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B&W INSTRUMENTATION & ELECTRICAL LD - Joint announcement relating to the pro forma financial effects of the firm intention by ELB Group to make an offer

Release Date: 06/02/2014 16:51
Code(s): BWI ELR     PDF:  
Wrap Text
Joint announcement relating to the pro forma financial effects of the firm intention by ELB Group to make an offer

B & W INSTRUMENTATION AND ELECTRICAL                                            ELB GROUP LIMITED
                     LIMITED                                          Incorporated in the Republic of South Africa
    Incorporated in the Republic of South Africa                        (Registration number 1930/002553/06)
      (Registration number 2001/008548/06)                             Share code: ELR ISIN: ZAE000035101
     Share code: BWI      ISIN: ZAE000098687                                        (“ELB Group”)
                      (“B&W”)


 JOINT ANNOUNCEMENT RELATING TO THE PRO FORMA FINANCIAL EFFECTS OF THE FIRM
 INTENTION BY ELB GROUP TO MAKE AN OFFER TO ACQUIRE THE ENTIRE ISSUED ORDINARY
 SHARE CAPITAL OF B&W AND WITHDRAWAL 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"), and the firm intention announcement released on SENS on 2
        December 2013 and published in the press on 3 December 2013 (“Firm Intention Announcement”), in connection
        with the firm offer by ELB Group 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") and the parties’ intention to terminate the listing of B&W
        on the AltX of the JSE Limited ("JSE") should the Proposed Transaction be implemented, B&W and ELB Group wish to
        set out in this joint announcement, the pro forma effect on the earnings and asset value per B&W share and ELB Group
        Share if the Proposed Transaction is implemented .

        Accordingly, this announcement should be read with the Firm Intention Announcement for all intents and purposes, as

        if it were incorporated in paragraph 14 thereof. Words and phrases defined in the Firm Intention Announcement will
        have the same meanings in this announcement, unless expressly indicated otherwise.



  2.    PRO FORMA EARNINGS AND ASSET VALUE PER B&W SHARE

        The pro forma financial effects of the Scheme on B&W Shareholders, for which the directors of B&W are responsible,
        are provided for illustrative purposes only to provide information about how the Scheme will affect the financial position
        of the B&W Shareholders who receive the Scheme Consideration, by illustrating the effect thereof on the earnings per

        share (“EPS”) and headline earnings per share (“HEPS”) of the Scheme Shares exchanged for new ELB Group
        Shares, as if the Scheme had become operative on 1 September 2012, and, for the purpose of net asset value per
        share (“NAVPS”) and net tangible asset value per share (“NTAVPS”) as if the Scheme had become operative on 31

        August 2013. These pro forma financial effects are based on the 12 month results for B&W to 31 August 2013. Because
        of their nature, the pro forma financial effects may not give a fair presentation of B&W Shareholders’ financial position,
        changes in equity, results of operations or cash flows, following the implementation of the Scheme. There are no post

        balance sheet events which require adjustment to the pro forma financial effects.




                                                                                                                                                                                   Before the Scheme            After the Scheme            Change
                                                                    (Note 1)                 (Note 2 - 7)             %
 EPS (cents)                                                            (17.6)                      427.2           2 527
 HEPS (cents)                                                           (17.6)                      205.5           1 268
 NAVPS (cents)                                                            73.3                    2 707.9           3 594
 NTAVPS (cents)                                                           69.3                    2 625.5           3 689
 Weighted average number of shares in issue
 for EPS & HEPS calculation                                        204 373 959                  27 288 500
 Shares in issue at year end for NAVPS &                           204 373 959                  27 521 820
 NTAPS calculation
 Switch Ratio                                                               108                           1

Notes:

1. The financial information in the "Before the Scheme" column is based on the financial information extracted, without
    adjustment, from B&W’s published audited consolidated financial results for the year ended 31 August 2013.

2. The financial information in the “After the Scheme” column is based on ELB Group’s published audited consolidated

    financial results for the year ended 30 June 2013 and consolidating B&W’s published audited consolidated financial
    results for the year ended 31 August 2013, taking into account the adjustments in notes 3 – 5 below and the effect of
    the Switch Ratio on B&W.

3. Estimated once-off transaction costs for ELB Group and B&W amounting to R1.5 million have been deducted. It has
    been assumed that these costs are not tax deductible. These amounts will be paid out of available cash resources
    and are attributable to the various professional advisers, regulatory authorities and printing costs.

4. Raising of additional depreciation on property, plant and equipment resulting in a reduction to the net book value of
    R5.7 million, an additional depreciation charge, amounting to R2.8 million, and the raising of a deferred tax asset as
    a result of aligning B&W’s depreciation estimates with those of ELB Group.

5. Recognition of a bargain purchase gain arising as a result of the Scheme, amounting to R70.9 million after applying
    the principles of International Financial Reporting Standard “IFRS” 3: Business Combinations. The R70.9 million is
    the difference between the provisional assessment of the fair value of the B&W assets and liabilities acquired,
    amounting to R156.1 million and the provisional Scheme Consideration (calculated as 1 964 527 Scheme Shares at
    the fair value of R45 being the market price of an ELB Group Share on 04 November 2013, the date of the issue of the
    cautionary announcement), amounting to R88.4 million, less the 72 176 Scheme Shares to be issued to the B&W
    Share Purchase Scheme Trust at the fair value of R45 per Scheme Share which will be debited to treasury shares,
    amounting to R3.2 million. On implementation of the Scheme an effective acquisition date reassessment of the fair
    value of the B&W assets and liabilities acquired will be undertaken. This reassessment may in all likelihood result in
    changes to the fair values of the B&W assets and liabilities acquired to those reflected above.

6. The HEPS of 205.5 cents per share is after adjusting earnings for the bargain purchase gain of R70.9 million, non
    controlling interests of (R10.7 million) and profit on disposal of plant and equipment net of tax of R0.2 million.

7. The switch ratio used in the pro forma calculation is 108 Scheme Shares for every one ELB Group Share.

The full pro forma financial information of B&W and the Reporting Accountants’ Report thereon will be set out in the
Circular.




                                                                                                                     
3.   PRO FORMA EARNINGS AND ASSET VALUE PER ELB GROUP SHARE

     The pro forma financial effects of the Scheme on ELB Group shareholders, for which the directors of ELB Group are

     responsible, are provided for illustrative purposes only to provide information about how the Scheme will affect the
     financial position of the ELB Group shareholders by illustrating the effect thereof on the EPS and HEPS of ELB Group,
     as if the Scheme had become operative on 1 July 2012, and, for the purpose of NAVPS and NTAVPS of ELB Group, as

     if the Scheme had become operative on 30 June 2013. These pro forma financial effects are based on the 12 month
     results for ELB Group to 30 June 2013. Because of their nature, the pro forma financial effects may not give a fair
     presentation of ELB Group’s financial position, changes in equity, results of operations or cash flows, following the

     implementation of the Scheme. There are no post balance sheet events which require adjustment to the pro forma
     financial effects.

                                                       Before the Scheme            After the Scheme         Change
                                                       (Note 1)                      (Notes 2 - 6)           %
     EPS (cents)                                       375.1                        427.2                    13.9
     HEPS (cents)                                      374.2                        205.5                    (45.1)
     NAVPS (cents)                                     2 345.3                      2 707.9                  15.5
     NTAVPS (cents)                                    2 345.3                      2 625.5                  11.9
     Weighted average number of shares in issue
     for EPS & HEPS calculation                        25 396 149                   27 288 500               7.5
     Shares in issue at year end for NAVPS &
     NTAPS calculation                                 25 629 469                   27 521 820               7.4

     Notes:

     1. The financial information in the "Before the Scheme" column is based on the financial information extracted, without
         adjustment, from ELB Group’s published audited consolidated financial results for the year ended 30 June 2013.

     2. The financial information in the “After the Scheme” column has been prepared based on ELB Group’s published
         audited consolidated financial results for the year ended 30 June 2013 and consolidating B&W’s published audited

         consolidated financial results for the year ended 31 August 2013, taking into account the adjustments in notes 3 – 5
         below.

     3. Estimated once-off transaction costs for ELB Group and B&W amounting to R1.5 million have been deducted. It

         has been assumed that these costs are not tax deductible. These amounts will be paid out of available cash
         resources and are attributable to the various professional advisers, regulatory authorities and printing costs.

     4. Raising of additional depreciation on property, plant and equipment resulting in a reduction to the net book value of
         R5.7 million, an additional depreciation charge, amounting to R2.8 million, and the raising of a deferred tax asset as
         a result of aligning B&W’s depreciation estimates with those of ELB Group.

     5. Recognition of a bargain purchase gain arising as a result of the Scheme, amounting to R70.9 million after applying

         the principles of International Financial Reporting Standard “IFRS” 3: Business Combinations. The R70.9 million is
         the difference between the provisional assessment of the fair value of the B&W assets and liabilities acquired,
         amounting to R156.1 million and the provisional Scheme Consideration (calculated as 1 964 527 Scheme Shares
         at the fair value of R45 being the market price of an ELB Group Share on 04 November 2013, the date of the issue
         of the cautionary announcement), amounting to R88.4 million, less the 72 176 Scheme Shares to be issued to the
         B&W Share Purchase Scheme Trust at the fair value of R45 per Scheme Share which will be debited to treasury
         shares, amounting to R3.2 million. On implementation of the Scheme an effective acquisition date reassessment of
         the fair value of the B&W assets and liabilities acquired will be undertaken. This reassessment may in all
         likelihood result in changes to the fair values of the B&W assets and liabilities acquired to those reflected above.
                                                                                                                        
       6. The HEPS of 205.5 cents per share is after adjusting earnings for the bargain purchase gain of R70.9 million, non
           controlling interests of (R10.7 million) and profit on disposal of plant and equipment net of tax of R0.2 million.

      The full pro forma financial information of ELB Group and the Reporting Accountants’ Report thereon will be set out in
      the Circular.

4.    POSTING OF THE CIRCULAR

       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 surrender and transfer in respect of the Scheme Shares, is
       subject to the approval of the TRP and JSE and is expected to be posted to B&W shareholders on or before Friday, 14
       February 2014. An announcement confirming the salient dates of the Scheme will be made upon posting of the Circular.



5.    WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

       Further to the renewal of the joint cautionary announcement dated 17 January 2014, caution is no longer required to be

       exercised by shareholders when dealing in either company’s securities as the comparative table of pro forma earnings

       and asset value per B&W share and ELB Group share has now been published.




Johannesburg

6 February 2014




     Corporate and Designated Advisor to B&W                                       Legal Advisor to B&W

                Merchantec Capital                                                      Fluxmans Inc. 


               Sponsor to ELB Group                                            Legal Advisor to ELB Group

                Rand Merchant Bank                                                 brink falcon hume Inc.



                                                                                                                          

Date: 06/02/2014 04:51:00 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
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