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Detailed terms announcement in relation to the Kanu acquisition and withdrawal of cautionary
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”)
DETAILED TERMS ANNOUNCEMENT IN RELATION TO THE KANU
ACQUISITION, UPDATE ON THE BEECH ACQUISITION, WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENTS AND APPOINTMENT OF COO
1. INTRODUCTION
Further to the SENS announcements published on 13 January 2014
and 28 January 2014 (“Initial Announcements”), Torre (through
its wholly-owned subsidiaries Torre International Holdings
Limited (“Torre International”) and Torre Holdings Proprietary
Limited (“Torre Holdings”)) is pleased to advise that it has
concluded an agreement to acquire 85% of the issued ordinary
share capital of Kanu Equipment Ltd (“Kanu Ltd”) and Kanu
Equipment Congo S.A.R.L (Congo) (“Kanu Congo”) as well as 100%
of Kanu Equipment (Pty) Ltd (South Africa) (“Kanu SA”)
(collectively Kanu Ltd, Kanu Congo and Kanu SA are the “Kanu
Group”) (the “Kanu Acquisition”) from Riverholmes Investments
S.A. (“RI”) on terms detailed in paragraph 2 below. The Kanu
Acquisition is expected to be effective from 1 March 2014 (the
"Effective Date").
The Kanu Group is the authorised dealer for Bell, Liebherr
(Liebherr Earthmoving and Liebherr Mobile Cranes), the Wirtgen
Group, Deutz and Tech King Tyres in the Republic of Congo. The
group sells and rents equipment and spare parts and has a blue
chip customer base operating across the agricultural,
construction and mining sectors. The Kanu Group has a fully
equipped workshop facility in Pointe Noire which facility also
has a port-free zone providing customs flexibility.
The Kanu Group is a platform for expansion in West and Central
Africa and the acquisition is consistent with Torre’s strategy
of building a distribution and servicing network across the
continent.
Capitalised terms used in paragraph 2 of this announcement
shall bear the meanings ascribed to them in the Initial
Announcements, unless otherwise defined.
2. THE KANU ACQUISITION
2.1 Terms of the Kanu Acquisition
The total consideration payable for the Kanu Acquisition will
comprise of the Subscription, Initial Purchase Consideration
and Deferred Purchase Consideration, subject to a maximum
amount of EUR 4,675,000. The Subscription will be paid for in
cash in South African denominated currency, as to an amount of
ZAR15,500,000 (the ZAR Subscription) and in Euro denominated
currency, as to an amount of EUR 1,000,000 (the EUR
Subscription).
The Initial Purchase Consideration, less the sum of the ZAR
Subscription (converted to Euros) and the EUR Subscription
will be payable in cash. The Deferred Purchase Consideration
will be an amount equal to 85% of 5x the average annual
consolidated headline earnings of the Kanu Group for the 28
months from the Closing Date, less the aggregate of the
Initial Purchase Consideration, the ZAR Subscription and the
EUR Subscription. The Deferred Purchase Consideration will be
settled by the issue of new Torre shares, capped at a maximum
number of 14,025,000 shares.
The Deferred Purchase Consideration shall be adjusted downward
proportionately to the extent that the Kanu Group fails to
achieve average annual headline earnings of EUR 1,100,000 for
the 28 months from 1 March 2014 to 30 June 2016. Should the
Kanu Group not achieve more than EUR 550,000 in average annual
headline earnings for that period, no Deferred Purchase
Consideration will be payable.
2.2 Warranties and other arrangements
2.2.1 The vendors have warranted a consolidated NAV for the
Kanu Group of EUR 2,000,000 as at the Effective Date
prior to both the ZAR Subscription and the EUR
Subscription.
2.2.2 The vendors have warranted consolidated headline
earnings for the Kanu Group of EUR 500,000 for the 14
months ended 28 February 2014.
2.2.3 Proceeds of the EUR subscription will remain in the Kanu
Group and be used to fund near term growth initiatives
of the business.
2.2.4 RI and Torre International have entered into a lock-in
and pre-emptive agreement wherein RI has agreed not to
dispose of (1) more than 40% of the shares to be issued
in settlement of the Deferred Purchase Consideration for
12 months after issue and (2) more than 70% of the
shares for 24 months after issue. Torre International
(or its nominee) has a right of pre-emption in respect
of 60% of the shares in the event that RI wishes to
dispose of or receives a bona fide offer for any such
shares, subject to obtaining regulatory approval as may
be required.
2.3 Conditions precedent of the Kanu Acquisition
All conditions precedent to the Kanu Acquisition have been
fulfilled or waived by Torre.
2.4 Categorisation
As noted in the Initial Announcements, the Kanu Acquisition is
a category 2 transaction in terms of the JSE Listings
Requirements.
3. UPDATE ON THE BEECH ACQUISITION
On 13 January 2014 and 28 January 2014 Torre announced that it
was in discussions to acquire 100% of Beech Finance Limited, a
Mauritian company providing trade finance and foreign exchange
services primarily to industrial companies in the Southern
African region (“Beech Acquisition”). Negotiations in relation
to the Beech Acquisition remain ongoing.
It is anticipated that the transaction value for the Beech
Acquisition will fall below the categorized threshold for
transactions requiring an announcement in terms of the JSE
Listings Requirements. The Beech Acquisition is expected to be
finalized by 30 April 2014.
4. PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects of the Kanu
Acquisition on Torre shareholders are the responsibility of
the Torre directors and have been prepared for illustrative
purposes only to provide information about how the Kanu
Acquisition 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 Kanu
Acquisition.
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.
Unadjusted The Kanu
Before the Kanu Group Acquisition After the
Kanu management Adjustments Kanu
Acquisition accounts (3)(4)(5) Acquisition %
(1) (2) (6)(7) (8)(9)(10) change
Profit for the
period (R’000) 4 999 11 132 (3 406) 12 725 155%
Headline
earnings for
the period
(R’000) 3 724 11 132 (4 565) 11 894 219%
Net asset
value per
share (cents) 96.6 12.7 (10.8) 98.5 2%
Net tangible
asset value
per share
(cents) 57.1 12.7 (21.6) 48.3 (15%)
Basic earnings
per share
(cents) 5.8 12.9 (5.3) 15 164%
Headline
earnings per
share (cents) 4.3 12.9 (5.3) 14 219%
Weighted
average number
of shares in
issue during
the period 86 353 688 86 353 688 86 353 688 86 353 688 -
Actual shares
in issue at
the end of the
period 180 316 308 180 316 308 180 316 308 180 316 308 -
Notes and assumptions:
(1) The amounts set out in the “Before the Kanu Acquisition”
column above have been extracted from the Torre audited
financial results for the year ended 30 June 2013.
(2) The Kanu Group financial information has been extracted
from the reviewed consolidated management accounts for the
year ended 31 December 2013.
(3) The Kanu Acquisition relates to the purchase of 85% of the
assets and liabilities of the Kanu Group. The total
purchase consideration comprises the aggregate of the ZAR
Subscription, the EUR Subscription, the Initial Purchase
Consideration and the Deferred Purchase Consideration.
(4) As detailed in paragraph 2.2.3 above, the proceeds of the
EUR Subscription, equating to a ZAR equivalent of ZAR12
987 000, will remain in the Kanu Group, subsidiaries of
Torre, to fund near term growth initiatives of the
business.
(5) The ZAR subscription and the Initial Consideration,
together equate to a total ZAR equivalent of ZAR22 727
000. The Deferred Consideration is assumed to equate to a
ZAR equivalent of ZAR16 145 000, based on the present
value of the anticipated deferred payment ZAR19 007 000,
discounted at a rate of 8.5% over two years.
(6) The total purchase consideration of ZAR51 850 000
recognised in the pro forma effects gives rise to goodwill
on acquisition of R19 351 000.
(7) For the purpose of the pro forma financial effects above
only, it is assumed that the Kanu Acquisition is financed
at a rate of 8.5%.
(8) It has been assumed that the Kanu Acquisition was
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.
(9) Tax consequences in relation to the Kanu Acquisition have
been taken into account.
(10) All adjustments, other than transaction fees, will have a
continuing effect.
5. ALIGNMENT OF MOI, FURTHER DOCUMENTATION AND SALIENT DATES
Torre will ensure that the provisions of the MOIs of the Kanu
Group, which will become subsidiaries of Torre from 1 March
2014, do neither frustrate nor relieve Torre in any way from
compliance with its obligations in terms of the Listings
Requirements.
6. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS
Given that the full terms including pro forma financial
effects of the Kanu Acquisition have been disclosed above and
that the Beech Acquisition will no longer be categorised, the
cautionary announcements dated 13 January 2014 relating hereto
are accordingly withdrawn.
7. APPOINTMENT OF CHIEF OPERATING OFFICER (“COO”)
Torre is pleased to announce the appointment of Henk Maree to
the position of COO of the Group. In this role Mr Maree will
assume various responsibilities including the measurement of
operational performance; the mentoring of business unit
managers; and the implementation of systems and processes that
will allow the Group to drive operational excellence across
all areas of its activity. Mr Maree will also be responsible
for the integration of new acquisitions and the oversight of
specific strategic projects designed to reduce costs and / or
grow revenue.
Mr Maree joins Torre with over 40 years of experience in the
industrial, energy and automotive sectors, during which time
he has managed a range of equipment and after-sales back up
and support businesses, generally in complex growth or
turnaround situations.
Following 23 years at Toyota South Africa Mr Maree moved to
Eqstra Holdings Limited where he served as the Chief Operating
Officer from September 1, 2007 until January 31, 2009 and then
as Divisional Executive of the Mining and Construction
Equipment Division from 2009 until December 2013.
Mr Maree will join the group executive team of Torre but will
not be represented as a director on the Torre board. The
Company welcomes Mr Maree to the team and looks forward to his
contribution going forward.
Johannesburg
28 February 2014
Corporate Adviser to Torre
AfrAsia Corporate Finance (Pty) Limited
Designated Adviser
PSG Capital (Pty) Limited
Date: 28/02/2014 12:24:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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