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DETAILED CAUTIONARY ANNOUNCEMENT – DETAILS OF ACQUISITION, CANCELLATION OF TRANSACTION
AND RENEWAL OF CAUTIONARY
QUEENSGATE HOTELS AND LEISURE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/013649/06)
Share code: QHL ISIN Code: ZAE000113718
("Queensgate" or "the Company")
DETAILED CAUTIONARY ANNOUNCEMENT –
DETAILS OF ACQUISITION, CANCELLATION OF TRANSACTION
AND RENEWAL OF CAUTIONARY
INTRODUCTION
Following the cautionary announcements dated 20 July 2012 and 1 August
2012, the Board of Directors of the Company is pleased to advise
shareholders that it has reached agreement to acquire a substantial
wholesale petroleum business in Mpumulanga Province, and intends
cancelling the EBOV transaction with immediate effect.
CANCELLATION OF THE EBOV TRANSACTION
The vendors of EBOV have failed to provide written undertakings in
relation to the net profit warranty called for by the Company.
Consequently, the Board is concerned that the net profits claimed by the
vendors may not materialise to the extent claimed, or with adequate
certainty, and that the resultant risk in the transaction is not
justifiable. The Board therefore wishes to advise shareholders that it
has cancelled the transaction with immediate effect.
WORKING CAPITAL REQUIREMENTS
The Board is in discussions relating to the raising of working capital,
and further progress in this regard will be reported in due course.
ACQUISITION
The Board is pleased to announce that the Company has entered into a
heads of agreement on 7 August 2012 to acquire the wholesale diesel
division of Nkomazi Fuel & Oil. The agreement constitutes an acquisition
by the Company of 100% of the shares and loan account claims (the “Sale
Assets”) of Interstate Clearing 116 (Proprietary) Limited (“Interstate”)
from the Jaco Van Den Berg Trust for an amount of R65,000,000.00 (Sixty
Five Million Rands). Mr Van Den Berg is the founder of the business. He
will continue to remain in operational control on behalf of the Company.
Nkomazi Fuel & Oil is the dominant player in the region and has a major
presence in Nelspruit and surrounding areas. Their area of service
extends as far as the Kruger Park to the North, Mozambique to the East,
Barberton in the South, and Middelburg to the West, most of which rely
on the benefits of heavy duty transport along the N4 corridor.
Nkomazi Fuel & Oil has three fuel divisions – wholesale, retail and
import. It is currently developing facilities in Mozambique to cater for
the heightened demand for fuel in the region, as well as the numerous
opportunities opening up in that country in the petroleum industry.
The group has acquired several sites in the Mpumulanga region for further
SA development.
The transaction will be settled by way of cash pursuant to a fully-
subscribed placement of vendor shares.
The agreement is subject to a net profit warranty of no less than R8m
Year 1, as well as various conditions precedent, including a
comprehensive due diligence, JSE, regulatory and majority shareholder
approval.
Interstate forecasts a net operating profit of R10.8m in the 2013
financial year, and R11.9m in the 2014 financial year. A final terms
announcement, including pro forma financial effects will be published in
a separate SENS announcement once a comprehensive transaction agreement
has been signed.
FURTHER ACQUISITION ANNOUNCEMENT - RIGHT OF FIRST REFUSAL
Pursuant to the Interstate transaction, the Company has acquired a right
of first refusal to acquire 100% of the shares and loan account claims
of Chenning Hills 10 (Proprietary) Limited (“Chenning Hills”). Chenning
Hills is the retail division of Nkomazi Fuel & Oil.
The parties have agreed that the right of first refusal shall be
converted into an option agreement simultaneously with the comprehensive
sale agreement relating to Interstate.
Nkomazi’s retail division comprises 9 filling station sites in the
region, with further development sites identified. Product is primarily
supplied by Interstate, as well as other price-competitive majors.
RATIONALE
The transactions are in line with the revised strategy of the Company,
and constitute a significant market penetration into an area teeming
with heavy duty road transport, as well as consumer demand.
Nelspruit (now Mbombela) and the Mpumulanga region, in general, have
enjoyed significant economic growth. Mbombela is the capital of the
Mpumalanga Province. The local economy thrives on sugar cane, citrus,
and tropical fruit farming, including mango, banana, avocado and
Macadamia nuts. It is a key manufacturing and agricultural hub for South
Africa. Major industries include canning, paper production, furniture
manufacture and timber mills.
The N4 corridor forms the South African section of the Walvis Bay to
Maputo highway. The entire route is now a world-class standard highway.
The section between Witbank and Mozambique is densely populated with ore
and coal bearing trucks heading from mines and collieries through to the
Port of Maputo.
It is this commercial activity, tourism traffic to the Kruger National
Park and the future development growth of the region that underpins the
acquisitions.
MANAGEMENT
Mr Van Den Berg intends remaining with, and growing the Nkomazi brand
footprint in both South Africa and Mozambique. The comprehensive
transaction agreement will make provision for a profit warranty,
operational management agreement and restraint of trade. Notwithstanding
this, it is the intention of the Company to invest in the activities
conducted by Nkomazi where those sites and opportunities are
commercially viable to the Company. The transactions announced form the
beginning of what the Board anticipates is a long and mutually
beneficial relationship.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are cautioned that the implementation of any proposed
acquisition, which will result in the issue of more than 100% of the
current issued share capital of the Company, will accordingly result in
a reverse takeover of Queensgate for the purposes of the Listings
Requirements, which stipulate that the Company can only retain its
listing following the reverse take-over if the JSE is satisfied that the
Company continues to qualify to be listed.
The assets must be suitable for a new listing and approved by the JSE
Limited (‘JSE’). A working capital statement will be made as part of
the JSE Listings Requirements.
Shareholders are advised to continue to exercise caution when dealing in
their securities until a further announcement has been made.
By order of the board
08 August 2012
Designated Advisor
Arcay Moela Sponsors
Date: 08/08/2012 01:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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