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Joint Announcement Of A Firm Intention By ELB Group To Make An Offer To Acquire The Entire Issued Ordinary Share Cap
B&W INSTRUMENTATION AND ELECTRICAL LIMITED ELB GROUP LIMITED
Incorporated in the Republic of South Africa Incorporated in the Republic of South Africa
(Registration number 2001/008548/06) (Registration number 1930/002553/06)
Share code: BWI ISIN: ZAE000098687 Share code: ELR ISIN: ZAE000035101
(“B&W”) (“ELB Group”)
JOINT ANNOUNCEMENT OF A FIRM INTENTION BY ELB GROUP TO MAKE AN OFFER TO
ACQUIRE THE ENTIRE ISSUED ORDINARY SHARE CAPITAL OF B&W (“FIRM INTENTION
ANNOUNCEMENT”) AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the joint cautionary announcement released on SENS on 4 November 2013 and published in the press on 5
November 2013 ("Joint Cautionary Announcement"), B&W shareholders are advised that on 29 November 2013,
B&W received a firm offer from ELB Group ("Firm Offer") in terms of which ELB Group offered to acquire, either itself
or through one of its subsidiaries, the entire issued ordinary share capital of B&W, excluding the B&W ordinary shares
held by B&W subsidiaries ("Scheme Shares") ("Proposed Transaction").
It is the intention of ELB Group to terminate the listing of B&W on the AltX of the JSE Limited ("JSE") should the
Proposed Transaction be implemented.
2. INFORMATION ABOUT ELB GROUP AND B&W
2.1 ELB Group
2.1.1 ELB Group is a holistic engineering solutions provider to the mining, minerals, power, port,
construction and industrial sectors in the field of materials handling and appropriate modular
plants. This is achieved through ELB generated innovation, in-house capability and the supply,
with world class partners, of equipment and technology. The group operates predominantly in
Africa and Australasia.
2.1.2 ELB Group is an investment holding company owning 85% of ELB Engineering Proprietary
Limited (“ELB Engineering Group”) with the remaining 15% owned by the ELB Educational
Trust, which is established as the group’s BBBEE partner to promote the education of historically
disadvantaged South Africans, specifically in engineering disciplines.
2.1.3 The ELB Engineering Group includes:
2.1.3.1 ELB Equipment which has a number of locally designed and manufactured
products and which represents internationally renowned manufacturers whose
products are designed to meet industrialised first world standards. ELB
Equipment operates in three specialised divisions each with a responsibility for
specific products, being construction equipment, earth moving equipment and
mining/quarrying equipment;
2.1.3.2 Ditch Witch Australia which is an importer and distributor of underground
and utility construction equipment; and
2.1.3.3 ELB Engineering Services which focusses on the supply of a total
engineered materials handling solution and appropriate modular plants to the
mining, minerals, industrial, port and power sectors based on its own in-house
capability as well as technology agreements with world class product and
know how companies. Specific product areas include bulk materials handling,
fine powder handling, modular plants, life extension services and total port
solutions to the African market.
2.2 B&W
2.2.1 B&W’s primary role onsite involves the building of a process plant’s electrical and
instrumentation ("E&I") infrastructure and ensuring that it functions in accordance with design
specifications as well as earthing, lightning and surge protection services. Its diversified client
base spans the mining, chemical, oil and gas, renewable energy, power generation, industrial,
utilities and infrastructure sectors.
2.2.2 B&W’s footprint extends across South Africa and sub-Saharan Africa, encompassing over 3 000
personnel at peak.
2.2.3 Design is supplied to B&W in the form of drawings, specifications and other data, which B&W
uses to deliver a plant that functions electrically and control wise in accordance with
specifications.
2.2.4 A number of project elements are incorporated to achieve the objectives of B&W’s clients, such
as:
- construction management and supervision;
- earthing, lightning and surge protection services;
- supply of material not supplied by the client;
- purchasing and inspection services;
- installation (the physical erection of the plant’s E&I system) including supply of tools
and equipment;
- management of skilled and unskilled labour according to the sequential installation
plan;
- calibration and commissioning post-installation, including highly specialist equipment
and trained personnel; and
- post-installation maintenance including client operated training.
3. RATIONALE FOR THE PROPOSED TRANSACTION
ELB Group's rationale for entering into the Proposed Transaction is based on the following considerations:
3.1 the Proposed Transaction is in line with ELB Group's strategic focus of being a leading holistic
engineering solutions provider;
3.2 B&W has over 40 years’ experience in the E&I market and is the major South African contractor
specialising in E&I construction;
3.3 B&W services the industries of infrastructure, mining, chemical, oil & gas, utilities, renewable energy,
power generation and industrial, which are similar industries to those that ELB Group services;
3.4 B&W's product offering is specialised and is complimentary to the current ELB Group product offering.
The Proposed Transaction will allow ELB Group to provide a broader service offering to its existing and
future clients;
3.5 reciprocally, the Proposed Transaction will allow B&W access to a broader customer base through the
current and future clients of ELB Group;
3.6 the Proposed Transaction will create improved efficiencies and long term sustainability for the combined
group of companies. In addition, synergies exist that can and will be leveraged; and
3.7 there is a good corporate cultural fit between the two organisations and the Proposed Transaction offers
B&W the opportunity to be part of a larger group and to bring to ELB Group many years’ experience on
the part of B&W management, which will ultimately benefit the customers that both organisations
currently serve.
4. MATERIAL TERMS OF THE PROPOSED TRANSACTION
4.1. Proposed Transaction mechanism
4.1.1. ELB Group intends acquiring the Scheme Shares by way of a scheme of arrangement in terms
of section 114(1)(d) of the Companies Act, 2008 ("the Companies Act") ("Scheme") to be
proposed by the board of directors of B&W ("B&W Board") between B&W and the holders of
Scheme Shares ("Scheme Participants").
4.1.2. The Scheme will be implemented as follows:
4.1.2.1. The Scheme will be subject to the fulfilment of the suspensive conditions
referred to in paragraphs 5 and 6.
4.1.2.2. The purchase consideration for the Scheme Shares, and the terms of
settlement, will be as is set out in paragraph 4.2.
4.1.2.3. If the Scheme is successfully implemented, B&W will become a wholly owned
subsidiary of ELB Group or any one of its subsidiaries and its listing on the JSE
will be terminated.
4.2. Scheme consideration
In terms of the Scheme, the purchase consideration due to Scheme Participants for the Scheme Shares
will be:
4.2.1 one fully paid up ELB Group share for every 108 Scheme Shares held by Scheme
Participants (“Exchange Ratio”) at the date on which Shareholders must be recorded in
the securities register in order to receive such ELB Group shares (“Scheme Record
Date”); and
4.2.2 if the aggregate number of ELB Group shares deliverable to a Scheme Participant yields a
fractional result, then the number shall be rounded up to the nearest whole number if the
fraction equals 0.5 or more and the number shall be rounded down to the nearest whole
number if the fraction equals less than 0.5.
(“Scheme Consideration”)
5. MATERIAL SUSPENSIVE CONDITIONS TO THE POSTING OF THE CIRCULAR
The posting of a circular to Scheme Participants in respect of the Scheme ("Circular") is subject to the fulfilment or
waiver of the following suspensive conditions:
5.1. the B&W Board appointing an independent expert in terms of section 114(2) of the Companies Act
("Independent Expert") and the regulations published in terms of section 120 of the Companies Act, as
set out in Chapter 5 of the Companies Regulations, 2011 ("Takeover Regulations") and the completion
of a due diligence investigation by the Independent Expert on ELB Group to verify the accuracy of the
Exchange Ratio as contemplated in 5.4
5.2. the receipt by ELB Group of third party consents or waivers in respect of any change of control rights
which such third parties may have pursuant to, or as a result of any events of default which may be
triggered by, the Proposed Transaction, in relation to specific uncompleted projects of B&W;
5.3. the Independent Expert having prepared and issued a report concerning the Scheme to Scheme
Participants in terms of section 114(3) of the Companies Act and Takeover Regulation 113;
5.4. the Independent Expert, in its report referred to in paragraph 5.3, expressing the opinion that the Scheme
Consideration is fair and reasonable to the Scheme Participants;
5.5. an independent board of B&W, consisting of board members who are not executive directors of B&W and
who are not conflicted by virtue of the proposed contracts of employment referred to in paragraph 5.8, to
be established for purposes of the Proposed Transaction ("B&W Independent Board") recommending
to Scheme Participants that they vote in favour of the Scheme;
5.6. all requisite approvals be obtained from the JSE, the Takeover Regulation Panel established in terms of
section 196 of the Companies Act (“TRP”) and the Financial Surveillance Department of the South
African Reserve Bank for the posting of the Circular;
5.7. the obtaining by B&W of irrevocable written voting undertakings from investors of B&W, holding in
aggregate not less than 51.79% of the Scheme Shares, undertaking to vote and/or procure the voting of
the stated number of Scheme Shares held by them as at the record date of the Scheme Meeting, either
as a principal or on behalf of beneficiaries in favour of the Scheme;
5.8. the signing by the following key executives of B&W, namely B Harley, D Evert, D Nevay and K Nel of
contracts of employment with B&W for a period of not less than 4 years calculated from the operative
date of the Scheme; and
5.9. at the date of the posting of the Circular that B&W in the opinion of the board of directors of B&W is a
going concern.
6. MATERIAL SUSPENSIVE CONDITIONS TO THE SCHEME
The Scheme will be subject to the fulfilment or waiver of the following suspensive conditions on or before 30 April 2014,
or such later date as ELB Group and B&W may agree upon before 30 April 2014:
6.1 the submission of an application for the approval of the “merger” resulting from the Proposed Transaction,
to the South African competition authorities in terms of section 13A of the Competition Act, 1998
(“Competition Act”) and the receipt of the unconditional approval in writing of such competition authorities
of the Proposed Transaction in terms of the Competition Act, or if such approval is conditional, such
conditions being acceptable to ELB Group and B&W;
6.2 the TRP granting an exemption for the approval of the Proposed Transaction in terms of section 119(6) of
the Companies Act or, alternatively, the TRP issuing a compliance certificate in respect of the Proposed
Transaction pursuant to section 121(b)(i) of the Companies Act;
6.3 the approval from the JSE of the termination of the listing of B&W on the implementation of the Scheme;
6.4 the approval of the Scheme by the requisite majority of Scheme Members at the shareholders’ meeting to
be convened to approve the Scheme ("Scheme Meeting"), as contemplated in section 115(2) of the
Companies Act and, if the suspensive condition in paragraph 6.5 is not fulfilled and ELB Group
nevertheless elects not to withdraw the Offer, the approval of the implementation of the special resolution
approving the Scheme, by the High Court of South Africa;
6.5 that no more that 14.99% of the Scheme Participants exercise their appraisal rights within 30 business
days following the Scheme Meeting, by giving valid demands in terms of section 164(7) of the Companies
Act in respect of no more that 14.99% of the issued ordinary shares of B&W and/or that no more than
14.99% of the Scheme Participants vote against the resolutions proposed at the Scheme Meeting, unless
ELB Group elects by notice in writing to the Scheme Participants to waive either such condition; and
6.6 the passing by the shareholders of the ELB Group of an ordinary resolution placing the required authorised
but unissued shares in the share capital of ELB Group under the authority of the directors of ELB Group to
enable them to issue the Scheme Shares to the Scheme Participants if the Scheme is approved by the
requisite majority and is implemented;
7. B&W EMPLOYEE SHARE TRUST
The trustees of the B&W Employee Share Trust, having exercised their discretionary powers in relation to the Scheme
Shares held by the B&W Employee Share Trust, resolved to vote their Scheme Shares in favour of all the proposed
resolutions to adopt and approve the Scheme. Accordingly, the trustees have signed a written undertaking to exercise
all of their voting rights in respect of their Scheme Shares in favour of all the resolutions proposed to be adopted at the
Scheme Meeting.
8. B&W SHARE PURCHASE SCHEME TRUST
In compliance with clause 13.1 of the B&W Share Purchase Scheme Trust, and provided that an opinion is received
from Carrim, Maritz and Associates, the auditors of the B&W Share Purchase Scheme Trust, confirming that if the
Scheme is approved and implemented, the Scheme Consideration that the participants will receive, will place them in a
position no less favourable than those to which the participants are entitled in terms of the B&W Share Purchase
Scheme Trust, B&W will procure that all the participants in terms of the B&W Share Purchase Scheme Trust will receive
ELB Group Shares in substitution for their existing Scheme Shares, on implementation of the Scheme, as they are
obliged to in terms of the B&W Share Purchase Scheme Trust.
9. FUNDING THE PROPOSED TRANSACTION
ELB Group has an authorised share capital of 50 000 000 ordinary par value shares of 4 cents each and an issued
share capital of 25 629 469 ordinary par value shares of 4 cents each, excluding 8 230 531 treasury shares. If the
Scheme is approved and implemented and ELB Group shares are issued in consideration for all the Scheme Shares,
being 212 168 959 ordinary par value shares of 0.001 cents each in the issued share capital of B&W, a maximum of
1 964 527 additional ELB Group shares will be issued to the Scheme Participants. Accordingly, ELB Group has
sufficient authorised but unissued shares in its share capital to issue the full consideration in terms of the Scheme to the
Scheme Participants if the Scheme is approved and implemented. The shareholders of ELB Group will be required in
terms of an ordinary resolution to be passed at a separate ELB Group shareholders’ meeting to be convened to be held
immediately before the Scheme Meeting, to put the requisite number of authorised but unissued shares in ELB Group
under the authority of the directors to enable them to issue the Scheme Shares.
10. SHAREHOLDING OF ELB GROUP AND CONCERT PARTIES IN B&W
10.1 As at the date of this announcement, ELB Group does not hold or control (directly or indirectly) any
shares or any options to acquire shares in B&W.
10.2 As at the date of this announcement, the directors of B&W hold or control (directly or indirectly) 76 894
030 shares in B&W, representing 36.24% of the Scheme Shares. The directors of B&W have indicated
that they intend to vote all the shares in B&W held by them in favour of the Scheme.
10.3 As at the date of this announcement, B&W Management holds approximately 7 795 000 Scheme Shares
in terms of the B&W Share Purchase Scheme Trust representing 3,67% of the Scheme Shares. If the
auditors of the B & W Share Purchase Scheme Trust, Carrim Maritz and Associates, issue an opinion to
the effect that the Scheme Consideration due to the participants of the B&W Share Purchase Scheme
Trust will place the participants, in terms of the trust, in a position which is no less favourable than the
position in which they are in terms of the B&W Share Purchase Scheme, the participants in terms of the
B&W Share Purchase Scheme will be obliged to accept the Scheme Consideration.
10.4 In terms of Regulation 87(2) of the Companies Regulations, 2011, comparable offers are required for all
classes of issued security that have voting rights or could have voting rights in the future, including
options. Accordingly, the B&W Share Purchase Scheme Trust and the B&W Employee Trust will receive
the same offer as other Scheme Participants.
11. SHAREHOLDER UNDERTAKINGS
To date, irrevocable undertakings to vote or procure the voting of the stated number of Scheme Shares held by each of
them as at the record date of the Scheme Meeting, either as a principal or on behalf of beneficiaries, in favour of the
Scheme and the other resolutions to be proposed at the Scheme Meeting have been received from certain B&W
Shareholders representing 51.79% of the Scheme Shares. The following B&W Shareholders have provided irrevocable
undertakings to vote the stated number of Scheme Shares in favour of the Scheme:
Shareholder Shares subject to Percentage holding at Effective voting rights in
undertaking at the signature date of respect of the Scheme at
signature date of irrevocable signature date of irrevocable
irrevocable undertaking undertaking undertaking
% %
B&W Industrial
Technology 71 760 000 33.82 33.82
Proprietary Limited
Mr. Kenneth Eric 12 680 000
5.98 5.98
Nel
B&W Employee 12 680 000
5.98 5.98
Share Trust
Mr. Brian Harold
12 744 030 6.01 6.01
Harley
Total 109 864 030 51.79% 51.79%
12. INDEPENDENT BOARD AND FAIR AND REASONABLE OPINION
The Proposed Transaction is classified as an affected transaction in terms of the Companies Act. Accordingly, B&W
has convened its Independent Board, comprising of Roger Pitt (chairman of the B&W Independent Board), Wolf
Wassermeier and George Robertson, to consider the terms of the Proposed Transaction and the report of the
Independent Expert on the Scheme.
13. DOCUMENTATION
Details of the Scheme will be included in the Circular, which will contain, inter alia, the terms of the Scheme, a notice
convening the Scheme Meeting, a form of proxy in connection with the Scheme Meeting, and a form of acceptance,
surrender and transfer in respect of the B&W shares. The Circular is expected to be posted to B&W Shareholders by no
later than 14 February 2014 in accordance with the parties’ obligations in terms of the Takeover Regulations.
The salient dates pertaining to the Scheme will be released on SENS and published in the press prior to the posting of
the aforementioned Circular.
14. PRO FORMA EARNINGS AND ASSET VALUE PER B&W SHARE AND ELB GROUP SHARE
14.1 In terms of Regulation 101(7)(b)(iv) of the Companies Regulations, 2011, a firm intention announcement
must contain inter alia, the pro forma earnings and asset value per offeree regulated company security, if
the offer consideration consists wholly or partly in offeror securities. Further, in terms of Section 9.15(d-e)
of the JSE Listings Requirements, the pro forma effect on the net assets, net tangible assets, historical
earnings and headline earnings of ELB Group must be disclosed on a per share basis as the Proposed
Transaction constitutes a Category 2 acquisition for ELB Group.
14.2 Due to some differences between the accounting policies of ELB Group and B&W as at the date of this
announcement, it has not been possible to finalise an adjusted statement in regard to the pro forma
earnings and asset value per B&W share and ELB Group share to take into account the accounting
differences and possible fair value adjustments required to be made to such earnings and asset value
per B&W share to fairly reflect the pro forma effect on earnings and asset value per B&W share and ELB
Group share and in the opinion of the directors of ELB Group and B&W a statement of pro forma earnings
and asset value per B&W share and ELB Group share without such accounting and possible fair value
adjustments would be misleading and not enable the shareholders of B&W to properly evaluate the true
impact of the Proposed Transaction on B&W pro forma earnings and asset value per B&W share.
14.3 Accordingly, the directors of ELB Group and B&W have decided to only publish a statement of the pro
forma earnings and asset value per B&W share and ELB Group share once the impact of the accounting
and possible fair value adjustments has been properly calculated. It is the intention of ELB Group and
B&W therefore, to publish, before the posting of the Circular, a further announcement containing a
comparative table which will reflect:
- the pro forma earnings and asset value per B&W share and ELB Group share without
accounting and possible fair value adjustments to take into account existing differences in the
accounting policies of the ELB Group and B&W and any possible fair value adjustments to B&W;
and
- the pro forma earnings and asset value per B&W share and ELB Group share with accounting
and possible fair value adjustments to take into account existing differences in the accounting
policies of the ELB Group and B&W and any possible fair value adjustments to B&W.
14.4 It is anticipated that the comparative table of the pro forma earnings and asset value per B&W share will
only be ready for publication during January 2014 in terms of a further announcement, which was
approved by the TRP on 27 November 2013. Accordingly, in terms of the JSE Listings Requirements, the
cautionary announcement of 4 November 2013 has been renewed as set out in paragraph 17 until the
date of publication of a further announcement containing the comparative table of pro forma earnings and
assets value per B&W share and ELB Group share.
15. ELB GROUP RESPONSIBILITY STATEMENT
The board of directors of ELB Group, individually and collectively accepts full responsibility for the accuracy of the
information contained in this Firm Intention Announcement to the extent that it relates to ELB Group. In addition, the
board of directors of ELB Group certifies that to the best of its knowledge and belief, the information contained in this
Firm Intention Announcement is true and, where appropriate, does not omit anything that is likely to affect the
importance of the information contained in this Firm Intention Announcement pertaining to ELB Group.
16. B&W INDEPENDENT BOARD RESPONSIBILITY STATEMENT
The B&W Independent Board, individually and collectively accepts full responsibility for the accuracy of the information
contained in this Firm Intention Announcement to the extent that it relates to B&W. In addition, the B&W Independent
Board certifies that to the best of its knowledge and belief, the information contained in this Firm Intention
Announcement is true and, where appropriate, does not omit anything that is likely to affect the importance of the
information contained in this Firm Intention announcement pertaining to B&W.
17. RENEWAL OF CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement dated 4 November 2013, shareholders are advised to continue exercising
caution when dealing in either company’s securities until a further announcement containing the comparative table of
pro forma earnings and assets value per B&W share and ELB Group share is made.
Johannesburg
2 December 2013
Corporate and Designated Advisor to B&W Legal Advisor to B&W Independent Expert to B&W
Merchantec Capital Fluxmans Inc. Grant Thornton
Sponsor to ELB Group Legal Advisor to ELB Group
Rand Merchant Bank brink falcon hume Inc.
Date: 02/12/2013 04:40:00 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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