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Acquisition of the BDM Group, specific issue and withdrawal of cautionary
M&S Holdings Limited
Incorporated in the Republic of South Africa
(Registration Number 2006/011359/06)
Share Code: MSA ISIN: ZAE000165411
("M&S" or "the Company")
ACQUISITION OF THE BDM GROUP, SPECIFIC ISSUE AND WITHDRAWAL OF CAUTIONARY
1. INTRODUCTION
1.1 Shareholders are referred to the detailed cautionary announcement
released by the Company on 21 June 2013, wherein shareholders were
advised that the Company was in an advanced stage of finalising formal
agreement(s) with BDM Holdings Proprietary Limited ("BDM Holdings") regarding
a proposed transaction in terms whereof the Company will acquire BDM Holdings
and its subsidiaries ("the BDM Group").
1.2 Shareholders are hereby advised that M&S has now entered into the following
acquisition agreements:
1.2.1 M&S entered into an agreement, dated 1 October 2013, ("the BDM Holdings
Agreement") with GTT Investments Proprietary Limited ("GTT"), PDT Investments
Proprietary Limited ("PDT")(together referred to as "the BDM Holdings Vendors"),
Barkomax Investments Proprietary Limited ("Barkomax"), NRT Investments Proprietary
Limited ("NRT"), Elias Borole ("Borole") and Jacques Lombard ("Lombard")(together
referred to as "Minority Interests Vendors") in terms of which M&S will acquire
100% of the issued share capital of BDM Holdings ("the BDM Holdings Acquisition
Shares") and the minority interests held by the Minority Interests Vendors in the
subsidiaries of BDM Holdings ("the Minority Interests Acquisition Shares")("BDM
Holdings Acquisition"); and
1.2.2 M&S entered into an agreement, dated 1 October 2013, (the BDM Namibia Agreement)
with GTT, PDT and Barkomax ("the BDM Namibia Vendors") in terms of which M&S will
acquire 100% of the issued share capital of BDM Plant Hire & Mining CC ("BDM
Namibia")("BDM Namibia Acquisition Shares"), following the conversion of BDM Namibia
from a closed corporation to a private company ("BDM Namibia Acquisition").
(together referred to as "the Acquisitions")
1.3 The effective date of the Acquisitions will be the third business day after the
fulfilment of the conditions precedent set out in paragraph 6 below.
1.4 M&S entered into an agreement, dated 1 October 2013 ("The Share Option Agreement"),
whereby M&S intends to issue share options at a strike price of 84 cents per share,
subject to the successful implementation of the Acquisitions, to the participants and
on the terms as set out in paragraph 7 below.
1.5 Shareholders are further advised that should the Acquisitions be successfully
implemented, it is the M&S board of directors intention to appoint Mr PJJ Dry ("Mr Dry"),
as the new Chief Executive Officer of M&S. Mr Dry qualified as a chartered accountant in 1987
and holds a Masters degree in Taxation which he obtained from the University of Pretoria.
He served four years at the Department of Finance - South African Revenue Services ("SARS").
Following his time at SARS, he practiced as a registered auditor from 1992 to 2000.
He was involved in the establishment of the BDM Group in 2001 in which he is a major
shareholder and director.
2. BUSINESS OF THE BDM GROUP
BDM Group provides outsourced personnel, industrial and mining services and contract
catering and food services to mines, industrial and manufacturing sites, transport
businesses, retail outlets, hospitals, schools and various other clients.
The personnel services include the provision of temporary outsourced personnel,
permanent placements, time keeping and payroll services and human resource and
industrial relations services.
The industrial and mining services include plant cleaning, factory, industrial site
and office cleaning, equipment hire, mining construction and engineering services,
remote site accommodation (village) construction and operation and management services
with a firmly established foothold in Southern African countries.
The contract catering and food services include managing staff canteens, supplying meals
to students, patients in hospitals, corporate head offices, mines and construction sites.
3. RATIONALE FOR THE ACQUISITIONS
The Acquisitions will result in a more substantial business, which is expected to
facilitate the accelerated growth of the combined group. Synergies which are expected to be
captured include cross-selling of services to the larger client base, the leveraging of
expertise across the combined group as well as capitalising on potential cost synergies.
4. INTENDED CHANGE OF NAME
Should the Acquisitions be implemented, it is intended that the name of the Company
will change to CSG Holdings Limited, which acronym stands for Contract Services Group
("Change of Name").
The rationale for the proposed Change of Name is to better reflect the combined underlying
businesses of M&S and BDM going forward, after the implementation of the Acquisitions.
If approved by M&S shareholders, it is intended to change the name of M&S to CSG Holdings
Limited as soon as reasonably possible thereafter.
It is intended to apply, in due course, to the JSE for approval to move the listing of the
Company to the main board.
5. PURCHASE CONSIDERATION
5.1. In terms of the BDM Holdings Agreement, M&S will acquire the BDM Holdings Acquisition
Shares for a total consideration of R111 984 976 from the BDM Holdings Vendors in
exchange for the allotment and issue of M&S ordinary shares at a issue price of 84
cents per share to the BDM Holdings Vendors in the following proportions ("BDM Holdings
Purchase Consideration Shares"):
5.1.1. 66 657 724 ordinary shares in M&S shall be issued to PDT; and
5.1.2. 66 657 724 ordinary shares in M&S shall be issued to GTT.
5.2. In terms of the BDM Holdings Agreement, M&S will acquire the Minority Interests Acquisition
Shares for a total consideration of R68 002 212 from the Minority Interests Vendors in
exchange for the allotment and issue of M&S ordinary shares at a issue price of 84 cents
per share to the Minority Interests Vendors in the following proportions ("Minority Interests
Purchase Consideration Shares"):
5.2.1. 9 945 046 ordinary shares in M&S shall be issued to Borole;
5.2.2. 21 310 814 ordinary shares in M&S shall be issued to NRT;
5.2.3. 43 873 400 ordinary shares in M&S shall be issued to Barkomax; and
5.2.4. 5 825 754 ordinary shares in M&S shall be issued to Lombard.
5.3. In terms of the BDM Namibia Agreement, M&S will acquire the BDM Namibia Acquisition Shares
for a total consideration of R15 541 902 from the BDM Namibia Vendors in exchange for the
allotment and issue of M&S ordinary shares at a issue price of 84 cents per share to the
BDM Namibia Vendors in the following proportions ("BDM Namibia Purchase Consideration Shares"):
5.3.1. 6 927 411 ordinary shares in M&S issued to PDT;
5.3.2. 6 927 411 ordinary shares in M&S issued to GTT; and
5.3.3. 4 647 442 ordinary shares in M&S issued to Barkomax.
5.4. The M&S shares will be issued at an issue price of 84 cents per share, being the 60 day volume
weighted average trading price of M&S as at 22 May 2013, the date the M&S board of directors
approved the Acquisitions in principle.
6. CONDITIONS PRECEDENT
6.1. The BDM Holdings Agreement is subject to the following outstanding conditions
precedent:
6.1.1. the issuing of a clearance certificate of the merger constituted by the transaction
contemplated in the BDM Holdings Agreement by the relevant Competition Authorities.
To the extent that any clearance is subject to any conditions, this condition precedent will
only be deemed to have been fulfilled if the parties to the BDM Holdings Agreement, acting reasonably
and in good faith, agree in writing to accept such conditions within fourteen days of being notified of
the conditional approval;
6.1.2. the key employees entering into new employment contracts with M&S on terms and conditions which
are satisfactory to M&S and the key employees concerned, which conditions shall be on no less
favourable terms and conditions than those on which each of them is currently employed by BDM Holdings
or the BDM Group or M&S, as the case may be, as at the signature date of the BDM Holdings Agreement,
but incorporating a twenty four month restraint of trade provision;
6.1.3. each of BDM Holdings Vendors waiving their respective pre-emptive rights in writing in respect of the
BDM Holdings Acquisition Shares, which are to be transferred by them to M&S, pursuant to the provisions
of the BDM Holdings Agreement;
6.1.4. each of the Minority Interests Vendors waiving their respective pre-emptive rights in writing in respect
of the Minority Interests Acquisition Shares, which are to be transferred by the Minority Interests
Vendors to M&S, pursuant to the provisions of the BDM Holdings Agreement;
6.1.5. the shareholders of both of the BDM Holdings Vendors approve the disposal by them of the BDM Holdings
Acquisition Shares to M&S, as provided for in section 112(2)(a) of the Companies Act No 71 of 2008,
as amended ("Companies Act"), in accordance with the provisions of section 115 of the Companies Act;
6.1.6. the shareholders of Barkomax approve the disposal by it of the portion of the Minority Interests
Acquisition Shares, which relates to Barkomax to M&S, as provided for in section 112(2)(a) of the
Companies Act, in accordance with the provisions of section 115 of the Companies Act;
6.1.7. the shareholders of NRT approve the disposal by it of the portion of the Minority Interests
Acquisition Shares, which relates to NRT to M&S, as provided for in section 112(2)(a) of
the Companies Act, in accordance with the provisions of section 115 of the Companies Act;
6.1.8. the board of directors of M&S authorises M&S to conclude the BDM Holdings Agreement and to
issue the BDM Holdings Purchase Consideration Shares and the Minority Interests Purchase Consideration
Shares to the BDM Holdings Vendors and the Minority Interests Vendors, respectively, in terms of the
provisions of the BDM Holdings Agreement, as contemplated in section 40(1) of the Companies Act;
6.1.9. the shareholders of M&S resolve to approve the BDM Holdings Acquisition as contemplated in the BDM Holdings
Agreement, in terms of the JSE Limited ("JSE") Listings Requirements;
6.1.10. the shareholders of M&S pass a special resolution approving the issue of the BDM Holdings Purchase Consideration
Shares and the Minority Interests Purchase Consideration Shares to the BDM Holdings Vendors and the Minority
Interests Vendors, respectively, in terms of the provisions of the BDM Holdings Agreement, pursuant to the
provisions of section 41(3) of the Companies Act;
6.1.11. the BDM Holdings Acquisition related agreements have all been executed by the parties thereto and have,
in each case, become unconditional and are fully implemented in accordance with their respective terms,
as confirmed in writing by the BDM Holdings Vendors;
6.1.12. the shareholders and directors of the parties passing such other relevant resolutions (other than those
specifically mentioned above) as may be required, in order to conclude and implement the BDM Holdings
Acquisition, in terms of the Companies Act, the memorandums of incorporation of those parties,
which are corporate entities, and the JSE Listings Requirements, to the extent applicable;
6.1.13. M&S taking such steps as may be required to implement the BDM Holdings Acquisition in accordance
with the Listings Requirements, to the extent applicable;
6.1.14. the Takeover Regulation Panel, granting its approval of the BDM Holdings Acquisition on such terms
as are acceptable to M&S and the BDM Holdings Vendors acting reasonably, to the extent applicable;
6.1.15. each of M&S and the BDM Holdings Vendors receiving written confirmation from the other of them that
it is satisfied with the outcome of the due diligence investigation;
6.1.16. the BDM Namibia Agreement has been executed by the parties thereto, as confirmed in writing by
both the BDM Holdings Vendors and M&S; and
6.1.17. the Share Option Agreement being executed by the parties thereto and the Share Option Agreement
becomes unconditional in accordance with its terms, as confirmed in writing by both BDM Holdings
Sellers.
6.2. The BDM Namibia Agreement is subject to the following outstanding conditions precedent:
6.2.1. that BDM Namibia is converted into a private company, pursuant to the provisions of the Namibia Companies
Act, with PDT and GTT as its initial shareholders;
6.2.2. each of PDT, GTT and Barkomax waiving their respective pre-emptive rights in writing in respect of the
BDM Namibia ordinary shares, which are to be transferred by them to M&S;
6.2.3. the boards of directors of each of the BDM Namibia shareholders authorise each of the BDM Namibia
shareholders to conclude the BDM Namibia Agreement and to sell and transfer the BDM Namibia Acquisition
Shares to M&S;
6.2.4. the board of directors of M&S authorises M&S to conclude the BDM Namibia Agreement and to issue the
BDM Namibia Purchase Consideration to the BDM Namibia shareholders;
6.2.5. the shareholders of M&S resolve to approve the BDM Namibia Acquisition in terms of the JSE Listings
Requirements;
6.2.6. the shareholders of M&S have passed a special resolution approving the issue of the BDM Namibia
Purchase Consideration Shares to the BDM Namibia shareholders;
6.2.7. the BDM Namibia Acquisition related agreements have all been executed by the parties thereto and
have, in each case, become unconditional and are fully implemented in accordance with their respective
terms, as confirmed in writing by PDT and GTT;
6.2.8. the shareholders and directors of the parties passing such resolutions as may be required, in order
to conclude and implement the BDM Namibia Acquisition, in terms of the Namibia Companies Act, the
Companies Act, the memorandums of incorporation of those parties, which are corporate entities, and the
JSE Listings Requirements, to the extent applicable;
6.2.9. M&S taking such steps as may be required to implement BDM Namibia Acquisition in accordance with the
JSE Listings Requirements, to the extent applicable;
6.2.10. each of the BDM Namibia shareholders and M&S receiving written confirmation from the other of
them that it is satisfied with the outcome of the due diligence investigation;
6.2.11. the BDM Holdings Agreement has been executed and implemented by the parties thereto,
as confirmed in writing by PDT, GTT and M&S; and
6.2.12. the issuing of a clearance certificate of the merger constituted by the BDM Namibia Acquisition
in the BDM Namibia Agreement and those in the BDM Holdings Agreement, by the relevant Competition
Authorities. To the extent that any clearance is subject to any conditions, this suspensive
condition will only be deemed to have been fulfilled if the parties, acting reasonably and in good faith,
agree in writing to accept such conditions within fourteen days of being notified of the conditional
approval.
7. SPECIFIC ISSUE OF SHARE OPTIONS
7.1. In terms of the Share Option Agreement, M&S will grant a total of 5 250 000 share options ("the Specific
Issue") to the participants as set out below in the following proportions:
7.1.1. 1 928 063 share options will be granted to GTT:
7.1.2. 1 659 788 share options will be granted to PDT;
7.1.3. 480 900 share options will be granted to NRT;
7.1.4. 327 600 share options will be granted to African Footprint Investments Holdings Proprietary Limited;
7.1.5. 300 825 share options will be granted to Borole:
7.1.6. 268 275 share options will be granted to Kernsig Proprietary Limited;
7.1.7. 131 250 share options will be granted to Lombard;
7.1.8. 76 650 share options will be granted to Paul Mabela; and
7.1.9. 76 650 share options will be granted to Dorreen Whyken.
(collectively referred to as "Specific Issue Participants")
7.2. The share options granted to the Specific Issue Participants in terms of the Specific Issue shall
only be capable of being exercised as follows:
7.2.1. 25% (twenty five percent) thereof as at the 2nd (second) anniversary of the share option
acceptance date ("First Vesting Date");
7.2.2. 25% (twenty five Percent) thereof as at the 3rd (third) anniversary of the share option
acceptance date ("Second Vesting Date");
7.2.3. 25% (twenty five Percent) thereof as at the 4th (fourth) anniversary of the share option
acceptance date ("Third Vesting Date"); and
7.2.4. 25% (twenty five Percent) thereof as at the 5th (fifth) anniversary of the share option
acceptance date ("Fourth Vesting Date").
7.3. The share options granted to the Specific Issue Participants in terms of the Specific Issue
must be exercised during the applicable exercise period of such share options. The exercise period
for the share options falling due at the First Vesting Date, the Second Vesting Date, the Third
Vesting Date and the Fourth Vesting Date (as the case may be) shall be within 30 (thirty) days of
each of such First Vesting Date, Second Vesting Date, Third Vesting Date and Fourth Vesting Date
(as the case may be). Upon the exercise of the share options, M&S shares will be issued to the
Specific Issue Participants.
7.4. The strike price for the share options issued to the Specific Issue Participants is 84 cents per
share option. The strike price of the share options is the 60 day volume weighted average trading
price of M&S as at 22 May 2013, the date the M&S board of directors approved the Acquisitions in principle.
7.5. The rationale for the proposed Specific Issue is to compensate the various vendors for the expected
dilution in shareholding between the signature date of the BDM Holdings Agreement and the BDM Namibia
Agreement and the effective date of the Acquisitions that may occur as a result of share options that
have been granted but not yet accepted by specific employees of M&S in terms of the M&S share
incentive scheme.
7.6. The Specific Issue is subject to the fulfilment of the conditions precedent that the resolutions
relating to the Acquisitions are approved by M&S shareholders at the general meeting.
8. PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects of the Acquisitions and the Specific Issue, as set out
below, is the responsibility of the directors of M&S. The unaudited pro forma financial effects
are presented in a manner consistent with the basis on which the historical financial information
has been prepared and in terms of M&Ss accounting policies. The unaudited pro forma financial
effects have been presented for illustrative purposes only and, because of their nature, may not
give a fair reflection of M&Ss financial position post the implementation of the Acquisitions
and the Specific Issue.
The table below sets out the unaudited pro forma financial effects of the Acquisitions and the
Specific Issue on M&S, based on the reviewed financial results for the financial year ended
30 June 2013.
Reviewed Unaudited pro Change (%)
results forma results
before the after the
Acquisitions Acquisitions
and the Specific and the
Issue Specific Issue
Basic earnings per
share(cents) 17.0 15.5 (8.7)
Headline earnings per
share (cents) 16.2 15.2 (6.1)
Net asset value per
share(cents) 41.2 54.9 33.1
Net tangible asset value
per share (cents) 32.2 30.0 (6.9)
Weighted average number
of shares in
issue ('000) 155 182 387 954 150.0
Number of shares in
issue(000) 155 182 387 954 150.0
Notes and assumptions:
1. The Reviewed results before the Acquisitions and the Specific Issue figures have been
extracted from the reviewed financial results of M&S for the year ended 30 June 2013.
2. The basic earnings per share and headline earnings per share figures in the Unaudited
pro forma after the Acquisitions and the Specific Issue column have been calculated on
the basis that the Acquisitions and the Specific Issue were effected on 1 July 2012.
3. The net asset value per share and net tangible asset value per share figures in the
Unaudited pro forma results after the Acquisitions and the Specific Issue column
have been calculated on the basis that the Acquisitions and the Specific Issue were
effected on 30 June 2013.
4. A taxation rate of 28% is assumed.
5. The basic earnings per share and headline earnings per share figures have been calculated
based on the weighted average number of shares in issue at 30 June 2013.
6. The net asset value per share and net tangible asset value per share figures have been calculated
based on the number of shares in issue at 30 June 2013.
7. M&S has settled the total purchase consideration for the Acquisitions of R195.5 million through
the issue of 232 772 726 M&S shares at an issue price of 84 cents per M&S share. In terms of the
Acquisitions, 133 315 448 M&S shares will be issued to the BDM Holdings Vendors, 80 955 014 M&S
shares will be issued to the Minority Interests Vendors and 18 502 264 M&S shares will be issued
to the BDM Namibia Vendors.
8. Identified intangible assets acquired as a result of the Acquisitions are deemed to be approximately
R21.3 million, while the goodwill acquired is deemed to be approximately R61.3 million.
9. Securities transfer tax is payable at a rate of 0.25% on the repurchase of shares in terms of the
BDM internal restructuring.
10. In terms of the Specific Issue, 5 250 000 Shares Options were assumed to be granted to the Specific
Issue Participants at a strike price of 84 cents per Share Option. The IFRS 2 annual share option expense
on the Share Options was determined by the Black-Scholes-Merton valuation model.
11. Transaction costs of R2.1 million are assumed applicable to the Acquisitions and the Specific Issue
and are allocated to each acquisition based on each purchase price as a percentage of the total purchase
price.
12. All adjustments, except for transaction costs, are expected to have a continuing effect.
9. OTHER RELEVANT INFORMATION
9.1. The BDM Holdings Vendors, Minority Interest Vendors, BDM Namibia Vendors and M&S have provided warranties
and indemnities to each other that are standard to a transaction of this nature.
9.2. M&S will ensure that the provisions of the memorandum of incorporation of all companies acquired as a
result of the Acquisitions do not frustrate M&S in any way from compliance with its obligations in terms
of the JSE Listings Requirements and nothing contained in the memorandum of incorporation of any subsidiary
of M&S will relieve M&S from compliance with the JSE Listings Requirements.
10. CATEGORISATION OF THE ACQUISITIONS
The Acquisitions are classified as a Category 1 acquisition in terms of the JSE Listings Requirements
requiring shareholder approval. Accordingly, a circular, incorporating revised listing particulars detailing
the terms of the Acquisitions, terms of the Specific Issue and a notice convening a general meeting will be
posted to shareholders in due course.
11. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the renewal of cautionary released on SENS on 20 September 2013 and are
hereby advised that the relevant details of the Acquisitions have been disclosed in this announcement
and accordingly caution is no longer required to be exercised by shareholders when dealing in the Companys
securities.
2 October 2013
Johannesburg
Transaction and corporate adviser: PSG Capital
Tax adviser: Grayston Elliot
Legal adviser: Martin Raubenheimer
Independent reporting accountant to M&S: Grant Thornton (Johannesburg)
Independent reporting accountant to BDM: PwC
Independent designated adviser: Questco
Date: 02/10/2013 03:11:00 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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