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Metair Terms Announcement Regarding The Proposed Mutlu Acquisition
Metair Investments Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1948/031013/06)
JSE share code: MTA ISIN: ZAE000090692
(Metair)
ANNOUNCEMENT REGARDING:
* THE PROPOSED ACQUISITION BY METAIR OF:
- 100% OF MUTLU HOLDING ANONIM SIRKETI (MUTLU HOLDING); AND
- 45% OF MUTLU PLASTIK VE AMBALAJ SANAYII ANONIM SIRKETI ("PLASTIK") NOT ALREADY OWNED BY MUTLU HOLDING;
* METAIR'S OBLIGATION TO MAKE A MANDATORY TENDER OFFER (MTO) TO THE MINORITY SHAREHOLDERS IN MUTLU AKÜ VE MALZEMELERI SANAYII ANONIM SIRKETI (MUTLU AKÜ) (A SUBSIDIARY OF MUTLU HOLDING); AND
* FURTHER CAUTIONARY ANNOUNCEMENT
1. Introduction
1.1 Metair shareholders (Shareholders) are advised that on 9 October 2013 Metair concluded a share purchase agreement (SPA) with Attila Türker and Ali Nuri Türker acting for themselves and
other members of the Türker family (hereafter collectively referred to as the Sellers) in terms of which Metair, acting through its Netherlands subsidiary, Metair International Holdings
Coöperatief U.A. (MIH) (or a wholly owned subsidiary of MIH):
1.1.1 will, subject to fulfilment of the conditions precedent outlined below, acquire 100% of the issued share capital of Mutlu Holding along with residual stakes owned by the Sellers in the
subsidiaries of Mutlu Holding (Mutlu Acquisition); and
1.1.2 intends to enter into an agreement with the holders of the remaining 45% of the issued shares in Plastik to acquire their shares in Plastik on substantially similar terms and conditions,
(collectively, the Transaction).
1.2 Following implementation of the Mutlu Acquisition, Metair will be required in terms of Turkeys laws and regulations, to make a MTO to the minority shareholders of Mutlu Akü for the remaining
publicly listed issued shares not currently held by Mutlu Holding representing 25% of Mutlu Aküs issued share capital.
2. Information regarding Metair
2.1 Metair is South Africas leading manufacturer of automotive products for original equipment (OE) manufacturers and the aftermarket. It has operations that are located in major South African
cities and Romania. Its products include lead acid batteries, heating and cooling systems, shock absorbers, springs, lighting and signalling devices, plastic mouldings, wiring harnesses and front
end modules.
2.2 The automotive battery sector is a key area of focus for Metair, through its First National Battery (FNB) and Rombat subsidiaries, which are the leading automotive battery manufacturing
companies in South Africa and Romania, respectively.
2.3 Metair has a significant competitive advantage in the battery manufacturing business, being at the forefront of technology and operational efficiency. This is evidenced by Metair being one
of the few suppliers of start-stop technology to OE manufacturers.
2.4 Metairs 50% x 3 strategy has been designed to strategically balance its business. The intention is that 50% of its business will be derived from OE manufacturers, 50% from the aftermarket,
and 50% of overall sales will be generated from the battery businesses. Pursuant to its strategy, in 2012 Metair acquired and successfully integrated the Romanian battery manufacturer, Rombat,
which provided Metair with its first manufacturing facility located close to the markets of its large European OE customers. The Rombat plant has since been expanded to include a start-stop
production line.
3. Details of the Mutlu Group
3.1 Mutlu Holding is a private joint stock company registered in Turkey.
3.2 Mutlu Holding directly and indirectly, together with certain residual stakes owned by the Sellers holds:
3.2.1 75% of the issued share capital of Mutlu Akü, a public company listed on Borsa Istanbul and registered in Turkey. Mutlu Akü is the leading Turkish manufacturer of automotive batteries for
OE manufacturers and the aftermarket, with a production capacity of approximately 5.7 million batteries per annum. Mutlu Akü has the largest battery manufacturing facility in Eastern Europe and
the Middle East. It has been the market leader in Turkey for more than 60 years, and has approximately 41% of the battery replacement market and approximately 57% of the OE market in Turkey.
Mutlu Akü has an extensive battery dealer network in Turkey with 82 dealerships and 6 180 sub-distributors. It is also a leading exporter of starter batteries to the Russian market where it has
had a presence for more than 30 years. Mutlu Aküs operations benefit from its vertically integrated scrap battery recycling capacity, which provided 44% of the lead used by it in 2012. This
enables it to meet its legal recycling obligations and is an important source of its raw material supply of lead;
3.2.2 100% of the issued share capital of Türker Izabe ve Rafine Sanayi Anonim Sirketi, a private joint stock company registered in Turkey (Izabe), which distributes stand-by batteries
manufactured by Mutlu Akü on its behalf;
3.2.3 100% of the issued share capital of Metropol Motorlu Tasitlar Kiralama Anonim Sirketi, a private joint stock company registered in Turkey (Metropol), which owns and operates the vehicle
fleet used by the Mutlu Group (defined below); and
3.2.4 55% of the issued share capital of Plastik, a private joint stock company registered in Turkey, which produces battery casings and caps for Mutlu Akü,
(hereafter Mutlu Holding, Mutlu Akü, Metropol, Izabe and Plastik shall be collectively referred to as the Mutlu Group).
4. Strategic rationale
4.1 The Transaction represents the opportunity for Metair to:
4.1.1 acquire the largest lead-acid battery manufacturer in Turkey which:
* is start-stop ready (although not currently producing);
* has good access to and the capability to recycle reclaimed lead and plastic; and
* has a sizeable share of the Turkish OE and aftermarket sales and a leading export market share in Russia;
4.1.2 transform its operations by:
* providing access to attractive growth markets;
* enhancing geographic diversification; and
* providing access to Europe, the Middle East and Africa (EMEA) that complements and extends Metairs existing footprint;
4.1.3 achieve scale in Metairs installed production capacity base, which together with Rombat and FNB will total approximately 12 million batteries per annum (including some as-yet-unused capacity
from recent investments by Mutlu Akü);
4.1.4 build on Mutlu Aküs OE relationships which are complementary to those of Metair, thereby making Metair a more globally relevant OE automotive battery partner to OE manufacturers based in EMEA;
4.1.5 capture a greater share of the anticipated growth in the international market for start-stop batteries by having production facilities in and adjacent to the geographies where the production
and utilisation of start-stop technology is anticipated;
4.1.6 commence the production of its own proprietary leading-edge start-stop battery technology in Mutlu Aküs production facility as it has in Rombat; and
4.1.7 leverage its unique technological leadership position particularly in start-stop batteries to create significant shareholder value through playing the role of regional consolidator for the
industry with the support of OE customers and industry groupings such as the German Purchasing council which represents the major German OE manufacturers.
5. Purchase price and funding
5.1 The aggregate purchase price for the Transaction is US$217 million (Purchase Price), which is made up as follows:
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Purchase Price allocation for the Mutlu Group
US$ millions
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Mutlu Akü
168.66
Plastik
5.10
Mutlu Holding, Metropol and Izabe
43.24
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Total 217.00
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In addition to the Purchase Price, Metair will also have an obligation to settle any purchase consideration which may be payable for the remaining Plastik shares and the MTO in respect of the
remaining shares of Mutlu Akü (collectively, the Additional Commitment).
5.2 The Purchase Price is subject to a possible downwards adjustment if the net debt position of the Mutlu Group exceeds the agreed amount as at the closing date of the Transaction.
5.3 Furthermore, should certain non-core real estate assets (with estimated value of approximately US$7 million) be sold by Mutlu Akü, which sale may occur no later than 31 December 2013, the
net proceeds received pursuant to such a sale will be passed on to the Sellers.
5.4 The Purchase Price and the anticipated Additional Commitment will be funded using approximately 50% new debt and approximately 50% new equity on the following basis:
5.4.1 Metair will fund MIH from new debt facilities to be raised for the purposes of the Transaction. In this regard, Metair has been advised by Absa Bank Limited that credit approval has been
obtained for bridging facilities which are sufficient to cover the debt funded component of the Purchase Price. These facilities remain subject to the execution of appropriate legal documentation.
Metair intends to replace this bridging facility with term debt facilities during the first quarter of 2014; and
5.4.2 Metair has received indicative commitments from existing and new investors to subscribe under a private placement for sufficient Metair shares to cover the equity funded component of the
Purchase Price, on indicative terms that are acceptable to the board of directors of Metair.
6. Conditions precedent to the Transaction
The Transaction is subject to, inter alia, the fulfilment or waiver as the case may be, of the following conditions precedent:
6.1 MIH shall have obtained funding (whether in the form of equity or debt or both) on terms acceptable to it, in respect of an amount, in the aggregate, at least sufficient to discharge the
maximum amount of the Purchase Price;
6.2 the Sellers shall have furnished MIH with a copy of the quarterly accounts for the Mutlu Group as at 30 September 2013 (Accounts Condition);
6.3 the spin-off of certain assets comprising non-productive immovable properties by the Sellers shall have been implemented in its entirety (Asset Transfer Condition);
6.4 MIH shall have entered into an agreement with the remaining shareholders of Plastik, on terms acceptable to it, for the purchase of their shares in Plastik;
6.5 the unconditional approval of the Transaction by Shareholders of Metair in a general meeting shall have been obtained in accordance with the Listings Requirements of the JSE Limited
(Listings Requirements) and the South African Companies Act, including, but not limited to, such approvals as may be necessary for the funding and implementation of the Transaction;
6.6 all regulatory approvals for the Transaction (whether in Turkey or South Africa or elsewhere) being obtained, including, but not limited to the approval by the Turkish Competition Board,
which must, other than in certain specific instances, be unconditional (Approval Condition);
6.7 the approval of the South African Reserve Bank shall have been obtained in writing in respect of the Transaction;
6.8 in relation to certain agreements entered to between the Mutlu Group and third parties, the waiver by third parties of their rights to terminate such agreements will have been obtained; and
6.9 no action shall have been commenced by or before any governmental authorities against any of the Companies within the Mutlu Group, seeking to restrain or materially and adversely alter or
affect the Transaction,
(collectively, the Conditions Precedent).
6.10 All the Conditions Precedent, other than the Accounts Condition, are required to be fulfilled or waived, as the case may be, by no later than Friday, 6 December 2013.
7. Documentation and timing
7.1 The Transaction is classified as a category 1 transaction in accordance with the Listings Requirements. A circular containing details of the Transaction is expected to be posted to Shareholders
on or about 1 November 2013.
7.2 Salient dates pertaining to the Transaction are expected to be as follows:
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Activity
2013
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Posting of circular
1st November
Shareholder approval
29th November
All conditions precedent to the Transaction fulfilled
6th December
Closing of the proposed transaction
6th - 17th December
MTO filing to the Capital Markets Board (CMB)
9th - 24th December
Launch of MTO process
Subject to CMB approval
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7.3 The above dates may be subject to variation and Shareholders will be advised from time to time, of any such variation through an updated timetable published on the Stock Exchange News Service
and in the South African press.
8. Further cautionary announcement
Further information, including the pro forma financial effects of the Transaction, together with a detailed timetable pertaining to the Transaction, will be published in due course. Shareholders
are advised to continue exercising caution when dealing in Metair securities until a further announcement which includes the abovementioned pro forma financial effects is published.
Johannesburg
10 October 2013
Sole Financial Advisor, Sole Bookrunner, Sole Debt Advisor and Transaction Sponsor to Metair
Absa Bank Limited (acting through its Corporate and Investment Banking Division) and Barclays Plc (acting through its Corporate and Investment Banking Division)
South African Corporate Law Advisor to Metair
Taback & Associates Proprietary Limited, Corporate Law Advisors
Turkish Legal Advisor to Metair
Taboglu and Demirhan, Attorneys at Law
Legal Advisor to ABSA/Barclays
Bowman Gilfillan (Member of Bowman Gilfillan African Group)
Independent Reporting Accountants
PricewaterhouseCoopers Inc
Independent Sponsor to Metair
One Capital
Cautionary statement concerning forward looking statements
Certain statements within this announcement may be considered forward looking, including without limitation those statements concerning timing; adjustments to the Purchase Price, expectations regarding
operating and financial performance; and other benefits anticipated from the Transaction. Although Metair believes that the expectations reflected in such forward looking statements are reasonable,
no assurances can be given that such expectations will prove to be correct.
Metair does not undertake any obligation to publicly update or revise any of the information given in this announcement that may be deemed to be forward looking.
Additional information
Absa Bank Limited (acting through its Corporate and Investment Bank division), which is authorised and regulated in South Africa by the Financial Services Board, along with its affiliates, is acting
as Sole Financial Advisor, Sole Book runner, Sole Debt Advisor, And Transaction Sponsor to Metair and no one else in connection with the Transaction and will not be responsible to anyone other than the
Board of Directors of Metair in accordance with the provisions of its mandate.
Date: 10/10/2013 08:33:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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