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Acquisition and Cautionary renewal
MORVEST BUSINESS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 2003/012583/06)
Share code: MOR ISIN code: ZAE000152567
(“Morvest”)
ACQUISITION OF CERTAIN OF THE BUSINESS ASSETS AND BUSINESS
LIABILITIES OF SIMMONS (SOUTH AFRICA) (PROPRIETARY) LIMITED
RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction and terms
Shareholders are advised that Morvest Retail (Proprietary)
Limited (a 50.01% owned subsidiary of Morvest)through its
wholly owned subsidiary Whoohaa (Proprietary) Limited (“the
Purchaser”),has entered into an agreement with Simmons
(South Africa) (Proprietary) Limited (“Simmons” or “the
Seller”)(“the Acquisition Agreement”) in terms whereof the
Purchaser will acquire certain business assets and business
liabilities (“the Business”) of Simmons for a total
purchase consideration of R75 million (“the purchase
consideration“) from the Seller (“the Acquisition”).
In terms of the Acquisition Agreement, Morvest Retail will
hold an effective 75% of the issued share capital of the
Purchaser and the current shareholders of Simmons will hold
the remaining 25%.
Simmons International is one of the world's leading
mattress manufacturers, founded in 1870 with over 148
patents for better sleep quality products. In 1958 Simmons
International became the first mattress company to
introduce the queen and king size mattresses.
Today Simmons is the fastest-growing major brand bedding
manufacturer, with a 64% growth in market share since 1986.
Since the 1920's the company has expanded internationally,
built on a reputation for excellence and pioneering spirit,
and is poised for continued growth and success in the
decades ahead.
2. Rationale
Simmons manufactures and distributes beds, bed bases,
linen, bedding and ancillary and associated products, and
is the South African partner of Simmons Bedding Company
(“Simmons Bedding”), which markets and sells Simmons’s
International’s products worldwide under the Simmons
International guidelines. Simmons International has a 140
year history in manufacturing and selling high quality
mattresses to the premium markets.
Morvest has identified the business of Simmons, in line
with Morvest diversification strategy, as a strategic
opportunity which could yield highly profitable returns and
could create significant value for the retail portfolio of
Morvest through Morvest Retail.
3. Particulars of the Acquisition
3.1. Subject of the Acquisition
The subject of the Acquisition is the Business of Simmons,
which includes the exclusive distribution rights to the
Simmons brand for South Africa and the majority of Africa.
Details of the Business and the specific business assets
and liabilities which form the subject matter of the
Acquisition will be provided in the circular and are
highlighted in paragraph 8 below. The Business includes,
inter alia, the business names, cash on hand, fixed assets,
goodwill, intellectual property, stock and the licenses and
distribution rights held by the seller and such business
liabilities of Simmons as are not specifically excluded
from the Acquisition.
3.2. Effective Date
The effective date of the Acquisition will be the earlier
of either 1 August 2014, or the 3rd business day after the
last of the conditions precedent detailed in paragraph 4
below has been fulfilled.
4. Conditions Precedent
The Acquisition is subject to, inter alia, the following
conditions precedent, which are to be fulfilled by no later
than the 105th day after signature of the Acquisition
Agreement:
4.1. To the extent required, if at all, the approval of
the Acquisition by the JSE Limited and/or
shareholders of Morvest (;
4.2. the approval of the Acquisition by the Competition
Authorities, unconditionally or on conditions
which are reasonably acceptable to Simmons and
Morvest;
4.3. transfer to Whoohaa of all of the various
licensing and distribution agreements, necessary
to maintain the ordinary operations of Simmons;
and
4.4. approval to enter into the Acquisition, to the
extent required under the Exchange Control
Regulations of the Financial Surveillance
Department of the South African Reserve Bank or an
authorised dealer of the South African Reserve
Bank.
5. Purchase Consideration
The Purchase Consideration for the Acquisition will be
settled in four tranches as follows: R40 million
payable within 3 days of fulfillment of the conditions
precedent; R15 million payable upon the achievement of
a sustainable Profit After Tax (“PAT”) of R18 million
by the Business for the financial year ended 31 May
2015; R10 million payable upon the achievement of a
sustainable PAT of R22 million by the Business for the
financial year ended 31 May 2016; and R10 million
payable upon the achievement of a sustainable PAT of
R27.5 million by the Business for the financial year
ended 31 May 2017;
In terms of the Acquisition Agreement Morvest is
responsible for payment in respect of each tranche of 75%
of the Purchase Consideration. These amounts will be paid
by Morvest out of cash reserves and institutional funding.
6. Financial Information
6.1. Renewal of cautionary announcement
Further to the cautionary announcement released on 26 May
2014, shareholders are advised that Morvest continues to be
in discussions regarding a transaction unrelated to the
Acquisition (“the Transaction”). Consequently shareholders
are advised to continue to exercise caution when dealing in
Morvest’s securities until a further announcement is made
that includes the financial effects of the Acquisition and
until a further announcement regarding the Transaction is
made.
7. Categorisation of the Acquisition
The categorization of the Acquisition is to be determined
with the JSE and will be announced to shareholders in due
course.
Johannesburg
3 June 2014
Sponsor: Sasfin Capital
(A division of Sasfin Bank Limited)
Date: 03/06/2014 04:48:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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