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Update Relating To The Acquisition Of Knife Capital Proprietary Limited, The Rights Offer, The Specific Issue
African Dawn Capital Limited
Incorporated in the Republic of South Africa
(Registration Number: 1998/020520/06)
JSE share code: ADW
ISIN: ZAE000060703
(“Afdawn” or the “Company")
UPDATE RELATING TO THE ACQUISITION OF KNIFE CAPITAL PROPRIETARY
LIMITED, THE RIGHTS OFFER, THE SPECIFIC ISSUE AND THE WITHDRAWAL
OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the announcement released on SENS on
Friday, 13 December 2013 (“the Announcement”), advising
shareholders that an agreement was entered into which if
successfully implemented would result in Afdawn acquiring 100% of
the issued shares in Knife Capital for a purchase consideration of
R10 million (“the Knife Capital Acquisition”).
Shareholders were further advised in the Announcement that Afdawn
intends to raise up to R40 654 732.40 from its shareholders by way
of a partially underwritten renounceable rights offer (“the Rights
Offer”) in terms of which 508 184 155 shares (“Rights Offer
Shares”) will be offered to shareholders recorded in the Afdawn
share register at the applicable record date to be determined, at
a subscription price of 8 cents per Rights Offer Share, in the
ratio of 1 Rights Offer Share for every 1 Afdawn ordinary share
held at the close of trade on the applicable record date to be
determined. In addition, the underwriters have agreed to
collectively underwrite 200 000 000 of the Rights Offer Shares. In
order to ensure that the underwriters obtain a meaningful stake in
Afdawn if insufficient shares are obtained as part of the
underwriting, Afdawn has agreed to propose the specific issue of
shares to the underwriters (“the Specific Issue”). In the event
that the Specific Issue is approved by shareholders at the general
meeting then the Company will issue up to a maximum of 62 500 000
Afdawn shares to the underwriters, provided that the maximum
number of shares issued to the underwriters shall be decreased by
each share acquired by the underwriters by virtue of being an
underwriter of the Rights Offer.
In accordance with the Announcement, the outstanding pro forma
financial effects of the Knife Capital Acquisition, the Rights
Offer and the Specific Issue are disclosed below.
PRO FORMA FINANCIAL EFFECTS
The pro forma financial information of Afdawn for the 6 months
ended 31 August 2013 is set out below. The pro forma financial
information has been prepared for illustrative purposes only to
provide information on how the Knife Capital Acquisition, the
Rights Offer and the Specific Issue might have impacted on the
financial position of Afdawn. The pro forma financial information
are presented in accordance with the Listings Requirements, the
Guide on Pro Forma Financial Information issued by SAICA and the
measurement and recognition requirements of International
Financial Reporting Standards (IFRS).
The pro forma financial effects have been presented for
illustrative purposes only and, because of their nature may not
fairly present Afdawn’s financial position or results of
operations after the Knife Capital Acquisition, the Rights Offer
and the Specific Issue. The pro forma adjustments to the statement
of financial position have been calculated on the assumption that
the Rights Offer, the Specific Issue and the Knife Capital
Acquisition were implemented on 31 August 2013. The pro forma
adjustments to the statement of comprehensive income have been
calculated on the assumption that the Rights Offer, the Specific
Issue and the Knife Capital Acquisition were implemented on 1
March 2013.
The pro forma financial information is presented in a manner that
is consistent with the accounting policies of Afdawn.
The pro forma statements have been prepared for 2 possible
scenarios.
Scenario 1 - the Rights Offer is assumed to be fully subscribed
and the underwriters receiving 62,500,000 shares in the Specific
Issue. This scenario reflects the maximum capital that can be
raised in terms of the Rights Offer and the Specific Issue.
Scenario 2 – Capital of R25 million is raised in the Rights Offer
with the underwriters receiving 62,500,000 shares as part of the
Rights Offer and no Specific Issue is required. This scenario
reflects the minimum capital expected to be raised in terms of the
Rights Offer and the Specific Issue.
A) Scenario 1 pro forma financial effects -
Unaudited Pro forma Percentage
financial financial change
information information
before the after the
Knife Capital Knife
Acquisition, Capital
Rights Offer Acquisition,
and Specific Rights Offer
Issue and Specific
Issue
Net asset value per share 11.7 9.6 (17.9%)
(cents)
Net tangible asset value 11.2 8.6 (23.2%)
per share (cents)
Basic earnings /(loss) (0.81) (0.32) 60.5%
per share (cents)
Diluted earnings per (0.56) (0.24) 57.1%
share (cents)
Basic headline earnings / (0.75) (0.30) 60.0%
(loss) per share (cents)
Diluted headline earnings (0.52) (0.22) 57.7%
/ (loss) per share
(cents)
Number of shares issued 508 184 1 178 868 132.0%
(‘000)
Weighted average number 508 184 1 178 868 132.0%
of shares issued (‘000)
Weighted diluted average 601 613 1 272 297 111.5%
number of shares issued
(‘000)
Notes and assumptions:
1) The Before the Rights Offer, Specific Issue and Knife Capital
Acquisition column has been extracted from the unaudited
published interim financial information of Afdawn for the six
months ended 31 August 2013.
2) Cash received from the Rights Offer of R40.655 million is
based on the Rights Offer being fully subscribed through the
issue of 508,184,155 Afdawn shares at 8 cents per Rights
Offer Share.
3) Transaction costs of R1.635 million are assumed which have
been accounted for in share capital.
4) Cash received from the Specific Issue of R5 million is
assumed, in terms of which 62,500,000 Afdawn shares are
issued to the underwriters at 8 cents per share.
5) The results for Knife Capital have been extracted from Knife
Capital’s statement of financial position in its audited
annual financial statements for the financial year ended 30
June 2013, without adjustment and from the statement of
comprehensive income in its reviewed interim financial
statements for the 6 month period ended 30 June 2013, without
adjustment.
6) The Knife Capital Acquisition by Afdawn of 100% of the share
capital of Knife Capital is assumed to be settled through the
issue of 100 000 000 Afdawn shares issued at 10 cents per
share.
7) Intangible assets arising as a result of the Knife Capital
Acquisition. Afdawn will undertake a purchase price
allocation relating to such intangible assets at Knife
Capital’s next year-end, which will be 28 February 2015.
Afdawn’s accounting policy in respect of intangible assets is
to account for all business combinations by applying the
acquisition method in accordance with IFRS 3. The excess of
the purchase price over the identifiable net assets was
recorded as intangible assets. The preliminary allocation of
the purchase price was based upon a preliminary valuation and
the estimates and assumptions are subject to change within
the purchase price allocation period (being one year from the
acquisition date). These changes may affect the intangible
assets recorded. It is currently assumed that no amount will
be allocated to goodwill as part of the purchase price
allocation exercise. The amortisation of intangible assets
arising as a result of the Knife Capital Acquisition has been
calculated after assessing the useful life of the intangible
assets based on a preliminary valuation and estimate.
8) The Rights Offer and the Specific Issue proceeds will be used
to invest in new companies in due course per Afdawn’s stated
vision, but as the nature of new acquisitions can’t already
be determined, it is assumed that the proceeds from the
Rights Offer and the Specific Issue have been invested in a
short term call account for the 6 month period of the pro
forma accounts earning interest at 3.5% per annum, being the
interest rate currently achieved on excess funding.
9) All adjustments are expected to have a continuing effect
other than interest received on the proceeds of the Rights
Offer and the Specific Issue.
B) Scenario 2 pro forma financial effects -
Unaudited Pro forma Percentage
financial financial change
information information
before the after the
Knife Capital Knife
Acquisition, Capital
Rights Offer Acquisition,
and Specific Rights Offer
Issue and Specific
Issue
Net asset value per share 11.7 10.1 (13.7%)
(cents)
Net tangible asset value 11.2 8.7 (22.3%)
per share (cents)
Basic earnings /(loss) (0.81) (0.45) 44.4%
per share (cents)
Diluted earnings per (0.56) (0.34) 39.3%
share (cents)
Basic headline earnings / (0.75) (0.42) 44.0%
(loss) per share (cents)
Diluted headline earnings (0.52) (0.31) 40.4%
/ (loss) per share
(cents)
Number of shares issued 508 184 920 684 81.2%
(‘000)
Weighted average number 508 184 920 684 81.2%
of shares issued (‘000)
Weighted diluted average 601 613 1 014 113 68.6%
number of shares issued
(‘000)
Notes and assumptions:
1) The Before the Rights Offer, the Specific Issue and the Knife
Capital Acquisition column has been extracted from the
unaudited published interim financial information of Afdawn
for the six months ended 31 August 2013.
2) Cash received from the Rights Offer of R25 million is based
on 312,500,000 Afdawn shares being issued through the Rights
Offer at 8 cents per Rights Offer Share.
3) Transaction costs of R1.635 million are assumed which have
been accounted for in share capital.
4) No cash is assumed to be received from the Specific Issue, as
the underwriters will receive their shares as part of the
Rights Offer.
5) The results for Knife Capital have been extracted from Knife
Capital’s statement of financial position in its audited
annual financial statements for the financial year ended 30
June 2013, without adjustment and from the statement of
comprehensive income in its reviewed interim financial
statements for the 6 month period ended 30 June 2013, without
adjustment.
6) The Knife Capital Acquisition by Afdawn of 100% of the share
capital of Knife Capital is assumed to be settled through the
issue of 100 000 000 Afdawn shares issued at 10 cents per
share.
7) Intangible assets arising as a result of the Knife Capital
Acquisition. Afdawn will undertake a purchase price
allocation relating to such intangible assets at Knife
Capital’s next year-end, which will be 28 February 2015.
Afdawn’s accounting policy in respect of intangible assets is
to account for all business combinations by applying the
acquisition method in accordance with IFRS 3. The excess of
the purchase price over the identifiable net assets was
recorded as intangible assets. The preliminary allocation of
the purchase price was based upon a preliminary valuation and
the estimates and assumptions are subject to change within
the purchase price allocation period (being one year from the
acquisition date). These changes may affect the intangible
assets recorded. It is currently assumed that no amount will
be allocated to goodwill as part of the purchase price
allocation exercise. The amortisation of intangible assets
arising as a result of the Knife Capital Acquisition has been
calculated after assessing the useful life of the intangible
assets based on a preliminary valuation and estimate.
8) The Rights Offer proceeds will be used to invest in new
companies in due course per Afdawn’s stated vision, but as
the nature of new acquisitions can’t already be determined,
it is assumed that the proceeds from the Rights Offer have
been invested in a short term call account for the 6 month
period of the pro forma accounts earning interest at 3.5% per
annum, being the interest rate currently achieved on excess
funding.
9) All adjustments are expected to have a continuing effect
other than interest received on the proceeds of the Rights
Offer and Specific Issue.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the renewal of cautionary
announcement included in the Announcement and are advised that
since the pro forma financial effects relating to the Knife
Capital Acquisition, the Rights Offer and the Specific Issue have
been disclosed in this announcement, caution is no longer required
to be exercised by shareholders when dealing in the Company’s
securities.
Johannesburg
20 January 2014
Corporate Adviser and Transaction Designated Adviser
PSG Capital
Date: 20/01/2014 02:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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