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Alert Steel Holdings Ltd - DISPOSAL OF ALERT HOLDINGS KLERKSDORP BRANCH AND TENDER AWARD

Release Date: 11/07/2012 14:55
Code(s): AET
Wrap Text
ALERT STEEL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2003/005144/06)
JSE code: AET
ISIN: ZAE000092847
(Alert Holdings)


DISPOSAL OF ALERT HOLDINGS KLERKSDORP BRANCH AND TENDER AWARD 1. Introduction
Alert Holdings is delighted to announce that Alert Steel Tshwane (Pty) Ltd (an entity in which Alert Holdings holds 50%) (Alert Tshwane) has been awarded a three year tender for the supply of carbon steel to Transnet SOC Limited (Transnet) in relation to Transnets Koedoespoort and Germiston outlets. It is anticipated that the award of this tender will have a significantly positive impact on the business of Alert Holdings and its subsidiaries and further details of this award are set out below. In addition, Alert Holdings has continued to pursue its restructuring process with a view to streamlining its operations, focusing on its core business, growing in its areas of strength and positioning the group for future growth. In this regard, shareholders are hereby advised that:
- as recorded in the SENS announcement dated 21May2012, Alert Steel (Pty) Ltd (Alert Steel), a wholly-owned subsidiary of Alert Holdings, acquired the business of Steelmecca (Pty) Ltd, comprising the retailing of steel and steel related products in Rustenburg, with effect from 1May2012; - Alert Steel closed its Benrose branch on 30June2012. Such closure serves to reduce overheads of Alert Steel related to the operation of such branch and it is envisaged that clients of the Benrose branch will now be serviced from the Pretoria branch of Alert Steel; - Alert Steel has opened approximately 30Alert express containers over the past 12months, which have been opened with a view to harnessing the rural market on a mobile basis such that Alert Steel is able to service the specific areas of demand on an ongoing basis; - Alert Steel has recently concluded an agreement with BSI Steel Limited, a non-related party to Alert Holdings, to dispose of the steel retailing business owned and operated by Alert Steel at its Klerksdorp branch with effect from 31July2012. Further detailed information in relation to this disposal is recorded below; and - it is envisaged that a new branch of Alert Steel will be opened in Mahikeng with effect from 1August2012. 2. Details pertaining to award of Transnet Tender
As referred to above, Alert Tshwane, an entity in which Alert Holdings holds 50%, has recently been awarded a tender to supply carbon steel to Transnet in relation to Transnets Koedoespoort and Germiston outlets. In terms of such award, Transnet has agreed that Alert Tshwane will supply to Transnet at least 10.6% of all of Transnets requirements for carbon steel for the period of three years from 1July2012 to 30June2015. The tender has been awarded and a letter of intent has been signed, but the award is still subject to finalisation of definitive contractual agreements, and shareholders will be informed further once such contractual agreements have been signed and become unconditional. 3. Disposal of Alert Steels Klerksdorp branch
As mentioned above, Alert Steel, a wholly-owned subsidiary of Alert Holdings, has concluded an agreement with BSI Steel Limited (BSI), a non-related party to Alert Holdings, to dispose of the steel retailing business owned and operated by Alert Steel at its Klerksdorp branch (the Disposal), with effect from 31July2012 (the Effective Date).
The rationale of the Disposal for Alert Holdings is that Alert Steels Klerksdorp branch (the Klerksdorp Branch) is not aligned to Alert Holdings rural strategy and is not producing the returns required by Alert Holdings.
The Disposal is subject to fulfillment of various suspensive conditions (relating to board approvals and regulatory approvals, to the extent required) by no later than 20July2012 and shareholders of Alert Holdings will be updated once such suspensive conditions have been fulfilled. 3.1 Purchase Consideration for Klerksdorp Branch
The purchase consideration in respect of the Disposal is an amount equal to the sum of: - the value of the stock of the Klerksdorp Branch as at the Effective Date (the Stock); - the value of the debtors of the Klerksdorp Branch as at the Effective Date (the Debtors); and - a further amount of approximately R1,2million in respect of all assets and liabilities being sold in terms of the Disposal other than the Stock and the Debtors, it being recorded that, subject to any variations in the amount of the Stock and the Debtors, the purchase consideration will be approximately R8,183,368 (the Purchase Consideration). 3.2 Settlement of the Purchase Consideration
The Purchase Consideration will be settled by BSI to Alert Steel as follows: - on 2 August 2012, an amount of approximately R0.6million;
- on 2 September 2012, a further amount of approximately R0.6million;
- amounts received by BSI from the Debtors will be paid by BSI to Alert Steel on each of 2August2012, 16August2012, 2September2012 and 16September2012 respectively; and - subject to the proviso below, the balance of the Purchase Consideration shall be settled on 30September2012 (the Final Payment Date), provided that, in the event that Alert Steel requests any supplies of steel from BSI prior to the Final Payment Date, BSI shall supply such steel to Alert Steel at an agreed price, and any such supply shall be deemed to be payment of an equivalent amount of the Purchase Consideration.
3.3 Pro Forma Financial Effects of the Disposal of the Klerksdorp Branch
The unaudited pro forma financial effects of the Disposal are provided for illustrative purposes only to indicate the effect of the Disposal on the loss per share, fully diluted loss per share, headline loss per share and fully diluted headline loss per share as if the Disposal took effect on 1July2011, and to show the effect of the Disposal on the net asset value per share and tangible net asset value per share as if the Disposal took effect on 31 December 2011. Because of their nature, the unaudited pro forma financial effects may not fairly present Alert Holdings financial position and performance. The unaudited pro forma financial effects have been compiled from the published reviewed results for the six months ended 31 December 2011 and are presented in a manner consistent with the format and accounting policies adopted by Alert Holdings and have been adjusted as described in the notes below. The directors of Alert Holdings are responsible for the preparation of the pro forma financial effects as set out below.
Column (i)
Column (ii) % change
Before the Acquisition After the Acquisition
Loss per share (cents) 2.0 1.9 5.0% Headline loss per share (cents)
2.0 1.9 5.0% Fully diluted loss per share (cents)
2.0 1.9 5.0% Diluted headline loss per share (cents) 2.0 1.9 5.0% Net asset value per share (cents)
(0.6) (1.1) 74.7% Tangible net asset value per share (cents) (1.0) (1.4) 46.8%
Weighted average number of shares in issue (000) 915 425 915 425 0.0%
Fully diluted weighted average number of shares in issue (000) 923 025 923 025 0.0%
Shares in issue at period end (including 7600000 treasury shares) (000)
1763 580 1763 580 0.0% Notes:
1. The pro forma information as reflected in column(i) has been extracted from Alert Holdings published reviewed consolidated interim results for the six months ended 31December2011.
2. The information reflected in column (ii) is calculated based on the assumptions that:
2.1 For the effect on the loss per share, fully diluted loss per share, headline loss per share and fully diluted headline loss per share it has been assumed that: a. the Disposal was effective on 1 July 2011;
b. the Purchase Consideration of R8,183,368 was received on 1 July 2011; c. Alert Holdings will have interest savings amounting to R464 073;
d. no transaction costs were incurred pertaining to the Disposal; and
e. only the direct effect of removing the branch trading results was considered as the branch was not contributing to Alert Holdings overheads.
2.2 For the effect on the net asset value per share and tangible net asset value per share it has been assumed that: a. the Disposal was effective on 31 December 2011; and
b. the Purchase Consideration of R8,183,368 was received on 31December2011. Pretoria 11July2012 Designated Adviser QuestCo (Pty) Limited Legal Adviser Prinsloo, Tindle & Andropoulos Inc.
Date: 11/07/2012 02:55:00 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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