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Category 2 and small related party transaction announcement
BUILDMAX LIMITED
Incorporated in the Republic of South Africa
(Registration No. 1995/012209/06)
Share Code: BDM
ISIN Code: ZAE000167318
("Buildmax" or "the Company")
CATEGORY 2 AND SMALL RELATED PARTY TRANSACTION ANNOUNCEMENT
1. Introduction
The board of directors of Buildmax (“the Board”) is pleased to announce that Main Street 1178
(Pty) Ltd, to be renamed Buildmax Vaal Quarry, (“the Purchaser”), a recently established special
purpose vehicle in which Buildmax, through its wholly-owned subsidiary Buildmax Aggregates
and Quarries (Pty) Ltd (“BAQ”), has a 74% interest, has entered into an agreement dated 9
December 2013 (“the Sale Agreement”) with Vaal Quarry (Pty) Ltd (“Vaal Quarry”) in terms of
which the Purchaser will acquire certain assets of Vaal Quarry (“the Acquisition”). The
Acquisition will be funded by a loan advanced by BAQ to the Purchaser, further information is
set out in paragraph 3.2 below.
The remaining 26% of the shares in the Purchaser are held by Harmoserve (Pty) Ltd,
(“Harmoserve”), 100% of these shares are held by Mr Jackie Mathebula, an executive director
of Buildmax.
2. Application of the JSE Listings Requirements
In a ruling provided by the JSE Limited (“the JSE”), the JSE ruled that the creation of the
Purchaser, the injection of funding into the Purchaser and the Acquisition (collectively, “the
Transaction”), should be viewed as a single transaction, the substance thereof being that
Buildmax (or its wholly-owned subsidiary) has sold a 26% interest in the Purchaser to
Harmoserve and has also separately funded the Acquisition.
3. Description of the Transaction
3.1. The creation of the Purchaser
Prior to the signature of the Sale Agreement, BAQ and Harmoserve each subscribed for 74
and 26 shares respectively in the Purchaser, a shelf company at the time, at a price of R1
per share.
3.2. The injection of funding into the Purchaser
BAQ will loan R20 666 594 to the Purchaser to fund the Acquisition.
The terms of the loan will be market related in that the funding will be advanced by BAQ to
the Purchaser on terms that are identical to those terms on which BAQ will secure the same
funding from a third party financier.
In accordance with section 45 of the Companies Act No. 71 of 2008 (“the Act”), the board of
directors of BAQ is satisfied and acknowledges that:
3.2.1. immediately after providing such financial assistance, BAQ will satisfy the
solvency and liquidity test as provided for in section 4 of the Act; and
3.2.2. the terms under which such financial assistance is to be given are fair and
reasonable to BAQ and Buildmax(being the sole shareholder of BAQ).
3.3. The Acquisition
In terms of the Sale Agreement, the Purchaser will acquire the mining right held by Vaal
Quarry in respect of aggregate and gravel (“the Mining Right”) as well as certain plant and
equipment.
The total cash purchase consideration is R20 666 594, which will be settled as follows:
3.3.1. R18 049 926, less the balance due to each Vaal Quarry creditor (“the Creditor
Portion”), will be payable within 30 days of the Implementation Date (as defined in
paragraph 6 below);
3.3.2. The balance of R2 616 666 (less, if applicable, any amount by which the Creditor
Portion exceeds R18 049 926) will be payable 12 months after the Implementation
Date.
4. Conditions precedent
The Acquisition is subject to inter alia,
4.1. the receipt by the Purchaser and Vaal Quarry of the requisite board and regulatory
approvals, including, inter alia, the consent of the Minister of the Department of
Mineral Resources, in terms of section 11(1) of the Mineral and Petroleum Resources
Development Act, No. 28 of 2002 (as amended) (“MPRDA”), to the cession and
transfer of the Mining Right from Vaal Quarry to the Purchaser.
5. Rationale for the Transaction
The Board of Buildmax is of the view that the Acquisition represents a well-priced opportunity
for BAQ to grow its current geographic footprint in the buoyant market in the immediate
surroundings of Vaal Quarry.
The Acquisition will further provide BAQ with access to high-grade gravel and aggregate
reserves and resources which are well situated to access new contracts and markets.
In terms of section 11, when read with sections 23 and 2(d) of the MPRDA, the approval of the
Minister of the Department of Mineral Resources will be only be granted if, inter alia, the
granting of such approval will substantially and meaningfully expand opportunities for
historically disadvantaged citizens. In addition, the Mining Charter requires that historically
disadvantaged persons represent at least 26% of the ownership and voting rights of that entity.
Mr Jackie Mathebula, in addition to his wealth of industry experience, provides the Purchaser
with the requisite empowerment credentials.
6. Effective date and implementation date
The effective date will be the date on which the conditions precedent, are fulfilled or, to the
extent possible, waived.
The risks and rewards of ownership of the assets acquired pursuant to the Acquisition, including
the Mining Right, shall pass from Vaal Quarry to the Purchaser on the later of:
6.1. the date that is five (5) business days following the effective date; and
6.2. the 31st business day following the date on which Vaal Quarry has published notices
in terms of section 34 of the Insolvency Act, No. 24 of 1936, as amended
(“Implementation Date”).
7. Pro forma financial effects
The pro forma financial effects of the Transaction on the Company’s basic and diluted earnings
and headline earnings per share for the six months ended 31 August 2013 and net asset value
and tangible net asset value per share as at 31 August 2013, assuming that the Transaction was
implemented on 1 March 2013 for the purposes of calculating the effect on earnings and
headline earnings per share and on 31 August 2013 for the purpose of calculating the effect on
net asset value and tangible net asset value per share, are not significant (being less than 3% in
accordance with the definition contained in the JSE Listings Requirements).
8. Categorisation of the Transaction
Shareholders are referred to the announcement released on SENS on 18 November 2012
wherein Buildmax disclosed that it had entered into a transaction (with an effective date of 1
March 2013) pursuant to which it disposed of a direct 10% interest in its mining services
business unit to Tylox (Pty) Ltd (“Tylox”) (“the BEE Transaction”). As Harmoserve is a 40%
shareholder in Tylox, the Transaction represents a transaction entered into by the issuer with an
associate of a party with whom another transaction was entered into, within a 12 month period
and, therefore, applying the provisions of sections 9.11 to 9.13 of the JSE Listings Requirements,
aggregation is required when determining the percentage ratio for the purposes of categorising
the Transaction.
On an aggregated basis, the Transaction is a category 2 transaction in terms of section 9 of the
JSE Listings Requirements and, as such, approval by shareholders in a general meeting is not
required.
9. Small related party transaction
The JSE has provided the Company with a ruling that, since Mr Jackie Mathebula was only
appointed as a director subsequent to the finalisation of the BEE Transaction, the aggregation
rules contained in section 10.8 of the JSE Listings Requirements will not be applicable to the
related party aspect of the Transaction.
Accordingly, the Transaction is categorised as a small related party transaction in terms of
section 10.7 of the JSE Listings Requirements.
In terms of section 10 of the JSE Listings Requirements, the JSE has been provided with written
confirmation from Questco (Pty) Ltd, the Independent Professional Expert acceptable to the JSE,
that the terms of the Transaction with the related party are fair as far as the shareholders of
Buildmax are concerned. The Independent Professional Expert's fairness opinion will be available
for inspection at the registered office of Buildmax for a period of 28 days from the date of this
announcement.
10. Cautionary announcement
Shareholders are referred to the cautionary announcement released by the Company on
28 August 2013 and thereafter renewed on 10 October and 21 November 2013 respectively. For
avoidance of doubt, the Company wishes to confirm that the said cautionary announcement
related to both the Acquisition of Vaal Quarry and a further unrelated potential transaction.
Shareholders are therefore advised that negotiations are still in progress on the potential
unrelated transaction, which if successfully concluded, may have a material effect on the price of
the Company’s securities. Accordingly, shareholders should continue to exercise caution when
dealing in the Company’s securities until a full announcement is made.
Benoni
10 December 2013
Sponsor and Independent Professional Expert to Buildmax
QuestCo (Pty) Ltd
Legal advisers to Buildmax
Webber Wentzel
Date: 10/12/2013 11:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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