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Acquisition of Interest in Angola Environmental Servicos Limitada
CONSOLIDATED INFRASTRUCTURE GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2007/004935/06)
Share code: CIL ISIN: ZAE000148201
(“Consolidated Infrastructure” or “CIG” or “the group)
ACQUISITION OF INTEREST IN ANGOLA ENVIRONMENTAL SERVIÇOS LIMITADA
1. Introduction
CIG is pleased to announce the acquisition of a 30.5% interest in Angola Environmental Serviços
Limitada (“AES”), an Angolan based company providing waste management services to the oil and gas
sector. Over the past year, the group has worked on defining a Pan-African growth strategy involving
acquisitions leveraging the expertise gained from the successful acquisition and management of its
power subsidiary, Consolidated Power Projects (Pty) Ltd in 2008. Group management believes AES is
an exceptional first step as part of its growth strategy, offering high growth potential in the oil and gas
sector in Angola and on the African continent. Through its operations, AES introduces CIG to another
thriving business that can harvest the opportunities that the African continent presents. The group is
confident that the acquisition will be earnings enhancing over time as AES continues to thrive in a
buoyant market. Although it is anticipated that the required Angolan regulatory approvals may take in
excess of a year to be fulfilled, CIG will be actively involved in the management of the business from
signature date.
2. Acquisition
Shareholders are informed that on 25 November 2012 an agreement (the “Acquisition Agreement”)
was entered into between, inter alia, Consolidated Infrastructure’s wholly owned Mauritian subsidiary
company, Consolidated Infrastructure Group-Angola 1 (“CIGA”) and N'zogi Yetu-Gestao de
Empreedimentos Limitada (the “Seller”), in terms of which, inter alia, the Seller irrevocably agrees to
sell to CIGA, subject to the fulfilment of the conditions precedent mentioned in 6 below, a
participation interest in AES representing 30.5% of the issued quota capital of AES (“CIG’s AES
Acquisition”).
In addition to, and as a single indivisible transaction with CIG’s AES Acquisition, each of Fundo De
Investimento Privado Angola S.C.A. SICAV-SIF (“FIPA”) and Morten Eriksen (“Eriksen”) have
irrevocably agreed to purchase -
2.1. in respect of FIPA or any of its affiliates, a participation interest in AES, representing 16% of
the issued quota capital of AES; and
2.2. in respect of Eriksen (or at the written election of Eriksen, CIGA and/or FIPA or any of their
appointees), a participation interest in AES, representing 1.5% of the issued quota capital of
AES,
(collectively the “Acquisition”).
3. Business of AES
AES was incorporated in Angola on 9 January 2005 and offers complete waste management services
through its facilities to the oil and gas sector in Angola.
4. Rationale for CIG’s AES Acquisition
4.1. AES, a business that generated turnover of $42.6 million in the year ended 31 December 2011,
is extremely well placed to benefit from the expansion in oil and gas activities in Angola. It is
anticipated that the number of oil rigs operating off-shore in Angola will increase significantly
over the next few years. Furthermore changes to environmental legislation enacted in July
2012 will significantly enhance AES’s business going forward.
4.2. Angola, a country previously identified as a strategic priority by CIG within which to expand
its operations, is one of the fastest growing economies in Africa with significant infrastructure
development taking place. In addition, substantial growth is expected in the oil and gas sector
currently the bedrock of the Angolan economy. Angola offers CIG with another base from
which to operate and identify additional opportunities for the group.
4.3. The investment in AES is an infrastructure vertical growth investment for CIG. The group can
now leverage this as another platform for growth on the African continent (via specialised
waste management services).
4.4. AES will increase CIG’s exposure to the growing oil and gas sector, an area to which CIG has
to date had limited exposure.
4.5. AES has a highly competent and committed management team with outstanding technical
expertise which is in line with the management profiles found in CIG’s current businesses.
4.6. AES offers a highly scalable platform within the waste management vertical.
4.7. AES has a blue chip client base, and resultant order book, consisting of international oil
companies operating in Angola.
4.8. AES has longer term contracts which provide the cash generating, annuity-type income,
previously lacking within CIG.
4.9. Potential commercial (customer-centric) synergies exist, as opportunities materialise, to
provide electrical and waste management services for on-shore oil assets.
4.10. AES is well aligned with the CIG growth strategy focused on operating multiple high-
performing infrastructure and service related businesses on the African continent.
4.11. Similar to CIG’s previous acquisitions, CIG has identified solid, like minded partners with
which to build long term business relationships.
5. Terms of the Acquisition
5.1. The aggregate purchase price payable to the Seller by CIGA, FIPA and Eriksen (collectively
the “Buyers”) for the aggregate sale quota is US$24 million, which shall be paid by the Buyers
on a pro rata basis in accordance with the sale quota ratio purchased by each of the Buyers,
provided that where the Buyers are legally required to pay the purchase price in Angolan
currency, the purchase price shall be the Kwanza equivalent of US$24 million.
5.2. Accordingly, the purchase price payable by CIG to the Seller for its 30.5% interest in AES is
US$15.25 million payable in cash. It is anticipated that the purchase price will be funded as to
30% from available cash resources and the remaining 70% through a placement by CIG of
additional equity in CIG. Due to the uncertainty in timing as to when all the conditions
precedent will be fulfilled, the timing of the placement of the additional equity still has to be
determined.
5.3. The Effective Date of the Acquisition is the first business day immediately following the date
upon which the conditions precedent detailed in 6 below, are fulfilled or waived, as the case
may be.
5.4. From the date of signature of the Acquisition Agreement, the Buyers have the right to actively
participate in the management of AES.
5.5. The purchase price shall be paid by the Buyers to the Seller by electronic funds transfer, on a
date agreed between the parties, but which shall not be later than 45 days following the
Effective Date (referred to in 5.3 above), by when the Parties shall have executed a notary deed
of division and transfer of the Aggregate Sale Quota before a notary public with offices in
Luanda, Angola.
5.6. As concerns the obligations and liabilities of each of the Buyers, in terms of the Acquisition
Agreement, each Buyer has agreed in its capacity as purchaser of the aggregate sale quota that
it shall be jointly liable to the Seller and AES.
6. Conditions Precedent
The Acquisition is, inter alia, subject to the fulfilment of several conditions precedent within a period
of 24 months (unless a shorter period is indicated below) following the signature date of the
Acquisition Agreement (or such later date as is mutually agreed in writing between the parties) -
6.1. the delivery by the Buyers, of a bank guarantee in favour of the Seller covering payment of the
purchase price by a date which is not later than the date stipulated under 5.5 above;
6.2. a notarial deed of transfer in respect of the surface rights over the property located in Cacuaco
on which AES conducts its business, being duly executed in favour of AES;
6.3. each of the key employees of AES entering into an employment agreement with AES on terms
which are mutually acceptable to the Seller and the Buyers;
6.4. the approval in writing by the Buyers and the Seller of the investment and funding plan which
identifies capital uses in respect of the business for the three year period following the date
referred to in 5.5 above and which imposes obligations on the current shareholders and the
Buyers for additional cash contributions required to be made to AES;
6.5. the Buyers confirming in writing that no Material Adverse Change has occurred or is
continuing;
6.6. all regulatory approvals being obtained for the proposed transaction to the extent that they are
legally necessary, including the approval of the proposed transaction pursuant to the Angola
Private Investment Law, Law 20/11 of 15 December 2011, as amended or replaced from time
to time (“Investment Law”) without any conditions attaching to such approval, alternatively
subject to such conditions which the Buyers in their sole and absolute discretion agree to in
writing;
6.7. the Seller presenting to the Buyers written confirmation in compliance with Angolan law that:
6.7.1. the Seller is the holder of the Seller current quota;
6.7.2. the notary deed executed on 16 May 2012 whereby the Seller acquired its
participation interest in AES is duly published in the Government Gazette;
6.7.3. AES holds the mandatory registration with the Ministry of Environment pursuant
to the Ministry of Environment Order Number 119/2012;
6.8. AES holds in good legal standing the necessary commercial operations permit;
6.9. each of the past shareholders of AES delivering to the Buyers a duly executed restraint of trade
letter;
6.10. the signature within 30 days of the signature date of the Acquisition Agreement of a
consortium agreement between the Buyers, which regulates, inter alia, FIPA’s funding and
exit from AES;
6.11. the Financial Surveillance Department of the South African Reserve Bank approving the
provisions of the Acquisition Agreement;
6.12. a resolution of the general assembly of the current shareholders of AES approving of the
transfer of the aggregate sale quota to the Buyers pursuant to the terms of the Acquisition
Agreement;
6.13. the unconditional and irrevocable waiver in writing by Elvira Graca and any third party of any
and all pre-emptive rights or rights of first refusal to acquire the aggregate sale quota;
6.14. the delivery to the Buyers within 30 days of the signature date of the Acquisition Agreement of
written confirmation by AES specifying the amount of AES’ indebtedness to the Seller as at
the date of signature of the Acquisition Agreement.
7. Financial Effects
The pro forma financial information set out below has been prepared for illustrative purposes only, to
provide information on how CIG’s AES Acquisition may have impacted on the historical results and
financial position of CIG.
The earnings and headline earnings per share figures illustrate the possible financial effects if CIG’s
AES Acquisition had taken place on 1 September 2011. The financial effects on the net asset and net
tangible asset per share figures are not significant (less than 3%) and therefore are not disclosed.
Because of its pro forma nature, the pro forma financial information may not give a fair reflection of
CIG’s financial position after CIG’s AES Acquisition, or the effect of CIG’s AES Acquisition on
CIG’s future earnings.
The calculation of the pro forma financial information is the responsibility of the directors of CIG.
Before the After the Percentage
Acquisition Acquisition change
Earnings per CIG share (cents) 116.5 122.6 5.3%
Diluted earnings per CIG share (cents) 116.2 122.3 5.3%
Headline earnings per CIG share (cents) 116.1 122.2 5.3%
Diluted headline earnings per CIG share (cents) 115.9 122.0 5.3%
Notes and assumptions:
1. The amounts set out in the “Before the Acquisition” column have been extracted from the
reviewed financial results of CIG for the financial year ended 31 August 2012.
2. The financial information relating to CIG’s AES acquisition has been extracted from the audited
financial statements of AES for the financial year ended 31 December 2011, a year in which AES
achieved net profit after tax of $6.5 million.
3. CIG’s AES Acquisition is assumed to have been implemented on 1 September 2011 for purposes
of statement of comprehensive income and 31 August 2012 for purposes of statement of financial
position.
4. The unaudited pro forma financial effects have been prepared in accordance with the accounting
policies of CIG that were used in the preparation of the reviewed results for the financial year
ended 31 August 2012.
5. Transaction costs are assumed to be approximately R4 423 950.
6. The purchase price payable in cash in respect of CIG’s AES Acquisition will be funded as to
30% from available cash resources and the balance of 70% through a placement of additional
equity in CIG at the relevant time. Due to the uncertainty in timing as to when the placement of
additional equity will take place, it has been assumed for the purposes of these financial effects
that 7493 441 CIG shares were issued at a 10% discount to the closing price as at 28 November
2012.
7. An exchange rate of R8.8384 per USD has been assumed based on the exchange rates as
published by the South African Reserve Bank as at 27 November 2012.
8. With the exception of transaction costs, all adjustments have a continuing effect.
9. The pro forma financial effects have been prepared under the assumption that CIGA will not
acquire Eriksen’s 1.5% of the issued quota capital of AES.
8. Categorisation of CIG’s AES Acquisition
CIG’s AES Acquisition is classified as a Category 2 transaction in terms of the JSE Listings
Requirements and, accordingly, no further documentation or approval by shareholders is required for
the implementation of the acquisition.
3 December 2012
Sponsor
Java Capital
Attorneys
Edward Nathan Sonnenbergs
Date: 03/12/2012 11:57:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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