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Terms announcement re acquisition of Manhand Proprietary Limited 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 ACQUISITION OF
MANHAND PROPRIETARY LIMITED AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement published on 28 January
2014, Torre (via its wholly-owned subsidiary Forktech
Proprietary Limited (“Forktech”)) is pleased to advise that it
has concluded an agreement to acquire 100% of the issued
ordinary share capital of Manhand Proprietary Limited
(“Manhand”) for a maximum consideration of R25 920 000 (the
“Manhand Acquisition”).
2. NATURE OF THE BUSINESS OF MANHAND
Manhand is a family owned business which was founded by Heinz
Glöckle Snr (“Heinz Snr”)in 2003 to focus on supplying a range
of materials handling and lifting solutions. Heinz Snr has
subsequently been joined in the business by his sons Dieter
Glöckle (“Dieter”) and Heinz Glöckle Jnr (“Heinz Jnr”).
Manhand has established distributorships with a small number
of carefully selected offshore suppliers to provide materials
handling parts and equipment to the South African market.
Manhand is now a one-stop shop for materials handling moving
and lifting equipment, with a consolidated product offering
that includes everything from small pallet trucks to heavy-
duty forklifts, as well as a wide variety of reach trucks,
stackers and lifters. Manhand has three national offices in
Johannesburg, Durban and Cape Town.
3. THE MANHAND ACQUISITION
3.1 Terms of the Manhand Acquisition
A sale of shares agreement (“Sale Agreement”) dated 31 March
2014 (the “Signature Date”) has been entered into between
Forktech, Torre, Manhand, Heinz Snr, Dieter and Heinz Jnr
(collectively the “Sellers”), Varan CC and Proplec CC whereby
Forktech agrees to purchase the entire issued share capital of
Manhand from the Sellers in the following proportions, 80%
from Heinz Snr, 10% from Dieter and 10% from Heinz Jnr (the
“Sale Shares”).
The purchase consideration (“Purchase Consideration”) payable
by Forktech to the Sellers for the Sale Shares is subject to a
maximum of R25 920 000.
The Purchase Consideration shall be comprised of:
- an amount equal to 70% of the Purchase Consideration
("Initial Consideration"), of which 30% (effective 21% of
Purchase Consideration) payable in cash and 70% (effective
49% of Purchase Consideration) payable through the issue of
Torre shares at a 10% discount to the 30 day VWAP as at 31
March 2014 (“Consideration Shares”);
- an amount equal to 30% of the Purchase Consideration, made
up of three deferred payments of 10% each, payable in cash
based on the achievement of target NPBT figures for the
financial year ending 30 June 2015 (“FY 2015”) of 110% of
the NPBT for FY2014 (“FY2015 Target NPBT”), 30 June 2016
(“FY 2016”) of 121% of the NPBT for FY2014 (“FY2016 Target
NPBT”), and 30 June 2017 (“FY 2017”) of 133% of the NPBT
for FY2014 (“FY2017 Target NPBT”) (“Deferred
Consideration”). The Deferred Consideration shall be
further adjusted if any of the deferred payments yield a
negative result or exceed the targeted result provided that
the maximum consideration does not exceed R25 920 000 and
the arithmetic average of the combined NPBT for FY2015,
FY2016 and FY2017 (“Average Annual Combined NPBT”) exceeds
the arithmetic average of the FY2015 Target NPBT, the
FY2016 Target NPBT and the FY2017 Target NPBT (“Average
Target NPBT”);
The Sellers shall also be eligible to receive a 50% share of
the future NPBT of Manhand, to the extent that such profits
exceed the Average Target NPBT, subject to a maximum amount of
R20 000 000 ("Profit Share").
The Profit Share shall be payable to the Sellers by Manhand in
cash or through the issue of new Torre shares by Torre, on
behalf of Forktech, at the 30 day VWAP on the date of issue or
through a combination of the two at the discretion of Torre.
The Manhand Acquisition will be effective from 1 April 2014
(the "Effective Date").
3.2 Rationale for the Manhand Acquisition
The Manhand Acquisition provides immediate scale to the
Group’s materials handling business. In addition the
transaction:
- Strategically positions the Company with a range of quality,
price competitive materials handling products that are
suitable for both South Africa and African conditions;
- Broadens the product range available for Torre customers to
cover a comprehensive range of forklifts, warehousing
equipment and forklift attachments;
- Provides an established national distribution network;
- Strengthens the management team in this business unit; and
- Is accretive to Group earnings from day one.
3.3 Warranties
The warranties contained in the Sale Agreement are standard in
respect of a transaction of this nature.
3.4 Other arrangements
The Sale Agreement includes the following additional
arrangements:
- The Sellers have entered into employment contracts with
Manhand for a minimum 3 year period;
- Torre and the Sellers have entered into a lock-in and pre-
emptive agreement in terms whereof the Sellers agree not to
dispose of any of the Consideration Shares or any Torre
shares received in respect of the Profit Share for a period
of 3 years after the date of issue thereof and the Sellers
further provide Torre with a right of first refusal to
acquire any such shares from the date the lock-in period
expires;
- Dieter and Heinz Snr will join the board of directors of
Forktech;
- Forktech will be renamed Manhand Holdings Proprietary
Limited;
- Heinz Snr and Dieter have agreed to waive all shareholder
loans and other claims against Manhand as at the Signature
Date save for an amount of R1,424,985 owed by Manhand to
Heinz Snr on shareholder loan account (“Heinz Snr Loan”)
with effect from no later than 30 April 2014; and
- Manhand shall repay the Heinz Snr Loan on or before the
date the Initial Consideration is paid.
3.5 Conditions precedent
There are no conditions precedent outstanding to the Manhand
Acquisition.
3.6 Categorisation
The Manhand Acquisition is a category 2 transaction in terms
of the JSE Listings Requirements.
4. PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects of the Manhand
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 Manhand
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 Manhand
Acquisition.
The pro forma financial information has been prepared using
the most recent published results of the Group for the interim
period ended 31 December 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.
Before the Manhand After the
Manhand Acquisition Manhand
Acquisition Adjustments Acquisition %
(1) (2)(3)(4)(5) (6)(7)(8) Change
Profit for
the period
(R’000) 12 735 1 009 13 744 8%
Headline
earnings for
the period
(R’000) 11 909 1 009 12 918 8%
Net asset
value per
share (cents) 103.61 2.95 106.56 3%
Net tangible
asset value
per share
(cents) 66.08 (1.73) 64.35 (3%)
Basic
earnings per
share (cents) 7.06 0.41 7.47 6%
Headline
earnings per
share (cents) 6.60 0.41 7.01 6%
Weighted
average
number of
shares in
issue during
the period
(000) 180 316 184 044 184 044 2%
Actual shares
in issue at
the end of
the period
(000) 180 316 184 044 184 044 2%
Notes and assumptions:
1) The amounts set out in the “Before the Manhand Acquisition”
column above have been extracted from the Torre unaudited
interim financial results for the six months ended 31
December 2013.
2) The Manhand financial information has been extracted from
the consolidated management accounts for the 6 months ended
31 December 2013.
3) The Manhand Acquisition relates to the purchase of 100% of
the issued share capital of Manhand. Based on the Manhand
budgets, the Purchase Consideration is estimated to be R19
305 123 and will give rise to goodwill of R10 020 406.
4) 49% of the Purchase Consideration is expected to be settled
by the issue of 3 728 141 Torre Shares at a strike price of
253.73 cents per share, being a 10% discount to the 30 day
VWAP of Torre shares as at 28 March 2014.
5) Profit for the period and headline earnings for the period
are adjusted by the after tax effect of estimated once off
transaction expenses of R220 000.
6) It has been assumed that the Manhand Acquisition was
implemented on 31 December 2013 for purposes of compiling
the statement of financial position and on 1 July 2012 for
purposes of compiling the statement of comprehensive
income.
7) Tax consequences in relation to the Manhand Acquisition
have been taken into account.
8) 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 MOI of Manhand,
which will become a subsidiary of Torre from 1 April 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 ANNOUNCEMENT
Given that the full terms including pro forma financial
effects of the Manhand Acquisition have been disclosed above,
the cautionary announcement dated 28 January 2014 relating
hereto is accordingly withdrawn.
Johannesburg
31 March 2014
Corporate Adviser to Torre
AfrAsia Corporate Finance (Pty) Ltd
Designated Adviser
PSG Capital (Pty) Ltd
Date: 31/03/2014 05:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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