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Acquisition of Burn Stewart Distillers Limited and withdrawal of cautionary announcement
DISTELL GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1988/005808/06)
ISIN: ZAE000028668
JSE share code: DST
(“Distell” or “the Company”)
CATEGORY 2 ANNOUNCEMENT REGARDING THE ACQUISITION OF BURN
STEWART DISTILLERS LIMITED (“BURN STEWART”) AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the cautionary announcements released on SENS on 15 February 2013
and 9 April 2013, Distell is pleased to announce that it has entered into binding
agreements with CL World Brands Limited (“CLWB”) and Angostura Limited
(“Angostura”) (CLWB and Angostura, together the “Sellers”) to acquire Burn Stewart
for a maximum total purchase consideration of USD244 million (ZAR2,264 million)
(the “Transaction”).
2. The Transaction
2.1. Description of Burn Stewart
Burn Stewart is a fully integrated Scotch whisky producer, which owns three
malt whisky distilleries and a strong portfolio of Scotch whisky brands. Burn
Stewart’s principal activities are the marketing of a proprietary range of
blended and single malt whiskies internationally, the sale of bulk whisky and
the supply of “own label” brands to retailers. Its core blended whisky brands
include Scottish Leader and Black Bottle, with the single malts portfolio
consisting of Bunnahabhain, Tobermory, Deanston and Ledaig. Burn
Stewart owns and operates three malt distilleries: Bunnahabhain (situated
on the Isle of Islay), Tobermory (situated on the Isle of Mull) and Deanston
(Doune, near Stirling), with a total of 6.7 million liters of alcohol annual
distilling capacity. Burn Stewart also operates a sales and marketing branch
in Taiwan and is a Joint Venture partner with Distell in sub-Saharan Africa.
2.2. Rationale
According to the Scotch Whisky Association (SWA), in 2012, Scotch whisky
exports hit a record GBP4.3 billion, an increase of 87% in the last 10 years.
Single Malt exports have risen over the same period by 190% from GBP268
million to GBP778 million. Rising demand for Scotch whisky from both
mature and emerging markets saw the value of exports grow for the eighth
consecutive year. The acquisition of Burn Stewart provides Distell access to
this highly attractive and growing category. Distell believes that the
acquisition of Burn Stewart fills a category gap in its portfolio and will allow
the Company to offer its customers an even broader range of products. Burn
Stewart’s strong presence in the United Kingdom, Taiwan and other
countries provides Distell with enhanced sales platforms and route-to-
market opportunities.
Following the acquisition of Bisquit Cognac in 2009, Burn Stewart is another
important step in establishing Distell as a global industry player.
3. Details of the Transaction
3.1. Terms of the Transaction
Distell will acquire 100% of the share capital of Burn Stewart Distillers
Limited from the Sellers. Distell will continue with existing arrangements
whereby Burn Stewart bottles and distributes for Angostura. Distell will retain
the Burn Stewart Managing Director and senior executive management. CL
Financial Limited (“CLF”), the ultimate parent company of CLWB, has the
right to appoint two Directors to the Board of Burn Stewart for the duration of
the future Contingent Consideration (as explained in Paragraph 3.2).
3.2. The Purchase Consideration
The total purchase consideration for the acquisition of Burn Stewart is a
maximum of USD244 million, consisting of an initial payment of USD229
million (the “Initial Payment”) and a contingent consideration of up to USD15
million (the “Contingent Consideration”). The Initial Payment shall be
payable in cash at the closing date to the Sellers, net of assumed liabilities
(net debt and minority interests) of USD38 million. The Contingent
Consideration shall be payable in cash within 12 months of the closing of the
Transaction, subject to Burn Stewart achieving a specified EBITDA target in
calendar year 2013.
3.3 Effective Date
The Closing of the sale took place on execution of the Sale Agreement
(“Sale Agreement”), which occurred on 12 April 2013.
3.4 Financing of the acquisition
Distell will finance the acquisition out of available resources.
4. Unaudited Pro Forma Financial Effects of the Transaction
The table below sets out the unaudited pro forma financial effects (“Financial
Effects”) of the Transaction based on the Company’s published, unaudited interim
results for the six months ended 31 December 2012 (“the period”). The Financial
Effects have been prepared for illustrative purposes only to assist Distell
shareholders in assessing the impact of the Transaction on the net asset value per
share (“NAV”), net tangible asset value per share (“NTAV”), earnings per share
(“EPS”) and headline earnings per share (“HEPS”) of Distell, had the Transaction
been undertaken at the beginning of the period, for statement of comprehensive
income purposes, or at 31 December 2012, for statement of financial position
purposes. These Financial Effects are the responsibility of the directors of Distell,
have been disclosed in terms of the Listings Requirements of the JSE Limited
(“JSE”) and, because of their pro forma nature, may not fairly present Distell’s
financial position, changes in equity, results of operations or cash flows after the
Transaction.
Pro Forma Financial Effects of the Transaction
Before the After the Percentage
Transaction Transaction change
Cents Cents
Earnings per share 433.1 420.8 -2.8%
Diluted earnings per share 419.5 407.6 -2.8%
Headline earnings per share 433.0 419.3 -3.2%
Diluted headline earnings per share 419.4 406.1 -3.2%
Net asset value per share 3,381.3 3,349.4 -0.9%
Net tangible asset value per share 3,223.0 2,876.1 -10.8%
Issued number of ordinary shares (‘000) 203,298 203,298
Weighted number of ordinary shares (‘000) 202,618 202,618
Weighted number of ordinary shares for diluted earnings(`000) 209,188 209,188
Notes: The "After the transaction" financial information includes the expensing of transaction costs of R35 million.
5. Conditions Precedent to the Transaction
There are no outstanding conditions precedent.
6. Categorisation of the Transaction in terms of the JSE Listings Requirements
The Transaction is classified as a Category 2 transaction in terms of the JSE Listings
Requirements. The JSE does not require the approval of shareholders for a
Category 2 transaction.
7. Withdrawal of Cautionary Announcement
As all the relevant information relating to the Transaction is contained in this
announcement, caution is no longer required to be exercised by shareholders when
dealing in their Distell shares.
Stellenbosch
15 April 2013
Financial Advisors to Distell:
Morgan Stanley & Co. Limited
Winchester Capital
Legal Advisor to Distell:
DLA Piper Scotland
Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited)
Date: 15/04/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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