares of Bucyrus
International Inc for USD 8.8 billion (including net debt). Bucyrus Inc
and its subsidiaries (Bucyrus) are global manufacturers and distributors
of a range of mining equipment which complements the Caterpillar mining
product range.
Bucyrus largely adopted a factory direct business model and owned
distribution businesses around the world. However, in South Africa and
Botswana, Eqstra is the dealer for a limited range of Bucyrus products.
Caterpillar Inc and its subsidiaries, on the other hand, follow a
dealership model throughout the global organisation and have offered
their mining dealers the opportunity to acquire the former Bucyrus
distribution businesses in their respective Cat dealership territories.
Barloworld and the Barloworld Subsidiaries have negotiated with CGM and
the CGM Subsidiaries the acquisition of the former Bucyrus distribution
and support businesses (including Eqstra`s Bucyrus distribution and
mining services business) in South Africa and Botswana and, on closure
of the transaction, will be entitled to distribute the extended product
range in all of their southern African Cat dealership territories.
The proposed acquisition enables Barloworld and its subsidiaries to
offer their customers in southern Africa a comprehensive range of
surface and underground mining equipment and support services.
3. Terms of the transaction
3.1 The salient agreements referred to above are the following:
3.1.1. Agreements for the cession and delegation of substantially all of
Bucyrus South Africa and Bucyrus Botswana`s rights and obligations
under the agreements they have entered into with Eqstra Holdings
Limited ("Eqstra") and certain of its subsidiaries ("Eqstra
Subsidiaries") for the sale by the Eqstra Subsidiaries of their
Eqstra mining services businesses relating to selling and
supporting Bucyrus products in South Africa and Botswana ("Eqstra
Businesses") (details of which are contained in Eqstra`s
announcement released on SENS on 14 March 2012). In consequence of
those cessions and delegations Barloworld South Africa and
Barloworld Botswana will purchase ("Eqstra Purchase") from the
Eqstra Subsidiaries directly the Eqstra Businesses including
certain assets relating to those businesses, such as inventories,
work in progress, equipment and tooling, and will acquire and
assume rights and obligations in terms of certain on-going
contracts relating to the Eqstra Businesses, such as maintenance
and repair contracts and services contracts relating to Bucyrus
equipment.
3.1.2 An agreement for the purchase ("Caterpillar Purchase") by the
Barloworld Subsidiaries from CGM and the CGM Subsidiaries of the
mining equipment sales (including promotion and marketing
activities), distribution and aftermarket sales and service and
support businesses conducted by the CGM Subsidiaries in South
Africa and Botswana (excluding the Eqstra Businesses and the assets
referred to in 3.1.1 above), and certain assets relating to those
businesses, such as assets of the kind referred to in 3.1.1 above;
and of certain intangibles relating to the southern African
countries in which the Barloworld group is the Caterpillar dealer.
The Barloworld Subsidiaries will also acquire rights and
obligations in terms of certain on-going contracts relating to
those businesses.
3.2 The Eqstra Purchase is expected to be implemented on 29 June 2012. The
purchase price for the Eqstra Purchase, expressed in Rands, is R475 000
000, subject to adjustments in relation to the actual inventory as at
the date of implementation of the Eqstra Purchase. Barloworld intends to
give a guarantee to Eqstra NH Equipment Proprietary Limited ("Eqstra
NH"), a South African subsidiary of Eqstra, and the seller of the South
African operations of the Eqstra Businesses, whereby Barloworld
guarantees to Eqstra NH the payment by Barloworld South Africa of the
South African purchase price payable to Eqstra NH.
3.3 The Caterpillar Purchase is expected to be implemented on 2 July 2012.
The purchase price for the Caterpillar Purchase is USD175 000 000, less
the USD equivalent of the purchase price for the Eqstra Purchase ("Non-
Eqstra Purchase Price"). The Non-Eqstra Purchase Price is subject to
adjustments in relation mainly to the actual inventory as at the date of
implementation of the Caterpillar Purchase. Barloworld has given a
guarantee to Bucyrus South Africa, whereby Barloworld guarantees
performance by Barloworld South Africa of its obligations to Bucyrus
South Africa in terms of the Caterpillar Purchase.
3.4 The aggregate purchase price for the Eqstra Purchase and the Caterpillar
Purchase is USD175 000 000, subject to the adjustment referred to in 3.3
above. Amounts payable in Botswana and South Africa in terms of the
agreements will be paid in the local currencies of those countries.
Other amounts will be paid in USD. An amount of USD106 000 000, which
largely covers the foreign exchange exposure on the transaction, has
been hedged at a forward rate of USD1:R7.91 (Bucyrus hedge).
3.5 Based on the purchase price this transaction is a Category 2 transaction
in terms of the JSE Listings Requirements.
3.6 The Eqstra Purchase is subject, inter alia, to the fulfilment of the
following conditions precedent:
3.6.1 approval of the Eqstra Purchase by the competition authorities in
South Africa; and
3.6.2 a stock take being undertaken and inventory schedules being signed.
3.7 The Caterpillar Purchase is subject, inter alia, to the fulfilment of
the following conditions precedent:
3.7.1 approval of the Caterpillar Purchase by the competition authorities
in South Africa; and
3.7.2 the implementation of the Eqstra Purchase.
4. Pro forma financial information
The illustrative unaudited pro forma financial effects referred to below
have been prepared to assist shareholders to assess the impact of the
acquisition on the Barloworld Earnings Per Share (EPS) and Headline
Earnings Per Share (HEPS) for the twelve months ended 31 March 2012 and
the Net Asset Value (NAV) and Tangible Net Asset Value (TNAV) per share
as at 31 March 2012.
The financial effects have been calculated using Barloworld`s accounting
policies. The material assumptions are set out in the notes below. Due
to the nature of the pro forma financial effects, they may not fairly
present Barloworld`s financial position after the acquisition, nor the
effect on Barloworld`s future earnings. The pro forma financial effects
are the responsibility of the Barloworld board of directors and are
provided for illustrative purposes only.
The impact of the acquisition on basic and diluted EPS and basic and
diluted HEPS is accretive but less than 3%. The impact of the
acquisition on NAV is less than 3%. In terms of the JSE Listings
Requirements, these effects are not significant.
The TNAV per share declines by 5% from 4602 cents before the
acquisition as at 31 March 2012 to 4355 cents after the acquisition as a
result of the provisional allocation of portion of the purchase price to
goodwill and other intangible assets.
Notes and assumptions:
4.1 The TNAV per share, before the acquisition, has been extracted
from the reviewed condensed Statement of Financial Position of
Barloworld as at 31 March 2012 and calculated based on 210 721 000
Barloworld shares in issue at 31 March 2012.
4.2 The TNAV per Barloworld share, after the acquisition, has been
calculated on the condensed consolidated Statement of Financial
Position of Barloworld as at 31 March 2012 after the Eqstra
Purchase and the Caterpillar Purchase, based on 210 721 000
Barloworld shares in issue at 31 March 2012.
4.3 Earnings information in respect of the Eqstra Purchase and
Caterpillar Purchase for the 12 month period ended 31 December
2011, which has been used in the pro forma financial effects
calculation, has been extracted from unpublished management
accounts prepared by the sellers, relevant to the products and
services being acquired by Barloworld. Management account
information has been adjusted, where relevant, to reflect future
commercial arrangements between Barloworld and CGM. The assets
and liabilities acquired and reflected in the pro forma financial
effects are based on a provisional fair value calculation. The
board of directors is satisfied with the quality of the information
used to determine the Financial Effects.
4.4 The purchase price of USD175 million is to be settled by cash
resources and interest-bearing debt in South Africa, Botswana and
the United Kingdom.
4.5 The unaudited pro forma Statement of Financial
Position of the Barloworld Limited Group has been prepared on the
assumptions that the acquisition was
effected on 31 March 2012, which resulted in the:
- inclusion of the assets and liabilities in respect of the
Eqstra Purchase and the Caterpillar Purchase
- the accounting for estimated once-off transaction costs of R15
million; and
- the exclusion of the effect of the Bucyrus hedge.
4.6 The closing exchange rate of R7.67 to the US Dollar was used to
calculate the Statement of Financial Position items on 31 March
2012.
4.7 The businesses are acquired as going concerns with the transfer of
client arrangements, employees, inventory, fixed assets and some
current assets.
5. Withdrawal of cautionary announcement
Shareholders are advised that the cautionary announcement issued on 18
May 2012 is hereby withdrawn and caution is no longer required to be
exercised when dealing in the securities of the Company.
Date: 30 May 2012
Sponsor:
J.P. Morgan Equities Ltd.
Date: 30/05/2012 14:00:01 Supplied by www.sharenet.co.za
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