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TORRE INDUSTRIAL HOLDINGS LIMITED - Terms regarding the acquisition of Control Instruments and cautionary withdrawal

Release Date: 03/02/2014 10:09
Code(s): TOR     PDF:  
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Terms regarding the acquisition of Control Instruments and cautionary withdrawal

TORRE INDUSTRIAL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number: 2012/144604/06)
Share code: TOR
ISIN: ZAE000169322
(“Torre” or “the Group” or “the Company”)

TERMS REGARDING THE ACQUISITION OF CONTROL INSTRUMENTS, UPDATE
ON THE PRIVATE PLACEMENT, DETAILS OF A PROPOSED NAME CHANGE
AND WITHDRAWAL OF CERTAIN CAUTIONARY ANNOUNCEMENTS

1.    CONTROL INSTRUMENTS

1.1   INTRODUCTION

Further to the SENS announcements published on 13 January 2014
and 28 January 2014, Torre is pleased to advise that it has
announced its firm intention to make an offer to acquire up to
100% of the total issued ordinary shares in Control
Instruments Group Limited (“Control Instruments”) not already
owned by Torre, being 91 761 265 shares (the “Offer Shares”),
for a cash consideration of R1.40 per share (“Offer
Consideration”), by way of:

- a scheme of arrangement in terms of section 114(1)(c) of
the Companies Act 71 of 2008, as amended (the "Companies
Act"), to be proposed by the board of directors of Control
Instruments (the "CI Board") between Control Instruments and
its shareholders, excluding Torre, (the "Control Instruments
Shareholders") (the "Scheme"); or

- an offer by Torre, if the Scheme is not proposed or fails,
at Torre’s election, to the Control Instruments Shareholders
to acquire the Offer Shares (the "General Offer")

(the "Proposed Offer").

The details of the Proposed Offer were published by Torre on
SENS in a firm intention announcement on 31 January 2014
(“FIA”). The making of the Proposed Offer is subject to the
fulfilment of certain conditions, including, amongst others,
that the independent board of Control Instruments recommends
that Control Instruments shareholders vote in favour of the
Scheme and accept the General Offer (as the case may be).

Defined terms used in paragraphs 1.1 – 1.8 of this
announcement shall bear the meanings ascribed to them in the
FIA. The CI General Meeting, where the resolutions regarding
the Proposed Offer will be considered, is expected to be held
early in April 2014. Following regulatory and reporting dates
thereafter, the expected implementation date of the Proposed
Offer is expected to be on or about 12 May 2014.

1.2   BRIEF OVERVIEW OF THE BUSINESS OF CONTROL INSTRUMENTS

The SENS announcement dated 12 December 2013 and the FIA
dated 31 January 2014 provided shareholders with detail on
the nature of the Control Instruments business. In summary
the Control Instruments Group manufactures and/or markets,
sells and distributes premium branded automotive aftermarket
products directly and/or indirectly into sub-Saharan Africa
and also manufactures automotive battery cases. Well-known
brands distributed by the group are Gabriel, Autocom, Echlin,
VDO, Textar, Mag-Brakes, Warn, Hi-Lift, VisionX and Truck-
Lite.

1.3   RATIONALE FOR THE PROPOSED OFFER

Torre considers the Proposed Offer to be consistent with
Torre’s 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.

1.4   CATEGORISATION OF THE PROPOSED OFFER

The Proposed Offer will be regarded as an acquisition for
Torre in terms of section 9 of the JSE Listings Requirements.
This acquisition has been categorised as a Category 2
acquisition, accordingly no Torre shareholder approval will be
required.

In terms of the Companies Act, the Proposed Offer will
constitute an "affected transaction" as contemplated in
section 117(1)(c) which, if implemented by way of Scheme, will
require approval from the Control Instruments Shareholders by
way of a special resolution, which resolution will be
presented at the CI General Meeting.
On implementation of the Proposed Offer, Torre will be
required to notify Control Instruments of its increased
shareholding in accordance with section 122 of the Companies
Act.

1.5   FUNDING OF THE PROPOSED OFFER

Torre has provided the TRP with an irrevocable cash
confirmation and an irrevocable bank guarantee which confirm
that Torre has sufficient cash resources at its disposal to
settle the Offer Consideration in full.

1.6   MECHANICS OF THE PROPOSED OFFER

In the event that the Scheme becomes operative, Control
Instruments will be delisted from the main board of the JSE
and Control Instruments Shareholders will be deemed to have
sold their Offer Shares to Torre for the Offer Consideration.
Torre will hold 100% of the issued shares in Control
Instruments.

In the event that the Scheme fails, Torre may, at its
election, make the General Offer to Control Instruments
Shareholders, which General Offer will be conditional upon,
amongst other things, the delisting of Control Instruments
from the JSE.

To the extent the General Offer is implemented following the
approval of the Delisting Resolution, only Control Instruments
Shareholders who accept the General Offer will sell their
Offer Shares to Torre at 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 Torre.

1.7   CONDITIONS PRECEDENT OF THE SCHEME AND GENERAL OFFER

Shareholders are referred to paragraphs 5 and 6 of the FIA for
details regarding conditions precedent of the Scheme and
General Offer. In summary, the following conditions are
required to be met by no later than 30 April 2014, or such
later date/s as may be agreed to between Torre and Control
Instruments regarding the Scheme:

1. Regulatory approval, including but not limited to JSE, TRP
   and Competition Commission;
2. Approval by the requisite majority of Control Instruments
   Shareholders of the Scheme, and:
   2.1   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
      2.2if applicable, Control Instruments not treating the
         aforesaid resolution as a nullity, as contemplated in
         section 115(5)(b) of the Companies Act; and
3. Not more than 10% of Control Instruments Shareholders
   exercise appraisal rights in terms of section 164 of the
   Companies Act.

The following conditions are required to be met by no later
than 30 April 2014, or such later date/s as may be agreed to
between Torre and Control Instruments in respect of the
General Offer (if made):

1. Receipt of applicable regulatory approvals, including but
   not limited to the JSE, TRP and Competition Commission;
2. Control Instruments Board approval of the delisting of
   Control Instruments from the JSE list; and
3. Approval by the requisite majority of Control Instruments
   Shareholders of the Delisting Resolution.

Other than the above conditions that are of a regulatory
nature and cannot be waived, Torre and Control Instruments, by
agreement and to the extent they are permitted to do so in
terms of the Companies Act, may extend the time period of the
fulfilment of the conditions or waive the conditions in
respect of the Proposed Offer.

1.8    WARRANTIES

There are    no     warranties   given   in   respect   of   the   Proposed
Offer.


2.     PRIVATE PLACEMENT

2.1    INTRODUCTION

Torre previously advised shareholders that it intended to
raise a minimum amount of R175 000 000 by way of a private
placement of new Torre shares.

Torre conducted a successful private placement road show to
potential investors over the period 14 - 24 January 2014 and
as a result of significant demand, the board of directors have
decided to increase the amount to be raised to a total of R300
000 000 via the issue of 136 363 636 new Torre shares at R2.20
per share (“Private Placement”).

The additional capital, combined with new debt facilities that
are being raised by the Group, will provide Torre with greater
flexibility in the funding of: its organic expansion plans;
the Control Instruments acquisition; and other recently
announced transactions to acquire Kanu, Power Parts and Beech
(announced on SENS on 13 January 2014).

The issue of the Private Placement shares at R2.20 per share
is at a discount of approximately 13% to the 30-day Volume
Weighted Average Price (“VWAP”).

2.2   CONDITIONS PRECEDENT TO THE PRIVATE PLACEMENT

The Private Placement is subject to the following conditions
precedent being achieved by no later than 30 April 2014:

-    JSE approval of a circular to Torre shareholders;
-    Approval by the requisite majority of Torre shareholders of
     the special resolutions (to the extent applicable and
     required) in terms of section 41 (3) of the Companies Act
     and section 5.51 of the JSE Listings Requirements; and
-    Approval of the listing of the Private Placement shares.

2.3   CATEGORISATION OF THE PRIVATE PLACEMENT

The Private Placement will be deemed a specific issue of
shares for cash in terms of the JSE Listings Requirements and
will require the support of at least 75% of the Torre
shareholders present and entitled to vote at a Torre general
meeting (the “General Meeting”). In addition, in accordance
with section 41(3) of the Companies Act, the Private Placement
will also require support of at least 75% of the Torre
shareholders present and entitled to vote at the General
Meeting as more than 30% of Torre’s issued share capital will
be issued. Details hereof will be included in a notice of
General Meeting attached to a circular to Torre shareholders
(the “Circular”), to be issued in due course.

The number of shares to be issued in terms of the Private
Placement will exceed 50% of the issued share capital of Torre
and accordingly Torre will issue revised listing particulars
together with the Circular.

Although the issue is at a discount to the 30-day VWAP, all
the investors participating in the Private Placement will be
public in terms of section 4.25 of the Listings Requirements
and therefore no fairness opinion is required.

Shareholders are reminded that the Private Placement is not an
offer to the public as contemplated in the Companies Act and
accordingly no prospectus will be issued or registered in
respect thereof.

3.    PRO FORMA FINANCIAL EFFECTS
For purposes of the pro forma financial effects, the Proposed
Offer and the Private Placement are collectively referred to
in this paragraph as the “Transactions”.

The unaudited pro forma financial effects of the Transactions
on Torre shareholders are the responsibility of the Torre
directors and have been prepared for illustrative purposes
only to provide information about how the Transactions may
affect the financial position and results of Torre and,
because of its nature, may not give a fair reflection of
Torre’s financial position, changes in equity, and results of
operations or cash flows after the Transactions.

The pro forma financial information has been prepared using
the most recent financial period of the Group for the year
ended 30 June 2013 in terms of the Listings Requirements and
guidelines issued by the South African Institute of Chartered
Accountants. The accounting policies of Torre have been used
in calculating the pro forma financial effects. The accounting
policies used are consistent with previous accounting policies
used by Torre and the accounting policies have been applied on
the same basis.

                 After
                  Post    Proposed     Private
             Reporting       Offer   Placement    After the
                Period     Adjust-     Adjust-       Trans-        %
             Events(1)     ment(2)     ment(3)   actions(4)   change
Profit for
the period
(R’000)          8 098      13 951       7 816       29 865     269%
Headline
earnings
for the
period
(R’000)          6 814      13 922       7 816       28 552     319%
Net asset
value per
share
(cents)           96.6           -        50.6        147.2      52%
Net
tangible
asset
value per
share
(cents)           48.3      (39.9)       111.3        119.7     148%
Basic
earnings
per share
(cents)            9.4        16.2      (12.1)         13.5      43%
Headline
earnings
per share
(cents)            7.9        16.1        (15)           9       14%
Weighted
average
number of
shares in
issue
during the
period      86 353 688 86 353 688 222 717 324 222 717 324    158%
Actual
shares in
issue at
the end of
the period 180 316 308 180 316 308 316 679 944 316 679 944       76%

Notes and assumptions:

1) The amounts set out in the “After Post Reporting Period
Events” column above have been extracted from the SENS
announcement published on 12 December 2013, in which the
acquisition of a 34.26% interest in Control Instruments
(excluding treasury shares) was announced.

2) The Proposed Offer accounts for the purchase of 91 761 265
Control Instruments Shares at a price of R1.40 per share,
being the Control Instrument Shares that Torre does not
already own. The Control Instruments financial information has
been extracted from the audited year end results for 31
December 2012 and the interim results for the period ended 30
June 2012 and reviewed results for the year ended 30 June
2013. The aggregate investment for the Proposed Offer of R128
465 771 is assumed to have been funded through the proceeds of
the Private Placement. The effects of the previously reported
acquisition of the 34.26% interest in Control Instruments
(excluding treasury shares) giving rise to an investment in an
associate was fully reversed for purposes of these pro forma
financial effects. The effect of IFRS 3.18-20 (Purchase Price
Allocation) was not considered in calculating the pro forma
financial effects. A best estimate of the Purchase Price
Allocation based on the information available to Torre will be
made in the Circular following this announcement. For the
purposes of these pro forma financial effects, goodwill of R53
415 000 was recognised on acquisition.

3) The proceeds of the Private Placement will be partly used
to fund the acquisition of Control Instruments as well as to
settle fees associated with the Transactions. The remaining
proceeds will be held as cash to fund organic growth and
potentially future acquisitions. All financing activities
presented in the pro forma financial effects are at an assumed
rate of 8.5%.

4) It has been assumed that the Transactions were implemented
on 30 June 2013 for purposes of compiling the statement of
financial position and on 1 July 2012 for purposes of
compiling the statement of comprehensive income.

5) Tax consequences in relation to the Transactions have been
taken into account.

6) All adjustments, other than listing and transaction fees
which amount to approximately R9.4 million, will have a
continuing effect.

4.    PROPOSED CHANGE OF NAME

The Group has developed rapidly over the past year both
organically and by way of acquisition. In order to correctly
describe the Group’s dynamic nature, the board of directors
proposes that the Company’s name be changed to “Torre
Industries Limited” (the “Name Change”). Torre has reserved
the name “Torre Industries Limited” with CIPC in accordance
with section 12 of the Companies Act.

The General Meeting will consider and, if deemed fit, pass the
special resolutions necessary to approve the Name Change and
make the necessary amendment to Torre’s memorandum of
incorporation (“MOI”) to reflect the new name.

Subject to obtaining Torre Shareholder approval for the
special resolutions to approve the Name Change and amend the
MOI, the special resolutions will be filed and registered with
CIPC.

5.   ALIGNMENT OF MOI, FURTHER DOCUMENTATION AND SALIENT DATES

Torre will ensure that the provisions of the MOI of Control
Instruments, which will become a subsidiary of Torre post-
implementation of the Proposed Offer, does not frustrate nor
relieve Torre in any way from compliance with its obligations
in terms of the Listings Requirements.

The Circular will incorporate the terms of the Private
Placement and Name Change, information regarding the intention
to transfer Torre from the Alternative Exchange to the main
board of the JSE (pending JSE approval), a notice of General
Meeting and revised listing particulars and will be submitted
to Torre shareholders in compliance with section 9.20(b) of
the JSE Listings Requirements.
The Company will keep shareholders informed of the expected
date of posting of the Circular and the salient dates in terms
of the corporate actions detailed in this announcement.

6.   WITHDRAWAL OF CERTAIN CAUTIONARY ANNOUNCEMENTS

Since full terms including pro forma financial effects of the
Proposed Offer and Private Placement have been disclosed
above, the cautionary announcements dated 12 December 2013 and
13 January 2014 as they specifically relate to the acquisition
of an interest in Control Instruments and the Private
Placement, are accordingly withdrawn.


Johannesburg
3 February 2014

Corporate Adviser to Torre
AfrAsia Corporate Finance (Pty) Ltd

Legal Adviser to Torre
DLA Cliffe Dekker Hofmeyr Inc.

Designated Adviser
PSG Capital (Pty) Ltd

Date: 03/02/2014 10:09:00 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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