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Firm Intention to make an offer to acquire up to 100% of the total issued ordinary shares in Control Instruments
TORRE INDUSTRIAL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number: 2012/144604/06)
Share code: TOR
ISIN: ZAE000169322
(“Torre” or “the Company”)
ANNOUNCEMENT OF THE FIRM INTENTION OF TORRE TO MAKE AN OFFER TO
ACQUIRE UP TO 100% OF THE TOTAL ISSUED ORDINARY SHARES IN CONTROL
INSTRUMENTS NOT ALREADY OWNED BY TORRE
1. INTRODUCTION
1.1 Shareholders are referred to the cautionary announcements
published on SENS by Torre and Control Instruments, the last
renewals of which took place on 13 January 2014 (the “Torre
Cautionary Announcement”) and 14 January 2014 (the “Control
Instruments Cautionary Announcement”), respectively, as well as the
announcement published on SENS by Torre on 28 January 2014.
1.2 The board of directors of Torre is pleased to announce that the
board of directors of Control Instruments has received
notification from Torre of its firm intention to make an offer
to acquire up to 100% of the total issued ordinary shares in
Control Instruments not already owned by Torre, being 91 761
265 shares (the “Offer Shares”), by way of:
1.2.1 a scheme of arrangement in terms of section 114(1)(c) of
the Companies Act, No. 71 of 2008, as amended (the
"Companies Act"), to be proposed by the board of directors
of Control Instruments between Control Instruments and its
shareholders, other than Torre (the "Control Instruments
Shareholders") (the "Scheme"); or
1.2.2 an offer by Torre if the Scheme is not proposed or fails,
at the election of Torre, to the Control Instruments
Shareholders to acquire the Offer Shares (the “General
Offer”),
(the "Proposed Offer").
1.3 The Proposed Offer constitutes a firm intention by Torre to
make an offer to Control Instruments Shareholders as
contemplated in Chapter 5 of the Companies Act and Chapter 5 of
the Companies Regulations, 2011, promulgated under the
Companies Act (which includes the Takeover Regulations issued
pursuant to sections 120 and 223 of the Companies Act) (the
“Companies Regulations”).
1.4 Control Instruments Shareholders will, if the Scheme becomes
operative or upon acceptance of the General Offer, as may be
applicable, receive a cash consideration of R1.40 per Control
Instruments Share (the “Offer Consideration”) disposed of,
which is equivalent to an aggregate cash consideration of
R128 465 771 for all the Offer Shares and represents a premium
of:
1.4.1 19.66% to the closing price of the Offer Shares on the
securities exchange operated by the JSE Limited ("JSE") as
at 28 November 2013, being the date of publication by
Control Instruments of the first cautionary announcement
related to the Proposed Offer ("First Cautionary"); and
1.4.2 44.33% to the volume weighted average price ("VWAP") of
the Offer Shares on the securities exchange operated by the
JSE for the 30 trading days up to and including 29 November
2013, being the date of publication of the First
Cautionary.
2. RATIONALE FOR THE PROPOSED OFFER
2.1 Nature of the business of Control Instruments
Control Instruments’ main subsidiaries are CI Automotive
Proprietary Limited and Control Instruments Automotive Plastics
Proprietary Limited, which manufacture and/or market, sell and
distribute premium branded automotive aftermarket products
(including the brand names Gabriel, Autocom, Echlin, VDO,
Textar, Mag-Brakes, Warn, Hi-Lift, VisionX and Truck-Lite), and
manufacture and sell automotive battery cases, directly and/or
indirectly into sub-Saharan Africa. The automotive aftermarket
is the secondary market of the automotive industry concerned
with the supply of automotive products after the sale of the
vehicle to the end-user.
2.2 Nature of the business of Torre
Torre is a listed industrial group which provides equipment,
engineering and financing solutions to its customers in
selected global markets. Torre is currently comprised of three
operating segments, namely: the Plant and Equipment segment,
consisting of SA French Limited, Forktech Proprietary Limited
and imminently Kanu Equipment Limited; the Engineering Services
and Supplies segment, consisting of Tractor and Grader Supplies
Limited and Control Instruments; and the Financial Solutions
segment, consisting of Torre Capital Limited. Torre is
committed to achieving ongoing, controlled growth via a
combination of organic and acquisitive expansion in its
targeted markets.
2.3 Torre considers the Proposed Offer consistent with its long
term growth strategy and believes the following benefits can be
achieved as a result of the implementation of the Proposed
Offer:
- Immediate scale and earnings power for Torre via the
consolidation of 100% of the operations of Control
Instruments;
- Opportunity to unlock significant value by consolidating
certain functions, improving operating efficiencies and
reducing operating expenses;
- Addition of attractive range of self-owned and exclusively
distributed products;
- Strong management team; and
- Diversification into the automotive aftermarkets part
sector.
2.4 The Proposed Offer will, if implemented by way of the Scheme,
or if accepted in respect of the General Offer, afford Control
Instruments Shareholders an opportunity to realise their
investment in Control Instruments rather than to continue
holding shares in an unlisted Control Instruments following the
termination of its listing on the Main Board of the securities
exchange of the JSE contemplated in paragraphs 3.3, 3.4 and 10
below.
3. MECHANICS OF THE PROPOSED OFFER
3.1 The Proposed Offer constitutes an "affected transaction" as
defined in section 117(1)(c) of the Companies Act. The
Proposed Offer will be implemented either by way of the Scheme
or, in the event that the Scheme is not proposed or fails and
Torre so elects, by way of the General Offer (refer paragraph
3.4 below).
3.2 Torre's firm intention to make the Proposed Offer is subject to
the suspensive conditions set out in paragraph 4.1 below.
3.3 The implementation of the Scheme will be subject to the
suspensive conditions set out in paragraph 5.2 below (the
"Scheme Conditions"). In the event that the Scheme becomes
operative, the listing of Control Instruments’ shares on the
Main Board of the JSE will be terminated, and Control
Instruments Shareholders will be deemed to have sold their
Offer Shares for the Offer Consideration, thereby constituting
Control Instruments a wholly owned subsidiary of Torre.
3.4 In the event that the Scheme is not proposed or fails, Torre
may, at its election, make the General Offer to Control
Instruments Shareholders, which General Offer will be subject
to the suspensive conditions set out in paragraph 6.1 below. To
the extent that the General Offer is implemented, following the
approval of the Delisting Resolution (as referred in paragraph
6.1.2 below), only Control Instruments Shareholders who have
accepted the General Offer will sell their Offer Shares to
Torre for the Offer Consideration. Those Control Instruments
Shareholders who do not accept the General Offer will remain
shareholders in Control Instruments, which will become an
unlisted subsidiary of the Torre Group.
4. OFFER CONDITIONS
4.1 Torre’s firm intention to make the Proposed Offer, and
accordingly also the posting of a circular in respect of the
Proposed Offer (the "Circular") is subject to the fulfilment of
the suspensive conditions that (“Offer Conditions”), on or
before 28 February 2014:-
4.1.1 the independent board of directors of Control
Instruments, being those directors of Control Instruments
who act independently as contemplated in the Companies
Regulations, namely Messrs Peter Surgey, Stuart Bromfield
and Prof. Alex Watson (the "Independent Board"), has
retained an independent expert in terms of section 114(2)
of the Companies Act and regulation 90 of the Companies
Regulations, and such expert has prepared and issued a
report in terms of section 114(3) of the Companies Act on
the Offer Consideration and the fairness and reasonableness
thereof;
4.1.2 the Independent Board recommends to the Control
Instruments Shareholders to vote in favour of (i) the
Scheme, and (ii) the Delisting Resolution and to accept the
General Offer, as may be applicable;
4.1.3 to the extent applicable, all requisite regulatory
approvals have been obtained as may be necessary in
relation to the Proposed Offer from the JSE, the Takeover
Regulation Panel (the “TRP”), the Financial Surveillance
Department of the South African Reserve Bank (to the extent
applicable) (either unconditionally or subject to
conditions acceptable to Torre); and
4.1.4 in respect of the Scheme only, Control Instruments has
concluded an unconditional agreement (save for any
condition requiring that the Scheme becomes unconditional)
with all holders of options issued by the Control
Instruments Incentive Scheme Trust to acquire Control
Instruments shares ("Options") in terms of the Control
Instruments Share Incentive Scheme, to waive all their
rights in respect of the Options and the Control
Instruments Share Incentive Scheme, on such terms and
conditions as may be acceptable to Torre and Control
Instruments, failing which Torre shall make such comparable
offer as may be required in terms of the Companies
Regulations.
4.2. The conditions in paragraphs 4.1.1 and 4.1.3 above are
regulatory in nature and cannot be waived. However, Torre may
and Control Instruments may, by agreement and to the extent
they are permitted to do so in terms of the Companies Act and
the Companies Regulations, extend the time period within which
such conditions are to be fulfilled by providing Control
Instruments with written notice thereof. Torre may, in its
discretion, waive either or both of the conditions set out in
paragraph 4.1.2 and/or 4.1.4 above on written notice to Control
Instruments.
5. THE SCHEME
5.1 Under the terms of the Proposed Offer, if the Scheme is
implemented, all Control Instruments Shareholders will receive
the Offer Consideration of R1.40 per Offer Share and Torre will
acquire all the issued shares in Control Instruments which it
does not already own. The Offer Consideration is calculated on
the assumption that Control Instruments will not conduct any
capital reduction, make any distributions, dividends or similar
payments to or for the benefit of shareholders of Control
Instruments ("Distribution") between 1 January 2014 and the
settlement date of the Offer Consideration. In the event that
Control Instruments makes any such Distribution, the Offer
Consideration will be adjusted downwards by the amount of the
Distribution on a per share basis.
5.2 The implementation of the Scheme is subject to the fulfilment
or, if appropriate, waiver (in whole or in part), by Torre of
the following suspensive conditions by no later than
30 April 2014 or such later date/s as may be agreed to between
Torre and Control Instruments:-
5.2.1 to the extent applicable, all requisite regulatory
approvals required for the Scheme have been obtained from
the JSE, the TRP, the Financial Surveillance Department of
the South African Reserve Bank and the South African
Competition Commission (either unconditionally or subject
to conditions acceptable to Torre);
5.2.2 the approval of the Scheme by the requisite majority of
Control Instruments Shareholders as contemplated in section
115(2)(a) of the Companies Act (being not less than 75% of
the votes exercised by shareholders present and entitled to
vote) at the general meeting of Control Instruments
shareholders to be convened for purposes of approving the
Scheme (the “CI General Meeting”), and:
5.2.1.1 to the extent required, the approval of the
implementation of such resolution by a court in
terms of section 115(2)(c) and/or section 115(3) of
the Companies Act; and
5.2.1.2 if applicable, Control Instruments not treating the
aforesaid resolution as a nullity, as contemplated
in section 115(5)(b) of the Companies Act;
5.2.3 the receipt of unconditional approval from the TRP in
terms of a compliance certificate or exemption to be issued
in terms of the Companies Act in relation to the Scheme;
5.2.4 in relation to any objections to the Scheme by Control
Instruments Shareholders:
5.2.4.1 if shareholders give notice objecting to the
Scheme, as contemplated in section 164(3) of the
Companies Act, and vote against the resolutions
proposed at the CI General Meeting, shareholders
holding no more than 10% of all Offer Shares
eligible to be voted at the CI General Meeting give
such notice and vote against the resolutions
proposed at the CI General Meeting; or
5.2.4.2 if shareholders holding more than 10% of all Offer
Shares eligible to vote at the CI General Meeting
give notice objecting to the Scheme, as contemplated
in section 164(3) of the Companies Act, and vote
against the resolutions proposed at the CI General
Meeting, the relevant shareholders do not exercise
their appraisal rights afforded to them in terms of
section 164 of the Companies Act, by giving valid
demands in terms of sections 164(5) to 164(8) of the
Companies Act within 30 (thirty) business days
following the CI General Meeting, in respect of more
than 10% of the Offer Shares eligible to be voted at
the CI General Meeting; and
5.2.5 the counterparties to all such material contracts (as
agreed between Torre and Control Instruments) consenting to
the change of control as a result of the implementation of
Scheme.
5.3 The Scheme Conditions in:
5.3.1 paragraphs 5.2.1 and 5.2.3 above are regulatory in nature
and cannot be waived; and
5.3.2 paragraphs 5.2.3 and 5.2.4 above have been inserted for
the benefit of Torre, which will be entitled, in its sole
discretion, to waive fulfilment of such Scheme Conditions,
in whole or in part, on written notice to Control
Instruments.
5.4 An announcement will be published on SENS as soon as
practicable after all the Scheme Conditions have been fulfilled
or waived, as the case may be.
6. GENERAL OFFER
6.1 Should the Scheme not be proposed or fail (but subject to the
fulfilment or waiver, where appropriate, of the Offer
Conditions), Torre may, at its election, make an offer to the
Control Instruments Shareholders to acquire all of their Offer
Shares for the Offer Consideration, subject to the fulfilment
or waiver of the following suspensive conditions by no later
than 30 April 2014 or such later date/s as may be agreed to
between Torre and Control Instruments:
6.1.1 to the extent applicable, all requisite regulatory
approvals have been obtained from the JSE, the TRP, the
Financial Surveillance Department of the South African
Reserve Bank and the South African Competition Commission
(either unconditionally or subject to conditions
acceptable to Torre);
6.1.2 approval by the requisite majority of Control Instruments
Shareholders at the CI General Meeting of the termination
of Control Instruments’ listing on the Main Board of the
JSE in terms of section 1.14(a) of the Listings
Requirements of the JSE (the “Delisting Resolution”);
6.1.3 approval by the board of directors of Control Instruments
of the termination of Control Instruments’ listing on the
Main Board of the JSE; and
6.1.4 the receipt of unconditional approval from the TRP in
terms of a compliance certificate or exemption to be issued
in terms of the Companies Act in relation to the General
Offer;
6.1.5 the counterparties to all material contracts (as agreed
between Torre and Control Instruments) consenting to the
change of control as result of the implementation of
General Offer.
6.2 The conditions in:
6.2.1 paragraphs 6.1.1 to 6.1.4 above are regulatory in nature
and cannot be waived; and
6.2.2 paragraph 6.1.5 above has been inserted for the benefit
of Torre, which will be entitled, in its sole discretion,
to waive fulfilment of such conditions, in whole or in
part, on written notice to Control Instruments.
6.3 If the General Offer is made, Control Instruments Shareholders
will only be able to accept the General Offer in respect of all
of their Offer Shares.
7. SHAREHOLDING IN CONTROL INSTRUMENTS AND ACTING AS PRINCIPAL
7.1 Torre currently beneficially and indirectly owns 47 675 489
Offer Shares, representing 34.54% of the issued share capital
of Control Instruments (excluding treasury shares) (“Torre’s
Control Instruments Shares”).
7.2 Torre is acting as principal and not as agent in respect of the
Proposed Offer and it is not acting in concert with any other
parties for purposes of the implementation of the Proposed
Offer.
8. CONFIRMATION OF FINANCIAL RESOURCES
In accordance with Regulation 111(4) and Regulation 111(5) of
the Companies Regulations, Cliffe Dekker Hofmeyr Incorporated
has provided Control Instruments and the TRP with an
irrevocable cash confirmation and Standard Bank of South Africa
Limited has provided Control Instruments and the TRP with an
irrevocable bank guarantee, which confirm that, in aggregate,
Torre has sufficient cash resources held in Escrow and by way
of bank guarantee in terms of Regulation 111, to satisfy
payment of the Offer Consideration in full.
9. IRREVOCABLE UNDERTAKINGS
Torre has received irrevocable undertakings from the following
Control Instruments Shareholders to vote in favour of the
Scheme and the Delisting Resolution, as may be applicable, in
respect of their entire shareholding in Control Instruments, to
the extent they are permitted to do so in terms of the
Companies Regulations and the Listings Requirements of the JSE:
Delisting
Scheme Resolution
% of % of % of
total issued issued
issued share share
share capital of capital of
capital Control Control
Total of Instru- Instru-
Number Control ments ments
of Instru- prior to prior to
Control ments the the
Instru- prior Proposed Proposed
Control ments to the Offer Offer
Instruments shares Proposed eligible eligible
Shareholders held Offer to vote* to vote*
Torre 47 675 489 34.54% - 34.54%
Kanthu Nkhama
Automotive
Proprietary
Limited 28 000 000 20.29% 31.00% 20.29%
Westbrooke
Capital
Management
Special
Opportunities
En Commandite
Partnership 19 918 150 14.43% 22.05% 14.43%
Flagship Unit
Trusts 7 616 044 5.52% 8.43% 5.52%
Niall Brown 5 735 287 4.16% 6.35% 4.16%
Total 108 944 970 78.94% 67.83% 78.94%
* Excluding 1 424 712 treasury shares
In terms of section 115(4) of the Companies Act, Torre’s
Control Instruments Shares will be excluded from voting on the
resolution to approve the Scheme at the CI General Meeting.
10. TERMINATION OF CONTROL INSTRUMENTS’ LISTING
In the event that the Scheme becomes operative or the General
Offer is implemented, application will be made to the JSE to
terminate the listing of all of the Control Instruments shares
from the Main Board of the JSE.
11. OPINIONS AND RECOMMENDATIONS
11.1 In accordance with section 114(3) of the Companies Act and
regulation 90(1) of the Companies Regulations, the Independent
Board is required to retain an independent expert acceptable to
the TRP for the purposes of providing external advice in regard
to the Scheme and the General Offer and to make appropriate
recommendations to the board of directors of Control
Instruments for the benefit of Control Instruments
Shareholders. The substance of such external advice and the
views of the Independent Board in this regard will be detailed
in the Circular.
11.2 Similarly, in accordance with paragraph 1.14(d) of the
Listings Requirements of the JSE, the board of directors of
Control Instruments is required to retain an independent expert
acceptable to the JSE for the purposes of providing external
advice in regard to the fairness of the Offer Consideration
insofar as same relates to the termination of Control
Instruments’ listing on the Main Board of the JSE, in the event
that the Scheme is not proposed fails but the General Offer is
made. The substance of such external advice and the views of
the board of directors of Control Instruments in this regard
will be detailed in the Circular.
12. DOCUMENTATION AND SALIENT DATES
Further details of the Scheme and the General Offer will be
included in the Circular, which will contain, inter alia, a
notice of the CI General Meeting, a form of proxy and a form of
acceptance, surrender and transfer. Each of the Scheme and the
General Offer will constitute a separate affected transaction
for purposes of the Companies Regulations and the Circular will
distinguish between them and accordingly contain, inter alia,
separate disclosures regarding each of the Scheme and the
General Offer. The Circular is expected to be posted on or
about 28 February 2014. The salient dates in relation to the
Scheme and the General Offer will be published on SENS and in
the press prior to the posting of the Circular.
Johannesburg
31 January 2014
Corporate Adviser to Torre: AfrAsia Corporate Finance Proprietary
Limited
Designated Advisor to Torre: PSG Capital Proprietary Limited
Legal Advisor to Torre: Cliffe Dekker Hofmeyr Incorporated
Date: 31/01/2014 05:39:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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