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Acquisition by GPI of a further 42.79% of the issued ordinary share capital of Mac Brothers
GRAND PARADE INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1997/003548/06)
Share code: GPL
ISIN: ZAE000119814
(“GPI” or “the Company”)
SMALL RELATED PARTY TRANSACTION: ACQUISITION BY GPI OF A
FURTHER 42.79% OF THE ISSUED ORDINARY SHARE CAPITAL OF MAC
BROTHERS CATERING EQUIPMENT (PROPRIETARY) LIMITED (“MAC
BROTHERS”)
1. THE ACQUISITION
Shareholders are hereby advised that GPI has entered into
a sale of shares agreement dated 16 May 2014 (“the
Agreement”) with, inter alia, Ranmac Management and
Holdings (Proprietary) Limited, Nadesons Investments
(Proprietary) Limited (“Nadesons Investments”), Razia Khan
and Ivanhoe Nigel Burns (collectively referred to as “the
Sellers”), in terms of which the Sellers have agreed to
sell 42.79% of the total issued ordinary share capital of
Mac Brothers (“the Sale Shares”) to the Company (“the
Acquisition”).
Following the implementation of the Acquisition, GPI’s
total interest in Mac Brothers will be 65.00%.
2. DETAILS OF THE BUSINESS OF MAC BROTHERS
Mac Brothers was established in 2002 and has grown to
become one of the largest catering equipment manufacturers
in South Africa and one of the leading suppliers of
catering equipment and related services to the food
service industry in Africa.
Mac Brothers manufactures and supplies its own extensive
range of stainless steel catering and refrigeration
equipment and has well established agency agreements in
place to import, supply and service some of the top
international brands of food service equipment. In some
cases, certain international brands are manufactured under
licence in their factory taking advantage of an abundance
of local stainless steel and well trained local artisans
and engineers. They have a well-established and varied
client base supplying from the local corner coffee shop,
bakery or restaurant through to franchise groups, hotel
groups, golf and wine estates, staff canteen feeding
organisations, prisons, hospitals, mines and a large
number of South Africa's finest world renowned
restaurants. Mac Brothers is also a patron sponsor of the
South African Chefs Association and part of their program
to inspire, train and promote up and coming chefs to the
industry.
The fabrication factory and head office is located in Cape
Town, with branches in Johannesburg, Durban and Harare. It
also has an extensive dealer network throughout Africa
including Namibia, Mozambique, Tanzania, Kenya, Zambia,
Botswana, Congo, Nigeria, Ghana, Uganda, Angola,
Seychelles and Mauritius.
3. RATIONALE FOR THE ACQUISITION
Mac Brothers is an established and professional business
that has proved its operational capabilities over a number
of years, some of which have been during difficult
financial periods that have seen a number of industry
players closing down. The technical capabilities of Mac
Brothers ensure that it is uniquely placed to gain market
share in a large and growing industry both locally and
throughout the African continent.
Mac Brothers has been approved by BURGER KING® Corporation
to manufacture and supply certain kitchen equipment for
BURGER KING® Restaurants through-out Africa. The kitchen
equipment required in a BURGER KING® Restaurant
represents, on average, one third of a BURGER KING®
Restaurant set-up cost, therefore the Acquisition will
allow GPI to reduce the BURGER KING® set-up costs.
As a result of the approval received from BURGER KING®
Corporation, Mac Brothers is able to supply kitchen and
catering equipment to any BURGER KING® Restaurant in
Africa and GPI, through its relationship with BURGER KING®
Corporation will look for further opportunities to supply
and export equipment to other BURGER KING® franchises
around the world.
Roughly 18% of Mac Brothers’ sales are made outside of
South Africa and accordingly, the Acquisition will give
GPI exposure to African markets, which are expected to
grow at a higher rate than South Africa and the rest of
the developed world. This exposure will assist GPI in
expanding the Burger King® franchise into Africa.
In addition, GPI has embarked on becoming the first local
manufacturer of slot machines and other gaming equipment.
A large portion of the components of a slot machine are
stainless steel, which Mac Brothers can manufacturer. The
Acquisition will further reduce GPI’s overall cost of
manufacturing the slot machines.
4. SMALL RELATED PARTY TRANSACTION
4.1 Due to the fact that one of the Sellers, being Nadesons
Investments, is an associate of Mr Hassen Adams and Mr
Alan Keet, both directors of GPI, the Acquisition is
deemed to be a “related party transaction” in terms of
section 10 of the Listings Requirements of the JSE Limited
(“JSE”).
4.2 However, as the Acquisition amounts to less than 5% of the
market capitalisation of GPI as at 30 April 2014, the
Acquisition is classified as a “small related party
transaction” in terms of paragraph 10.7 of the Listings
Requirements of the JSE and written confirmation is
required from an independent expert confirming the
fairness of the terms of the Acquisition in relation to
GPI shareholders.
4.3 Accordingly, GPI has appointed Mazars Corporate Finance
(Proprietary) Limited (“Mazars”) as the independent expert
and Mazars has provided written confirmation to the JSE
that the terms of the Acquisition are fair in relation to
GPI shareholders. The fairness opinion will lie open for
inspection at the registered office of GPI for a period of
28 days from the date of publication of this announcement.
4.4 This announcement is made for information purposes only
and no action is required by GPI shareholders with regards
to the Acquisition.
5. PURCHASE CONSIDERATION
The total consideration payable by the Company to the
Sellers for the purchase of the Sale Shares is the sum of
R 42 790 300 and shall be payable to the Sellers, in cash,
in proportion to the number of Sale Shares being sold by
each Seller, provided that the amount payable to each
Seller shall be reduced by way of set-off against any
amount which that Seller owes to Mac Brothers under any
loan received from Mac Brothers.
6. CONDITIONS PRECEDENT
6.1. The Acquisition is subject to the fulfillment of the
following outstanding conditions precedent, that:
6.1.1. by no later than 23 July 2014, the parties to the
Agreement (“the Parties”) comply, to the extent
necessary in law, with the Listings Requirements of the
JSE Limited and the Competition Act, 1998; and
6.1.2. by no later than 30 May 2014, the unconditional
approval, exemption and/or compliance certificate which
might be required from the Takeover Regulation Panel
for the purchase and sale of the Sale Shares shall have
been obtained.
7. OTHER SIGNIFICANT TERMS OF THE AGREEMENT
The Agreement provides for warranties and indemnities that
are normal for a transaction of this nature.
8. PRO FORMA FINANCIAL EFFECTS
The pro forma financial effects of the Acquisition are
presented for illustrative purposes only and because of
their nature may not give a fair reflection of the
Company’s financial position nor of the effect on future
earnings after the Acquisition.
Set out below are the unaudited pro forma financial
effects of the Acquisition, based on the unaudited interim
results for the period ended 31 December 2013. The
directors of GPI are responsible for the preparation of
the unaudited pro forma financial information.
Unaudited Unaudited Change (%)
before the Pro Forma
Acquisition after the
(cents) Acquisition
(cents)
Basic earnings 26.21 26.74 2.0%
per share
Basic headline 13.95 14.49 3.9%
earnings per
share
Net asset 369.00 376.00 2.0%
value per
share
Net tangible 315.00 312.00 (0.7%)
asset value
per share
Notes and assumptions:
1. The basic earnings per share and basic headline earnings
per share figures in the “Pro Forma after the
Acquisition” column have been calculated on the basis
that the Acquisition was effected on 1 July 2013.
2. The net asset value per share and net tangible asset
value per share figures in the “Pro forma after the
Acquisition” column have been calculated on the basis
that the Acquisition was effected on 31 December 2013.
3. The taxation rate applicable is assumed to be 28%.
4. The basic earnings per share and basic headline earnings
per share figures are calculated based on weighted
average number of shares in issue of 461.4 million at 31
December 2014.
5. The net asset value per share and net tangible asset
value per share have been calculated based on 469.6
million shares in issue at 31 December 2014.
6. The results of Mac Brothers have been extracted from the
statement of financial position and the statement of
comprehensive income included in their management
accounts for the 6 month period ended 31 December 2013,
without adjustment.
7. GPI management has undertaken a preliminary purchase
price allocation to determine the recognition and
classification of the excess of the purchase price paid
in the Acquisition over the identifiable net assets
acquired. Accordingly based on the preliminary purchase
price allocation an amount of R45.6 million is accounted
for as goodwill.
8. The total purchase consideration for the Acquisition is
assumed to be R42.8 million, being funded from GPI's cash
reserves at an interest rate of 5.16% per annum, being
the tax free rate of 57.38% of the prime interest rate
applicable to preference share funding.
9. All adjustments, are expected to have a continuing
effect.
9. EFFECTIVE DATE OF THE ACQUISITION
In terms of the Agreement, the effective date of the
Acquisition is 1 January 2014.
10. SUBSIDIARY COMPANY
As a result of the Acquisition, Mac Brothers will become a
subsidiary company of GPI and GPI shall ensure that the
memorandum of incorporation of Mac Brothers (“MOI”) will
not frustrate GPI in any way from compliance with its
obligation in terms of the Listings Requirements of the JSE
and nothing contained in the MOI shall relieve GPI from
compliance with the Listings Requirements.
Cape Town
19 May 2014
Sponsor and corporate advisor:
PSG Capital
Lead corporate advisor:
Leaf Capital
Legal advisor:
Bernadt Vukic Potash & Getz
Independent expert:
Mazars Corporate Finance (Proprietary) Limited
Independent Reporting Accountants and Auditors:
Ernst & Young Incorporated
Date: 19/05/2014 03:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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