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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').
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