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AMALGAMATED ELECTRONIC CORP LTD - Disposal of Secequip and renewal of cautionary

Release Date: 16/05/2014 16:28
Code(s): AER     PDF:  
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Disposal of Secequip and renewal of cautionary

AMALGAMATED ELECTRONIC CORPORATION LIMITED
(“Amecor”) or (“the company”)
(Incorporated in the Republic of South Africa)
(Registration number: 1997/010036/06)
Share code: AER ISIN: ZAE 000070587




       DISPOSAL OF THE SECEQUIP BUSINESS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT




1.   Introduction
     

     Shareholders are referred to the cautionary announcement dated 11 March 2014 and the
     subsequent renewal thereof dated 24 April 2014 wherein shareholders were advised that the
     company had entered into discussions with separate parties regarding a potential acquisition
     (“acquisition”) by the Company and a potential disposal of a group asset.
     Amecor hereby announces that its 79% held subsidiary, Secequip Proprietary Limited,
     (“Secequip” or “seller”) has entered into an agreement with Divine Inspiration 579 Proprietary
     Limited, (“DI 579” or “purchaser”) to sell, as a going concern, the Secequip business consisting of
     inter alia fixed assets, cash deposits, inventory (comprising stock and slow moving stock),
     customers, continuing contracts, goodwill, as well as the employee liabilities, but excluding
     debtors and certain liabilities, subject to the fulfilment of the condition precedent set out in
     paragraph 4 below (“the transaction”). The proceeds from the transaction is an estimated R30
     million.

2.   Rationale for the disposal of the Secequip business

     Amecor’s market leading operations are focused on making it safe to live and do business by
     providing key products and services of a strategic nature to the security industry in South Africa
     and increasingly into Africa.
     Secequip is an importer and wholesale distributor of security products within the Amecor
     Group.
     Amecor has reviewed the strategic fit of Secequip in the Amecor group and decided to dispose
     of the Secequip business as it sharpens its strategic focus on businesses that generate superior
     free cash flow, deliver attractive margins and provide good prospects for growth.
     The disposal of Secequip will furthermore improve the quality of Amecor’s free cash flow.


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3.   Consideration for the transaction
            
     Subject to the fulfilment of the condition precedent set out in paragraph 4 below, Secequip will
     dispose of certain business assets and liabilities to DI 579 with effect from the effective date.
     The final purchase consideration will be determined on or about the third business date prior to
     the effective date following a stock take at which each of the parties will be entitled to be
     present. It is expected that the purchase consideration will not exceed R30 million and that the
     final consideration payable will not vary materially from this estimate. Shareholders will be
     advised of the final purchase consideration in a further announcement (“further
     announcement”).
     The purchase consideration shall be discharged by the purchaser -:
     3.1 paying an amount of R600 000 on the effective date, which is an amount equal to the
         approximate value of the fixed assets plus the approximate value of the cash deposits less
         the approximate value of the employee liabilities;
     3.2 paying Secequip an amount on or before the last business day of each month commencing
         on the last business day of the second month following the effective date and for 10 months
         thereafter until the purchase price of the stock has been discharged in full.
     3.3 discharging the balance of the purchase price payable for the slow moving stock, being an
         amount of R3 000 000, less an amount equal to the amounts received for the slow moving
         stock during the period commencing on 21 February 2014 and the effective date by paying
         the seller an amount of R500 000 per month on or before the last business day of each
         month commencing on the thirteenth month following the effective date until the purchase
         price in respect of the slow moving stock has been discharged in full.

4        Condition precedent
         The sale of business agreement is subject to the shareholders of Secequip passing the necessary
         resolution to enable the seller to conclude the transaction set out in the agreement by no later than
         31 July 2014.

5        Effective date
         The effective date of the transaction is the later of the first day of the month following the month in
         which the condition precedent is fulfilled, and the thirty first day after publication in terms of
         section 34 of the Insolvency Act falls.

6        Unaudited pro forma financial effects
         Based on the estimated maximum purchase consideration of R30 million, the pro forma financial
         effects of the transaction on Amecor’s earnings per share, headline earnings per share, net asset
         value per share and net tangible asset value per share are not significant and have, therefore, not
         been disclosed.

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         The value of the net assets subject to the transaction will be determined on or about the effective
         date and the profits attributable to the net assets that are the subject to the transaction will be
         disclosed in the further announcement.
         The cash proceeds of the transaction will be used to discharge financial obligations within Secequip.

7.      Categorisation
         Based on the estimated maximum consideration of R30 million, the transaction is a Category 2
         transaction in terms of the JSE Limited Listings Requirements. Shareholders will be advised of the
         final categorisation of the transaction in the further announcement.

8.       Renewal of cautionary announcement
         Further to the information in this announcement regarding the transaction, shareholders are
         advised that the company remains in discussions with a separate party regarding a potential
         acquisition. The successful conclusion of the acquisition may have an effect on the price of the
         company’s securities.
         Accordingly shareholders are advised to exercise caution when dealing in Amecor shares until the
         further announcement is made and an announcement regarding the acquisition is made.


     Johannesburg
     16 May 2014
     Sponsor                                               Legal Advisor
     Sasfin Capital                                        HR Levin Attorneys, Notaries and Conveyancers
     (A division of Sasfin Bank Limited)




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