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NAMPAK LIMITED - Acquisition by Nampak of Alucan Investments and Alucan Packaging

Release Date: 18/11/2013 08:46
Code(s): NPK     PDF:  
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Acquisition by Nampak of Alucan Investments and Alucan Packaging

Nampak Limited
(Incorporated in the Republic of South Africa)
Registration number: 1968/008070/06
Share code: NPK
ISIN: ZAE000071676
(“Nampak” or “the Company” or “the Group”)

     -   ACQUISITION BY NAMPAK OF ALUCAN INVESTMENTS AND ALUCAN
         PACKAGING

     -   OPTION TO ACQUIRE ANOTHER NIGERIAN COMPANY IN THE RELATED
         FIELD OF RIGID PLASTIC MANUFACTURE

     -   UPDATE ON ANGOLA

     1. Introduction

         Nampak shareholders are advised that Nampak, through its
         wholly owned subsidiary, Nampak Holdings (UK) Limited,
         has entered into an agreement with Clements Nominees Ltd
         ("CNL"), in terms of which Nampak will acquire the entire
         issued share capital of Alucan Investments Limited
         (BVI)("AIL") as well as all the shareholder loans made by
         CNL as at the effective date.

         AIL is the beneficial owner of the entire issued share
         capital of Alucan Packaging Limited ("APL") including the
         shareholder loans.

         As an integral part of the transaction Nampak has been
         granted an option, valid for a period of ten years, to
         acquire the entire issued share capital of a company
         engaged in rigid plastic packaging in Nigeria if and when
         the beneficial owner elects to sell his interest (the
         "Option").

2.       Background Information on AIL AND APL
         AIL is an investment holding company incorporated in the
         British Virgin Islands. Its sole investment is its 100%
         shareholding in APL.

         APL is a beverage can manufacturing facility located in
         Agbara, Nigeria. APL was formed to establish an operation
         to run an 8 colour, 2-piece single aluminium beverage can
         manufacturing line. The company manufactures beverage
         cans for the beer, malt and soft drink industry in
         Nigeria and commenced operations in late March 2013.

         APL’s manufacturing facility occupies 35,000m2, on 8.4 ha
         of land, while its main factory occupies 32,000m2 and has
     a current production capacity of 1.1bn cans per annum.
     The installed capacity is valued at US$120m and includes
     the preparation and civil engineering for a second line
     with the potential of adding a further 1.1bn cans per
     annum in this rapidly growing market.


3.   Rationale for the Acquisition and the Option

     Beverage can manufacturing is one of Nampak’s core
     businesses where the Group believes it has a strategic
     competitive advantage. Furthermore, it is the Group’s
     communicated strategy to grow its revenue footprint in
     Africa to 35% by 2015. As a result, Nampak has been
     looking to invest in a beverage can manufacturing
     facility in Nigeria, Africa’s second largest economy. The
     decision to acquire AIl/APL at a substantial premium to
     net asset value is to access the Nigerian market
     immediately and to gain first mover advantage in Africa’s
     second largest economy. Nampak evaluated the greenfields
     alternative but, based on our experience in setting up
     other   plants  on   the   continent,  notably  our   can
     manufacturing plant in Angola and our Cartons and Labels
     business in Nigeria, this option was not favoured as it
     was estimated that it would take Nampak in the region of
     three to four years to be up and running at a cost of
     approximately US$160m. In this scenario, early market
     advantage would have been lost.


     Plastic packaging manufacture is also a core business for
     Nampak and the Option to acquire a large and established
     rigid plastic manufacturer in Nigeria will provide an
     opportunity to further grow Nampak’s revenue in the rest
     of Africa.

4.   Purchase Consideration

     The consideration payable for the Acquisition and the
     Option is US$301m, which Nampak will fund through
     available cash resources and existing debt facilities.

5.   Conditions Precedent

     The   Acquisition  is   subject  to   various  conditions
     precedent, inter alia, approval in writing being granted
     to Nampak by the Financial Surveillance Department of the
     South African Reserve Bank.
6.    Representations and warranties

     The sale and purchase agreement includes representations
     and warranties usual for a transaction of this nature.

7.   Pro Forma Financial Effects

      The pro forma financial effects of the Acquisition are
      presented for illustrative purposes only and because of
      their nature may not give a fair reflection of the
      Company’s financial position, changes in equity, results
      of operations or cash flows nor of the effect on future
      earnings after the Acquisition.

      Set out below are the pro forma financial effects of the
      Acquisition, based on the unaudited interim results for
      the period ended 31 March 2013. APL commenced operations
      in March 2013 so the pro forma financial information
      presented below, only reflects the costs incurred by
      Nampak in undertaking the due diligence of AIL & APL as
      well as the implied cost of borrowings and related
      taxation effect for the period 1 October 2012 to 31 March
      2013. The directors of Nampak are responsible for the
      preparation of the pro forma financial information. The
      pro forma financial effects are prepared in terms of JSE
      Listings Requirements using accounting policies of Nampak
      as at 31 March 2013.


                         Unaudited      Pro Forma    Change
                           before         after        (%)
                        Acquisition    Acquisition
                          (cents)        (cents)
     Basic earnings         134.8         126.5       -6.1
     per share
     Headline              108.8          100.5       -7.6
     earnings per
     share
     Net asset value      1,136.8        1,134.2      -0.2
     per share
     Net tangible         1,000.4         709.6      -29.1
     asset value per
     share
Notes:

  1. The figures in the “Unaudited before Acquisition” are
     based on the unaudited results of Nampak for the six
     months ended 31 March 2013.

  2. The basic earnings per share and headline earnings per
     share figures in the “Pro Forma after Acquisition”
     column have been calculated on the basis that the
     Acquisition was effected on 1 October 2012. The impact
     on net profit for the six months ended 31 March 2013
     was a cost of R49 million. This cost relates to
     interest and acquisition related costs that would be
     incurred if the business had been acquired on 1 October
     2012. There is no further effect on net profit for the
     six months ended 31 March 2013 as the business only
     commenced trading in late March 2013.

  3. The net asset value per share and net tangible asset
     value per share figures in the “Pro forma after
     Acquisition” column have been calculated on the basis
     that the Acquisition was effected on 31 March 2013. Net
     asset value per share and net tangible asset value have
     been adjusted to include the pro forma consolidated net
     assets attributable to APL as at 31 March 2013 of R1.2
     billion and the goodwill arising on the Acquisition of
     R1.7 billion.


  4. The taxation rate applicable is assumed to be 23.5%.

  5. The basic earnings per share and basic headline
     earnings per share figures are calculated based on
     weighted average number of ordinary shares in issue of
     593 001 184 at 31 March 2013.

  6. The net asset value per share and net tangible asset
     value per share have been calculated based on 593 186
     505 ordinary shares in issue at 31 March 2013.

  7. Once-off transaction costs of R15m have been accounted
     for in the pro formas.

  8. The interest and tax adjustments are of a continuing
     nature.

  9. There are no post balance sheet events which need to be
     taken into account in the pro forma financial effects.
8.   Effective Date of the Acquisition

     Subject to fulfilment of the conditions precedent, Nampak
     expects the Acquisition to close in the first half of the
     2014 financial year.

9.   Classification of the Acquisition

     The Acquisition is classified as a Category 2 transaction
     in terms of the Listings Requirements of the JSE Limited.

10. Update on Angola

     Further to the press speculation, Nampak confirms that it
     is evaluating the addition of a second beverage can line
     in Angola due to current capacity constraints in the
     country. Further details will be provided in due course.


     Johannesburg

     18 November 2013

     Sponsor: UBS (South Africa) (Pty) Ltd

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