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Acquisition by Kelly Group of 80% of the Issued Share Capital of Anglo African Outstaffing Proprietary Limited
KELLY GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/026249/06)
Share code: KEL
ISIN: ZAE000093373
(“Kelly Group” or “the Company” or “the Group”)
ACQUISITION BY KELLY GROUP OF 80% OF THE ISSUED SHARE
CAPITAL OF ANGLO AFRICAN OUTSTAFFING PROPRIETARY LIMITED
(“ANGLO AFRICAN”)
1. THE ACQUISITION
Shareholders are hereby advised that the Company has
entered into an agreement (“Acquisition Agreement”)
with the trustees for the time being of the
Troyleigh Family Trust (“the Seller”), in terms of
which:
1.1. the Seller will dispose of 80% of the issued
share capital in Anglo African (“the Sale
Shares”), to the Company (“the Acquisition”);
1.2. on 30 September 2014, the Company shall be
entitled, but not obliged, to require the
Seller to sell the remaining 20% of the issued
share capital in Anglo African (“the Option
Shares”) to the Company (“the Call Option”);
and
1.3. on 30 September 2014, the Seller shall be
entitled, but not obliged, to require the
Company to purchase the Option Shares (“the Put
Option”).
2. BACKGROUND INFORMATION ON ANGLO AFRICAN
The Anglo African business started in 1996 and in
2002 Anglo African identified a growing need in the
blue collar market for temporary employment services,
particularly in the specialised code 14/Hazchem
driver arena. In the same year, five code 14 drivers
were placed at a listed transport business and today
Anglo African’s main target market comprises blue
chip companies in the transportation, energy and
retail sectors.
3. RATIONALE FOR THE ACQUISITION
In line with the Group’s strategy, Kelly Group will
acquire businesses that complement the Company’s
core operations and enable the Group’s national
footprint to achieve scale and grow market share.
Kelly Group believes that the market within which
Anglo African operates has significant potential for
growth and will bolster the Group’s offering in the
warehousing and logistics sector. In addition, the
current business has good profitability and cash
flows. Management understands the sector well and
the business has well established customers that
will benefit through cross-selling and leveraging
the focused divisions within Kelly Group.
4. PURCHASE CONSIDERATION
4.1. The consideration payable by the Company to the
Seller for the purchase of the Sale Shares is
the sum of R10 400 000 and shall be payable, in
cash, as follows:
4.1.1. 50% of the purchase price shall be paid
on fulfilment of all the conditions
precedent (“the 1st Tranche”); and
4.1.2. the balance, being 50% of the purchase
price, shall be paid within 7 days of
the Company receiving Anglo African’s
signed 2014 audited annual financial
statements (“AFS”), provided that such
AFS do not differ materially from the
projections made by the Seller
(“Projections”).
4.2. In the event of there being a material
difference between the Projections and the AFS,
the Company shall be entitled to resile from
the Acquisition Agreement and:
4.2.1. the Seller shall be obliged to repay the
1st Tranche to the Company;
4.2.2. the Company shall return to the Seller
the Sale Shares in its possession;
4.2.3. the Acquisition Agreement shall lapse
and be of no force or effect; and
4.2.4. neither party shall have any claim
against the other arising out of and in
connection with the Acquisition
Agreement and the cancellation thereof,
save for any damages.
4.3. The purchase consideration for the Option
Shares shall be the sum of R2 600 000 and shall
be payable by the Company, in cash, to the
Seller at the time that the Call Option or the
Put Option, as the case may be, is exercised.
Interest shall accrue on the purchase
consideration in respect of the Option Shares
and shall be calculated from 1 March 2014 to
30 September 2014 (both days inclusive) at the
publicly quoted daily call rate of interest.
5. CONDITIONS PRECEDENT
The Acquisition Agreement is subject to the
following outstanding conditions precedent:
5.1. the Seller and Anglo African notifying Anglo
African’s management team (“Management Team”)
of the Acquisition and the Company, together
with the Seller, meeting with the Management
Team and Anglo African’s top three customers,
if so requested by the Company; and
5.2. the Company and the Seller reaching agreement
on the form and substance of the Memorandum of
Incorporation (“MOI”) of Anglo African and the
requisite resolution to amend the MOI being
passed.
6. ADDITIONAL MATERIAL TERMS
The Acquisition Agreement provides for warranties and
indemnities that are normal for a transaction of this
nature.
7. PRO FORMA FINANCIAL EFFECTS
The table below sets out the unaudited pro forma
financial effects of the Acquisition on the Company’s
audited results for the financial year ended 30
September 2013. The unaudited pro forma financial
effects have been prepared in accordance with the
Listings Requirements of the JSE Limited (“Listings
Requirements”), the Guide on Pro Forma Financial
Information issued by SAICA and the measurement and
recognition requirements of International Financial
Reporting Standards (“IFRS”). Accounting policies
used to prepare the unaudited pro forma financial
effects are consistent with those applied in the
preparation of the Company’s audited financial
statements for the financial year ended 30 September
2013.
The unaudited pro forma financial effects are the
responsibility of the directors and have been
prepared for illustrative purposes only, in order to
provide information about how the Acquisition may
have affected shareholders on the relevant reporting
date. Due to the nature of pro forma financial
information, it may not give a true reflection of the
Company’s actual financial position, changes in
equity, results of operations or cash flows after
implementation of the Acquisition nor of the
Company’s future earnings.
Pro forma
Audited after the
before the Acquisition
Acquisition(1) (1,2,3)
Change
(cents) (cents) (%)
EPS 38.43 40.73 5.99
Headline EPS 9.00 11.30 25.59
NAV per share 2.49 2.48 (0.36)
NTAV per share 1.39 1.36 (2.45)
Notes:
1. The number of shares in issue and the weighted
average number of shares in issue for the
period was 98 442 190.
2. Adjustments to earnings per share (“EPS”) and
headline EPS have been made on the assumption
that:
2.1. the Acquisition was effected on 1 October
2012;
2.2. the cash consideration of R10 400 000 was
financed through the Group’s existing
banking facilities, and interest incurred
was based on the Group’s prime-linked
funding facility;
2.3. notional interest on the option provision
of R2 600 000 was accounted for in terms
of the Acquisition Agreement for a 7 month
period based on a call banking rate of
3.25% p.a.;
2.4. due to the Company’s assessed tax loss and
its decision not to increase the size of
its deferred tax asset, no adjustment for
South African taxation was made for the
purposes of the pro forma adjustments;
2.5. the results of Anglo African were
extracted from the management accounts for
the 12 month period ended 30 September
2013 and a company tax rate of 28% was
applied to these results; and
2.6. transaction costs of R250 000 excluding
VAT were assumed to be applicable to the
Acquisition.
3. Adjustments to net asset value (“NAV”) per
share and net tangible asset value (“NTAV”) per
share have been made on the assumption that:
3.1. the Acquisition was effected on 30
September 2013;
3.2. the cash consideration of R10 400 000 was
financed through the Group’s existing
banking facilities;
3.3 a provision amounting to R2 600 000 was
raised for the option to purchase the
remaining 20% shareholding on 30 September
2013; and
3.4 no further intangible assets were
identified, and goodwill amounting to
circa R2 500 000 was recognized.
4. All adjustments other than transaction costs
are expected to have a continuing effect.
8. EFFECTIVE DATE OF THE ACQUISITION
In terms of the Acquisition Agreement, the effective
date of the Acquisition is 1 March 2014.
9. CLASSIFICATION OF THE TRANSACTION
The Acquisition is classified as a Category 2
transaction in terms of the Listings Requirements.
Sandton
3 March 2014
Sponsor
PSG Capital
Legal advisor
Eversheds
Date: 03/03/2014 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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