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The acquisition of Partquip Group Pty Ltd
HUDACO INDUSTRIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1985/004617/06)
Share code: HDC & ISIN: ZAE000003273
(“Hudaco”)
ANNOUNCEMENT REGARDING THE ACQUISITION OF PARTQUIP GROUP PTY LTD (“PARTQUIP”)
1. INTRODUCTION
Shareholders are advised that Hudaco has signed a binding agreement to acquire 100% of Partquip
(“the Transaction”).
2. RATIONALE FOR THE TRANSACTION
Hudaco is a South African group of companies specialising in the importation and distribution of
selected high quality branded and industrial products, mainly in the southern African region. One of
Hudaco’s key strategies is to apply its strong cash flows to acquire new businesses in similar fields of
activity when the opportunity arises.
Partquip is involved in the distribution in Southern Africa, of automotive components sold under the
established brands of Partquip, A-Line, Brake Part and Ironman 4x4.
Partquip is an ideal fit for Hudaco in that its main business is the distribution of branded products, an
area of core competency for Hudaco. It will complement Hudaco’s existing automotive after-market
businesses, which distribute clutches, seals and automotive bearings.
3. DETAILS OF THE TRANSACTION
3.1 Structure of transaction
Hudaco will become a 100% shareholder of Partquip.
3.2 Consideration
The consideration will be a payment of R550 000 000, to be settled in cash on the day all
suspensive conditions are fulfilled. This will be funded from existing and new facilities.
3.3 Management
3.4 Carl Rogers, the current financial director who also has broad general management
responsibilities within the business, and who is not a shareholder, will be appointed
managing director. The shareholders, who have limited involvement in management of the
business, have entered into restraint of trade agreements in favour of Hudaco for a period of
three years.
3.5 Suspensive conditions
The Transaction is conditional upon the following:
- such approvals as may be required in terms of the Competition Act of 1998, as
amended;
- satisfactory due diligence of the business of Partquip;
- service and restraint agreements with Carl Rogers;
- approval of the major suppliers of Partquip to continue supply; and
- signing of a new lease over the property in Johannesburg, the main premises from
which the company operates.
4. PRO FORMA FINANCIAL EFFECTS
The table below sets out the unaudited pro forma financial effects of the Transaction on Hudaco’s
earnings per share and net asset value per share. The unaudited pro forma financial information and
the preparation thereof, which is the responsibility of the directors of Hudaco, has been prepared
for illustrative purposes only, and because of its nature, may not give a fair reflection of Hudaco’s
financial position and results of operations, nor the effect and impact of the Transaction on Hudaco
going forward.
Before the After the Transaction Change
Transaction (cents)1 (cents)2,3 %
Headline earnings per share 928 1 045 12.6%
Basic earnings per share 930 1 046 12.6%
Comparable earnings per share 983 1 100 11.9%
Fully diluted basic earnings per share 918 1 033 12.6%
Net asset value per share 5 737 5 733 -0.1%
Net tangible asset value per share 3 659 2 771 -24.3%
Notes:
1. The amounts in the “Before” column are based on the audited financial results for Hudaco for
the year ended 30 November 2013. The reason for using full year results rather than 31 May
2014 half year results is that Partquip does not prepare interim financial statements.
2. The amounts in the “After” column have been calculated using the audited results of Hudaco for
the year ended 30 November 2013 plus the audited results of Partquip for the year ended 30
June 2014. No account has been taken of the acquisition of the Dosco Group, which was
effective 1 December 2013. The effect of that acquisition was announced on 1 November 2013.
3. The amounts in the “After” column have been adjusted to take into account anticipated interest
to be paid on the total purchase price of R550 million at 8.0% per annum, less taxation thereon.
4. For the purposes of calculating the HEPS, EPS, Comparable EPS and Diluted EPS, it was assumed
that the Transaction was effective on 1 December 2012.
5. Per share earnings have been calculated using the weighted average number of shares in issue
for the year ended 30 November 2013, being 31 645 703 shares for HEPS, EPS and Comparable
EPS and 32 053 606 shares for Diluted HEPS. Net asset value per share and net tangible asset
value per share have been calculated based on the 31 645 703 shares in issue at 30 November
2013, net of those held by a Hudaco subsidiary.
6. Estimated transaction costs of a non-recurring nature amounting to R1.3 million relating to the
Transaction have been included in the determination of HEPS, EPS, Comparable EPS and Diluted
EPS.
7. As no purchase price allocation has yet been conducted, no account has been taken of
amortisation of intangible assets that may be identified.
5. CATEGORISATION
The Transaction is classified as a “Category 2 transaction” in terms of Section 9 of the JSE Limited
Listing Requirements.
Johannesburg
04 September 2014
Sponsor
Nedbank Capital
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