Wrap Text
Proposed acquisition of Kian Ann Engineering Limited and withdrawal of cautionary announcement
INVICTA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1966/002182/06
Share code: IVT
ISIN: ZAE000029773
(“Invicta”)
ANNOUNCEMENT REGARDING THE PROPOSED ACQUISITION OF KIAN ANN
ENGINEERING LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement issued on Stock
Exchange News Service on 2 August 2012 and renewed on 14
September 2012, Invicta's shareholders are advised that an
indirect wholly-owned subsidiary of Invicta, Invicta Asian
Holdings Pte Ltd (“the Acquiror” or “the Offeror”) and Kian
Ann Engineering Limited (“Kian Ann”) have entered into an
implementation agreement dated 15 October 2012 (“the
Agreement”) under which the Acquiror will acquire all the
issued and paid-up ordinary shares in the capital of Kian Ann
(“Shares”) through a scheme of arrangement (“the Scheme”),
pursuant to Section 210 of the Companies Act (Chapter 50 of
Singapore) (“the Act”) and the Singapore Code on Take-overs
and Mergers (“the Code”) (“the Acquisition”). The Scheme is
subject to the fulfilment of the conditions precedent as set
out in paragraph 4.4 below.
2. BACKGROUND INFORMATION ON KIAN ANN
Kian Ann was incorporated in Singapore on 6 October 1971.
Kian Ann was listed on the Official List of the Main Board of
the Singapore Exchange Securities Trading Limited (“SGX-ST”)
on 12 November 1996.
Kian Ann is a distributor of heavy equipment parts and diesel
engine spares. Its products are used for bulldozers, wheel
loaders, trucks, motor graders, excavators, power generation
sets and marine engines. It has the capacity to distribute
more than 1.3 million line items covering over 270 brands
from 220 suppliers, to a global customer base of dealers and
end-users in infrastructure development, construction,
forestry, agriculture and mining to marine industries.
3. RATIONALE
Invicta is pursuing a selective international expansion
strategy focused on investing in opportunities in stable
countries with the most attractive growth fundamentals.
Invicta believes that Kian Ann will be an excellent strategic
fit and that the Acquisition will create a source hub in Asia
and enable the combined group to leverage on operations in
Africa to create a more sizeable spare parts group. With
Singapore, Malaysia and Indonesia offering a unique
combination of industry growth potential and stable macro
economic backdrop, Invicta believes it will be able to use
Kian Ann as a platform for further expansion in the region.
4. TERMS OF THE ACQUISITION
4.1 The Scheme
The Scheme will involve, amongst other things, the
following:
(a) the transfer of all the Shares held by the
shareholders of Kian Ann (“Shareholders”) to the
Acquiror; and
(b) in consideration of such transfer:
(i) the Shareholders will receive from the Acquiror
a cash consideration of S$0.44 (ZAR3.11)(1) per
Share (the “Offer Price”); and
(ii) LPK (as defined in paragraph 4.2(a)) and LCC (as
defined in paragraph 4.2 (b)) will swap their
respective interests in Kian Ann for a
shareholding interest in the Acquiror as set out
in paragraph 4.2 below.
Pursuant to the Scheme, the Shares are to be transferred
by the Shareholders to the Acquiror (A) fully paid; (B)
free from any mortgage, assignment of receivables,
debenture, lien, hypothecation, charge, pledge, title
retention, right to acquire, security interest, option,
pre-emptive or other similar right, right of first
refusal, restriction, third-party right or interest, any
other encumbrance, condition or security interest
whatsoever or any other type of preferential arrangement
(including without limitation, a title transfer or
retention arrangement) having similar effect
(“Encumbrance”); and (C) together with all rights,
benefits and entitlements as of the date of the
announcement by the Acquiror and Kian Ann on the
Acquisition (“the Joint Announcement”) and thereafter
attaching thereto, including the right to receive and
retain all dividends, rights and other distributions (if
any) declared by Kian Ann on or after the date of the
Joint Announcement but not including the dividend of
S$0.82 cents (ZAR5.79)(1) per Share announced by Kian Ann
in its full year financial statement released on the SGX-
NET on 24 August 2012, which is expected to be paid on or
about 14 November 2012.
At present, Kian Ann has no intention of declaring any
other dividends. However, in the event that any dividend,
other distribution or return of capital is declared by
Kian Ann on or after the date of the Joint Announcement,
the Acquiror reserves the right to reduce the Offer Price
by the amount of such dividend, distribution or return of
capital.
4.2 Management equity arrangements
It is the intention of the Acquiror that the following
personnel, who are part of the key management team of Kian
Ann and its subsidiaries (“the Group”), will continue to
be involved in the business of the Group:
(a) Mr Law Peng Kwee (“LPK”) (Co-Founder and Managing
Director);
(b) Mr Kevin Law Cher Chuan (“LCC”) (Group General Manager
and Executive Director); and
(c) Mr Loy Soo Chew (“LSC”) (General Manager and Executive
Director),
(collectively, “the Key Personnel”).
Each of the Key Personnel has entered into a subscription
agreement (“the Subscription Agreement”) with the Acquiror
pursuant to which such Key Personnel will subscribe for
ordinary shares in the capital of the Acquiror (“the
Acquiror Shares”) (“the Subscription”). The Subscription
is conditional upon the Scheme becoming effective and
binding in accordance with its terms, and the subscription
price for each Acquiror Share shall be the same price as
that paid by the Acquiror for each Acquiror Share.
Upon the Scheme becoming effective in accordance with its
terms and following the completion of the Subscription, it
is envisaged that the resultant shareholding in the
Acquiror would be as follows:
Shareholding percentage Number of
Shareholder in Acquiror Acquiror shares
Invicta Offshore Holdings 75.39 7 500
LPK 20.10 2 000
LCC 2.51 250
LSC 2.00 199
Total 100.00 9 949
4.3 Purchase consideration
As mentioned in paragraph 4.1(b) above, pursuant to the
Scheme, in consideration of the transfer of all the Shares
held by Shareholders to the Acquiror:
(a) the Shareholders will receive from the Acquiror the
Offer Price of S$0.44 per Share (approximately
ZAR3.11)(1) other than in respect of LPK and LCC as
contemplated in 4.3(b) below; and
(b) LPK and LCC will swap their respective interests in
Kian Ann for a shareholding interest in the Acquiror
as set out in paragraph 4.2 above.
The aggregate consideration payable by the Acquiror for
the Acquisition is S$192.64 million (approximately
ZAR1.360 billion)(1).
4.4 Conditions precedent
The Acquisition conditions upon the following:
(a) Scheme Meeting: the approval of the Scheme by the
Shareholders in compliance with the requirements of
Section 210(3) of the Act;
(b) Court Order: the grant of the order of the Court
sanctioning the Scheme under Section 210 of the Act
(“the Court Order”) and the Court Order having become
final;
(c) No Injunctions: no injunction or other order being
issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the
consummation of the Scheme or the Acquisition or any
part thereof;
(d) ACRA Registration: the registration of the Court Order
with the Accounting and Corporate Regulatory Authority
of Singapore (“ACRA”);
(e) Regulatory Approvals: all regulatory approvals having
been obtained prior to the Record Date, and not
withdrawn or revoked on or before the Record Date (the
date falling on the business day immediately preceding
the Effective Date (as defined below)), including
without limitation, the following:
(i) confirmation from the Securities Industry
Council (“SIC”) that Rules 14, 15, 16, 17, 20.1,
21, 22, 28, 29 and 33.2 and Note 1(b) to Rule 19
of the Code shall not apply to the proposed
Scheme subject to any conditions the SIC may
deem fit to impose;
(ii) the approval-in-principle from the SGX-ST of the
Scheme document and the proposed delisting of
Kian Ann from the Main Board of the SGX-ST;
(iii) confirmation from SIC that the arrangement
whereby the Key Personnel will swap all or part
of their respective shareholding interests in
Kian Ann for an equivalent stake in the Acquiror
would not be regarded as a prohibited special
deal for the purpose of Rule 10 of the Code and
would not prevent such Key Personnel from voting
their Shares at the Scheme meeting; and
(iv) any requisite approvals to the extent required
under the applicable law of the Republic of
South Africa having regard to the transaction
contemplated in terms of the Agreement,
including the JSE Limited and the South African
Reserve Bank;
(f) Authorisations: prior to the Record Date, in addition
to the approvals mentioned in paragraph (e) above:
(i) in relation to the Acquiror all other
authorisations, consents, waivers, clearances,
permissions and approvals as are necessary or
required by the Acquiror under any and all
applicable laws, from any other relevant
governmental agencies, and under any instrument,
contract, document or agreement to which the
Acquiror is a party, for or in respect of the
implementation of the Scheme and the
Acquisition; and
(ii) in relation to Kian Ann, all other
authorisations, consents, waivers, clearances,
permissions and approvals as are necessary or
required by Kian Ann under any and all
applicable laws, from any other relevant
governmental agencies, and under any instrument,
contract, document or agreement to which Kian
Ann is a party, for or in respect of the
implementation of the Scheme and the
Acquisition;
having been obtained, and not withdrawn or revoked on
or before the Record Date;
(g) No Prescribed Occurrence: between the date of the
Agreement and the Record Date, no Prescribed
Occurrence (as defined in the Agreement) in relation
to the Group or the Acquiror, as the case may be,
occurring other than as required or contemplated by
the Agreement or pursuant to the Acquisition;
(h) Kian Ann's Representations, Warranties and Covenants:
(i) the representation and warranties of Kian Ann
set out in the Agreement being true and correct
in all respects as of the date of the Agreement
and as of the Record Date as though made on and
as of that date and for this purpose only; and
(ii) Kian Ann having, as of the Record Date,
performed and complied in all respects with all
covenants and agreements contained in the
Agreement which are required to be performed by
or complied with by it, on or prior to the
Record Date;
(i) The Acquiror's Representations, Warranties and
Covenants:
(i) the representations and warranties of the
Acquiror set out in the Agreement being true and
correct in all respects as of the date of the
Agreement and as of the Record Date as though
made on and as of that date; and
(ii) the Acquiror having, as of the Record Date,
performed and complied in all respects with all
covenants and agreements contained in the
Agreement which are required to be performed by
or complied with by it, on or prior to the
Record Date;
(j) lrrevocable Undertakings: contemporaneous with the
execution of the Agreement: certain shareholders (as
set out in the Agreement) delivering to the Acquiror
their respective irrevocable undertaking, to vote all
their Shares in favour of the Scheme at the Scheme
meeting;
(k) Material Adverse Event: there being no event occurring
from the date of the Joint Announcement which has the
effect of causing a diminution in the Group's
consolidated equity attributable to the owners of the
parent after deducting the value of the intangible
assets and goodwill (the terms “equity attributable to
the owners of the parent”, “intangible assets” and
“goodwill” for such purpose shall have the same
meaning as the respective terms in the financial
statements of Kian Ann as at 31 March 2012 and 30 June
2012) to an amount below S$149 686 070.79 (as
reflected in the financial statements of Kian Ann as
at 31 March 2012) at any time until the Record Date,
provided that:
(i) any diminution in value of any item of the
assets or increase in value of any item of the
liabilities of the Group arising from currency
translation shall not be taken into account;
(ii) any increase or decrease in value of any item of
the assets due to a revaluation of the assets of
the Group subsequent to 31 March 2012 shall not
be taken into account;
(iii) any diminution in value of the Group's
consolidated equity attributable to the owners
of the parent due to the following shall not be
taken into account:
(A) the payment of dividends to Shareholders, so
long as the total dividend paid between 31
March 2012 and the Record Date does not
exceed S$5 036 000;
(B) the amount of S$59 164.61 (being the
aggregate amount paid by Kian Ann (including
charges) pursuant to the buy-back of an
aggregate of 270 000 Shares undertaken by
Kian Ann in May 2012 and June 2012); and
(C) the amount of computer software costs, so
long as the total amount does not exceed
S$193 947.00; and
(iv) the computation of the Group's consolidated
equity attributable to the owners of the parent
shall be on a basis consistent with the
Singapore Financial Reporting Standards (“SFRS”)
principles and the historical accounting
policies adopted by Kian Ann; and
(l) Major Customers and Major Suppliers: between the date
of the Joint Announcement and the Record Date, there
being no loss of any Major Customer or Major Supplier
Group (other than by reason of a company of the Group
having terminated such relationship(s) in writing) nor
any written notice given by any Major Customer or
Major Supplier Group indicating that it/they wish(es)
to cease being a customer of, or supplier(s) to, the
Group.
For these purposes:
(i) a “Major Customer” means a major customer that
had contributed five percent (5%) or more to the
gross revenue of the Group as disclosed and
reflected in the audited consolidated financial
statements of the Group for the financial year
ended 30 June 2012; and
(ii) A “Major Supplier Group” means such number of
suppliers which collectively accounted for
fifteen percent (15%) or more of the Group's
total purchases for the financial year ended 30
June 2012, provided that the loss of a supplier
shall be disregarded for the purposes of this
condition precedent if Kian Ann is able to
satisfy the Acquiror that the loss of such
supplier will not have an adverse impact
(including with limitation, from the perspective
of prospective revenue, profitability and
working capital investment) on the business of
the Group.
Upon the satisfaction and/or waiver of the conditions
precedent set out above, the Scheme shall become effective in
accordance with its terms on the date of registration of the
Court Order with the ACRA (“the Effective Date”). Under the
terms of the Agreement, the Effective Date shall be no later
than 180 days from the date of the Agreement (or such other
date as the Acquiror and Kian Ann may agree).
(1) Based on the mid-market exchange rate of S$1.00:ZAR7.06
as at 12 October 2012.
5. PRO FORMA FINANCIAL EFFECTS
The table below summarises the pro forma financial effects of
the Acquisition. The pro forma financial effects are the
responsibility of the board of directors of Invicta (the
“Board”) and have been prepared for illustrative purposes
only, to provide the possible financial effects of the
Acquisition as if the Acquisition had taken place from 01
April 2011 for the year ended 31 March 2012 for statement of
comprehensive income purposes and as at 31 March 2012 for
statement of financial position purposes.
The pro forma financial effects, because of their nature, may
not give a true reflection of the financial position, the
cash flow position, the results of operations or the changes
in equity of Invicta. The accounting policies of Invicta as
at 31 March 2012 have been used in the preparation of the pro
forma financial effects. The pro forma financial effects are
prepared in terms of the Listings Requirements of the JSE and
guidelines issued by the South African Institute of Chartered
Accountants.
Unaudited pro forma financial information
Before After % Change
Earnings per ordinary
share (cents) 698 704 0.86
Headline earnings per
ordinary share (cents) 687 694 1.02
Net asset value per
share (cents) 2 789 3 206 14.95
Tangible net asset value
per share (cents) 2 212 2 365 6.92
Weighted average shares
in issue ('000) 70 405 70 405 –
Shares in issue at
period-end ('000) 74 113 74 113 –
Notes and assumptions:
(a) A mid-market exchange rate of 7.06 has been used for
ZAR:SGD exchange rate as at 12 October 2012.
(b) Kian Ann's financial statements are prepared in
accordance with the SFRS. No changes were required to
align IFRS and SFRS.
(c) The earnings and headline earnings per Invicta share, as
set out in the “Before” column of the table, are based on
the published audited financial results of Invicta for
year ended 31 March 2012.
(d) The earnings and headline earnings per Invicta share, as
set out in the “After” column of the table, are based upon
the published audited financial results of Invicta for the
year ended 31 March 2012; the published audited financial
results of Kian Ann as at 30 June 2012 and the assumptions
that:
(i) ZAR221.90 million (S$31.43 million) of the
Acquisition cost will be funded by the Key
Personnel; ZAR458.90 million (S$65 million) will be
funded from two Singapore banks (“Singapore
Funding”) and the remaining amount will be funded
through the issue of preference shares to the value
of ZAR679.24 million (S$96.21 million) (“Preference
Share Funding”).
(ii) Financing transaction costs, which are amortised
over the term of the funding of five years, are
estimated to be:
(A) ZAR4.59 million (S$0.65 million) for the
Singapore Funding; and
(B) ZAR18.71 million (S$2.65 million) for the
Preference Share Funding.
(iii) Total estimated transaction costs of ZAR33.18
million (S$4.70 million), which are once off in
nature; and
(iv) Finance costs are calculated as follows: Singapore
Funding of ZAR458.90 million (S$65 million) at a
rate of 3.36% (SIBOR + 3%); Preference Share Funding
of ZAR679.24 million (S$96.21 million) at a rate of
82% of the prime interest rate in South Africa; and
ZAR56.48 million (S$8 million), utilised for
transaction costs, at a rate of 7.6% (3 month JIBAR
+ 2.6%).
(e) The net asset value per share and the tangible net asset
value per share as set out in the “Before” column of the
table, are based upon the published audited statement of
financial position of Invicta at 31 March 2012.
(f) The net asset value per share and the tangible net asset
value per share as set out in the “After” column of the
table, are based upon the published audited statement of
financial position of Invicta at 31 March 2012; the
published audited statement of financial position of Kian
Ann as at 30 June 2012 and the assumptions that:
(i) Invicta's effective investment of 75.39% in Kian Ann
(after the investment of 24.61% by the Key
Personnel) comprises of the Preference Share Funding
of ZAR679.24 million (S$96.21 million) and Singapore
Funding of ZAR458.90 million (S$65 million);
(ii) Financing transaction costs, which are amortised
over the term of the funding of five years, are
estimated to be:
(A) ZAR4.59 million (S$0.65 million) for the
Singapore Funding; and
(B) ZAR18.71 million (S$2.65 million) for the
Preference Share Funding.
(iii) Total estimated transaction costs of ZAR33.18
million (S$4.70 million), which are once off in
nature; and
(iv) Goodwill amounts to ZAR174.17 million (S$24.67
million), following the recognition of additional
Property, Plant and Equipment of ZAR185.96 million
(S$26.34 million) arising from a provisional
purchase price allocation exercise using a purchase
consideration of ZAR138.80 million (S$19.66 million)
and the preliminary fair value of the assets and
liabilities of Kian Ann.
6. CATEGORISATION
In terms of the Listings Requirements of the JSE, the
Acquisition is categorised as a Category 2 transaction and
therefore does not require shareholder approval.
7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
As the full terms of the Acquisition have been provided in
this announcement, shareholders are no longer required to
exercise caution when dealing in their Invicta securities.
8. RESPONSIBILITY STATEMENT
The Board accepts responsibility for the information
contained in this announcement. To the best of their
knowledge and belief, the information contained in this
announcement is true and nothing has been omitted which is
likely to affect the import of the information.
A copy of the Joint Announcement has been made available on SENS
for the reference of Invicta's shareholders.
Cape Town
15 October 2012
SPONSOR:
Deloitte & Touche Sponsor Services (Pty) Ltd
(Incorporated in the Republic of South Africa)
(Registration number 1996/000034/07)
SOUTH AFRICA AND SINGAPORE FINANCIAL ADVISER:
Standard Chartered Bank
INVESTMENT BANK AND PRIMARY FUNDER:
The Standard Bank of South Africa Limited
SINGAPORE LEGAL ADVISORS:
WongPartnership LLP
SOUTH AFRICAN TAX ADVISORS:
Edward Nathan Sonnenbergs
SOUTH AFRICAN LEGAL ADVISORS:
Bernadt, Vukic, Potash & Getz Attorneys
Date: 15/10/2012 08:00:00 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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