Wrap Text
Firm Intention to make an Offer to Altech Minority Shareholders
ALLIED ELECTRONICS CORPORATION LIMITED
Incorporated in the Republic of South Africa
Registration number 1947/024583/06
Share code: ATN
ISIN: ZAE000029658
Share code: ATNP
ISIN: ZAE000029666
(“Altron”)
ANNOUNCEMENT OF A FIRM INTENTION (“FIRM INTENTION ANNOUNCEMENT”) BY
ALTRON TO MAKE AN OFFER TO ACQUIRE THE ENTIRE ISSUED ORDINARY SHARE
CAPITAL OF ALTECH THAT IT DOES NOT ALREADY OWN ("PROPOSED
TRANSACTION") AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders of Altron are referred to the cautionary announcement released on the Securities
Exchange News Service ("SENS") of the JSE Limited ("the JSE") on 22 March 2013 and
subsequent renewal of the cautionary announcement on 7 May 2013. The board of directors of
Altron is pleased to announce that Altron has made an offer, through its wholly-owned
subsidiary Altron Finance Proprietary Limited (“Alfin”), to acquire the entire issued ordinary
share capital of Altech that Altron and its subsidiaries (the “Altron Group”) do not already own
(“Altech Share(s)”), by way of a scheme of arrangement (“Scheme”) in terms of section 114 of
the Companies Act 71 of 2008 (the "Companies Act"), to be proposed by the board of
directors of Altech (“Altech Board") between Altech and the holders of Altech Shares (“Altech
Shareholder(s)”).
2. PURCHASE CONSIDERATION
The consideration payable by Altron to Altech Shareholders in terms of the Scheme (the
“Scheme Consideration”) will be settled as to:
2.1. R47.50 in cash for every Altech Share reflected on the Scheme consideration record date
(“Cash Consideration”); alternatively
2.2. Altech Shareholders may elect to receive all, or part of the Scheme Consideration in the
form of Altron participating preference shares (“Altron Share(s)”) in the ratio of 2.22
Altron Shares per Altech Share (“Switch Ratio”) held by them (“Share Consideration”);
provided further that the aggregate Share Consideration will be limited to a maximum of 50% of
the aggregate Scheme Consideration (“Share Consideration Limitation”).
In the event that Altech Shareholders in aggregate elect to receive the Share Consideration in
excess of the Share Consideration Limitation, such excess will be paid in the form of the Cash
Consideration and the calculation of the Share Consideration component of the Scheme
Consideration will be based on the formula set out below:
A = B/C x D
Where:
The Share Consideration received by an Altech Shareholder, in the event that Altech
A= Shareholders in aggregate elect to receive the Share Consideration in excess of the
Share Consideration Limitation
B= The number of Altron Shares that comprise the Share Consideration Limitation
C= The aggregate Share Consideration elected by Altech Shareholders
D= The Share Consideration elected by an Altech Shareholder
Altech Shareholders who do not make a valid election in terms of the Scheme will be deemed
to have elected to receive the Cash Consideration in respect of 100% of their Altech Shares.
No fractions will be issued and any fraction of Altron Shares to which any Altech Shareholder is
entitled after the conversion of all of the Altech Shares held by such Altech Shareholder will, if it
comprises 0.5 or more of an Altron Share be rounded up, otherwise will be rounded down to
the nearest whole Altron Share.
The Cash Consideration and Share Consideration represent a premium of:
• 31.1% to the volume weighted average price ("VWAP") of Altech Shares traded on the
securities exchange operated by the JSE over the 30 business days up to the date on which
the first cautionary announcement was released on SENS, being 22 March 2013 (the
“Cautionary Date”)
3. RATIONALE FOR THE SCHEME
The Proposed Transaction will inter alia:
? create a single listed point of entry into the Altron Group;
? simplify the corporate and operating structure of the Altron Group; and
? enable the maximisation of synergies within the Altron Group.
4. CONDITION PRECEDENT TO THE POSTING OF THE SCHEME CIRCULAR TO ALTECH
SHAREHOLDERS
The posting of the circular to Altech Shareholders in relation to the Scheme (“Scheme
Circular”) is subject to the fulfilment of the following condition precedent, namely the requisite
approvals being received from the JSE, the Takeover Regulation Panel ("TRP") and the South
African Reserve Bank (“SARB”) for the posting of the Scheme Circular. This condition is of a
regulatory nature and cannot be waived.
5. CONDITIONS PRECEDENT TO THE SCHEME
5.1. The Scheme will be subject to the fulfilment or waiver (in whole or in part) by Altron, of
the following conditions precedent by 16 August 2013 or such later date as Altron and
Altech may agree to in writing:
5.1.1. to the extent required, the requisite majority of the shareholders of Altron ("Altron
Shareholder(s)") approving the relevant resolutions required to implement the
Proposed Transaction or incidental thereto, in terms of the Companies Act and the
Listings Requirements of the JSE ("JSE Listings Requirements");
5.1.2. the listing of the Altron Shares for the purpose of settling the Share Consideration
being approved by the JSE;
5.1.3. the approval of the Scheme by the requisite majority of Altech Shareholders, as
contemplated in section 115(2) of the Companies Act, and:
5.1.3.1. to the extent required, the approval of the implementation of such
resolution by the court as contemplated in section 115(3)(a) of the
Companies Act; and
5.1.3.2. if applicable, Altech not treating the aforesaid resolution as a nullity, as
contemplated in section 115(5)(b) of the Companies Act;
5.1.4. Altech Shareholders not having exercised appraisal rights by giving valid demands
to this effect to Altech, in terms of section 164(7) of the Companies Act, in respect
of more than 5% of the Altech Shares within 30 business days following the Altech
Shareholders meeting convened to approve the Scheme ("Scheme Meeting"),
provided that, in the event that any Altech Shareholders give notice objecting to
the Scheme, as contemplated in section 164(3) of the Companies Act, and those
Altech Shareholders vote against the resolution proposed at the Scheme Meeting
to approve the Scheme, but do so in respect of no more than 5% of the Altech
Shares, this condition shall be deemed to have been fulfilled at the time of the
Scheme Meeting; and
5.1.5. by the date on which each of the abovementioned conditions are fulfilled or waived
(as the case may be), an adverse effect, fact, circumstance which is or might
reasonably be expected (alone or together with any other such adverse effect, fact
or circumstance) to be material with regard to the operations, continued existence,
business, condition, assets and liabilities of Altech and its subsidiaries (whether as
a consequence of the Scheme or not) has not occurred. For the purposes of this
clause, to be material, the adverse effect, fact or circumstance must:
? constitute a change in the laws of the Republic of South Africa (including,
without limitation, laws relating to taxation) which has (or may reasonably be
expected to have) a material adverse effect upon the Scheme such that the
effective direct or indirect cost of the Scheme to Altron, including but not
limited to the Scheme Consideration would increase by 15% or more.
5.2. The conditions precedent other than of a regulatory nature are stipulated for the benefit
of Altron and may be waived by Altron in its sole discretion by notice in writing to Altech.
Conditions that are of a regulatory nature cannot be waived.
6. PRO FORMA EARNINGS AND NET ASSET VALUE EFFECTS PERTAINING TO THE
SCHEME
6.1. Altron
The unaudited and unreviewed pro forma financial effects of the Scheme on Altron
Shareholders, for which the directors of Altron are responsible, are provided for illustrative
purposes only to provide information about how the Scheme will affect the financial position of
the Altron Shareholders by illustrating the effect thereof on the basic earnings per share (“Basic
EPS”) and diluted basic earnings per share (“Diluted Basic EPS”) for continuing operations,
discontinued operations and total operations and headline earnings per share (“HEPS”) and
diluted headline earnings per share (“Diluted HEPS”) for total operations of Altron as if the
Scheme had become operative on 1 March 2012, and, for the purpose of net asset value per
share (“NAVPS”) and net tangible asset value per share (“NTAVPS”) of Altron, as if the
Scheme had become operative on 28 February 2013. Because of their nature the unaudited
and unreviewed pro forma financial effects may not give a fair presentation of Altron’s financial
position, changes in equity, results of operations and performance after the Scheme. The
unaudited and unreviewed pro forma financial effects have been compiled using accounting
policies that comply with International Financial Reporting Standards (“IFRS”) and that are
consistent with those applied in the audited consolidated financial statements of Altron for the
twelve months ended 28 February 2013. There are no post balance sheet events which require
adjustment to the pro forma financial effects.
Before the After the Change
Scheme Scheme %
(Note 1) (Note 2)
Continuing operations
Basic EPS (cents) 158 164 4%
Diluted Basic EPS (cents) 153 159 4%
Discontinued operations
Basic EPS (cents) (252) (362) (44%)
Diluted Basic EPS (cents) (239) (350) (47%)
Total operations
Basic EPS (cents) (94) (198) (110%)
Diluted Basic EPS (cents) (86) (191) (123%)
HEPS (cents) 136 135 (1%)
Diluted HEPS (cents) 133 130 (2%)
Net asset value per share (cents) 1,498 1,157 (23%)
Tangible net asset value per share (cents) 988 707 (28%)
Weighted average number of shares in issue (‘000) 316 358 13%
Diluted average number of shares in issue (‘000) 319 370 16%
Number of shares in issue (‘000) 317 358 13%
Notes:
1. The financial information in the "Before the Scheme" column has been prepared based on Altron’s
audited financial results for the twelve months ended 28 February 2013. In terms of IFRS, Altron
already exercises control over Altech by virtue of its shareholding in Altech. Consequently, Altech's
results are consolidated into Altron's statement of comprehensive income and balance sheet.
2. The financial information included in the "After the Scheme" column has been prepared based on
Altron’s audited financial results for the twelve months ended 28 February 2013, taking into account the
following:
2.1 The Scheme Consideration elected by Altech Shareholders is assumed to comprise of 50%
Cash Consideration and 50% Share Consideration. The Cash Consideration is funded by debt
of R894.0 million and the Share Consideration by the issue of 41.9 million new Altron Shares
(increasing both weighted average and diluted average number of shares in issue) to the value
of R894.0 million (based on Altron’s 30 day VWAP up to the Cautionary Date);
2.2 An after tax debt funding rate of 5.46% has been used. Debt funding is assumed to be
repayable over five years;
2.3 Assumed once-off transaction costs for Altron and Altech amounting to R18.0 million have been
capitalised in accordance with IFRS. These amounts will be paid out of available cash resources
and are attributable to the various professional advisers, issuers of debt, regulatory authorities
and printing costs;
2.4 In terms of the requirements of IFRS and based on Altron management’s best estimate at the
date of this Firm Intention Announcement, the excess of the Scheme Consideration paid to
Altech Shareholders over the net asset value of Altech to be acquired, amounting to R1,469.0
million at 28 February 2013, has been deducted directly from equity; and
2.5 There are no post balance sheet events which require adjustment of the pro forma financial
effects.
2.6 All adjustments, with the exception of transaction costs, are expected to have a continuing
effect.
6.2. Altech
6.2.1. The financial effects for Altech Shareholders who elect to receive the Cash
Consideration are presented below:
Cash Consideration Before the After the Change
Scheme Scheme %
30 day VWAP (cents) (Note 1) 3622 4750 31%
Closing price (cents) (Note 2) 3439 4750 38%
Notes:
1. The 30 day VWAP of an Altech Share traded on the JSE up to the Cautionary Date.
2. The closing price of an Altech Share traded on the JSE as at 16 May 2013, being the
last business day immediately prior to the date of this Firm Intention Announcement.
6.2.2. The financial effects for Altech Shareholders who elect to receive the Share
Consideration are presented below:
In terms of IFRS, Altron exercises control over Altech by virtue of its shareholding
in Altech. Consequently, Altech's results are consolidated into Altron's statement
of comprehensive income and balance sheet. The unaudited and unreviewed pro
forma financial effects of the Scheme on Altech Shareholders, for which the
Altron Board is responsible, are provided for illustrative purposes only to provide
information about how the Scheme will affect the financial position of the Altech
Shareholders who elect the Share Consideration, assuming that the Scheme
Consideration is settled as to 50% Cash Consideration and 50% Share
Consideration, by illustrating the effect thereof on the Basic EPS and Diluted
Basic EPS for continuing operations, discontinued operations and total
operations and HEPS and Diluted HEPS for total operations, of the Altech Shares
exchanged for Altron Shares at the Switch Ratio, as if the Scheme had become
operative on 1 March 2012, and, for the purpose of NAVPS and NTAVPS as if
the Scheme had become operative on 28 February 2013. These pro forma
financial effects are based on the twelve month audited financial results for Altech
to 28 February 2013. Because of their nature the unaudited and unreviewed pro
forma financial effects may not give a fair presentation of Altech Shareholders’
financial position and performance following the implementation of the Scheme.
There are no post balance sheet events which require adjustment to the pro
forma financial effects.
Share Consideration Before the After the Change
Scheme Scheme %
(Note 3) (Note 4)
Continuing operations
Basic EPS (cents) 369 365 (1%)
Diluted Basic EPS (cents) 353 353 0%
Discontinued operations
Basic EPS (cents) (1,330) (805) 39%
Diluted Basic EPS (cents) (1,273) (779) 39%
Total operations
Basic EPS (cents) (961) (440) 54%
Diluted Basic EPS (cents) (920) (426) 54%
HEPS (cents) 268 300 12%
Diluted HEPS (cents) 256 290 13%
Net asset value per share
849 2,570 203%
(cents)
Tangible net asset value per
409 1,571 284%
share (cents)
Weighted average number of
98 358 n/a
shares in issue (‘000)
Diluted average number of
102 370 n/a
shares in issue (‘000)
Number of shares in issue (‘000) 98 358 n/a
Notes:
3. The financial information in the "Before the Scheme" column has been prepared
based on Altech’s audited financial results for the twelve months ended 28 February
2013.
4. The financial information included in the "After the Scheme" column has been derived
by taking the “After the Scheme” financial effects for Altron, as illustrated in paragraph
6.1 above, and multiplying these results by the Switch Ratio to provide the pro forma
financial effects for those Altech Shareholders who elect the Share Consideration.
Once-off transaction costs incurred will be paid out of available cash resources.
7. SHAREHOLDER UNDERTAKINGS
Altron has received irrevocable undertakings and letters of support from certain Altech
Shareholders who, at the date of this Firm Intention Announcement, hold between them
22,241,909 Altech Shares, to vote in favour of the Scheme and the resolutions to be proposed
at the Scheme Meeting, representing in aggregate approximately 59.1% of the Altech
Shareholders entitled to vote at the Scheme Meeting.
8. GUARANTEES AND CONFIRMATIONS TO THE TAKEOVER REGULATION PANEL
Altron has delivered an irrevocable and unconditional bank guarantee from ABSA Bank Limited
to the TRP in compliance with regulations 111(4) and 111(5) of the Takeover Regulations in
terms of the Companies Act (“Takeover Regulations”). The aggregate amount of the bank
guarantee is sufficient for the purpose of fully satisfying the Cash Consideration.
Altron has confirmed to the TRP that it has sufficient authorised and unissued Altron
participating preference shares available in order to issue new Altron Shares which may be
required to fully satisfy the Share Consideration.
9. TERMINATION OF THE ALTECH LISTING
Following implementation of the Scheme, application will be made to the JSE to terminate the
listing of Altech Shares on the JSE.
10. SHAREHOLDINGS IN ALTECH AND ACTING AS PRINCIPAL
Altron confirms that the Altron Group, through Alfin, is the ultimate proposed purchaser of all
the Altech Shares and that it is acting alone and not in concert with, or as agent or broker for,
any other party.
Altron is the beneficial owner of 59,927,685 Altech ordinary shares, comprising approximately
61.4% of the ordinary share capital of Altech (excluding treasury shares).
11. DOCUMENTATION
Further details of the Scheme will be included in the Scheme Circular to be sent to Altech
Shareholders, containing, inter alia, a notice of the meeting of Altech Shareholders, a form of
proxy and a form of surrender and transfer. The Scheme Circular is expected to be posted to
Altech Shareholders on or about 14 June 2013. The salient dates in relation to the Scheme will
be published prior to the posting of the Scheme Circular.
The Proposed Transaction will constitute a Category 1 transaction in terms of the JSE Listings
Requirements. Accordingly, a circular containing full details of the Proposed Transaction and a
notice of general meeting of Altron Shareholders will be posted in due course. The general
meeting will provide Altron Shareholders with the opportunity to consider and, if deemed fit,
pass, with or without modification, the ordinary resolutions required to approve and implement
the Proposed Transaction and matters ancillary thereto
12. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS
Following the release of this Firm Intention Announcement, the cautionary announcement
originally published by Altron on 22 March 2013 and renewal of cautionary announcement on 7
May 2013 are hereby withdrawn and caution is no longer required to be exercised by Altron
Shareholders when dealing in their shares.
13. ALTRON RESPONSIBILITY STATEMENT
Altron’s board of directors accepts responsibility for the information contained in this Firm
Intention Announcement to the extent that it relates to Altron. To the best of its knowledge and
belief, the information contained in this Firm Intention Announcement is true and nothing has
been omitted which is likely to affect the import of the information.
Johannesburg
17 May 2013
Investment Bank and advisor to the transaction
Investec Bank Limited
Sponsor to Altron
Investec Bank Limited
Legal Adviser to Altron
Edward Nathan Sonnenbergs
Reporting Accountants and auditors to Altron
KPMG Inc.
Financial Advisor to Altron in relation to Debt and Mandated Lead Arranger
ABSA Bank Limited
Legal Advisor to Mandated Lead Arranger
Bowman Gilfillan Inc.
Date: 17/05/2013 04:00:00 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.
Sharenet Sites 
