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GRAND PARADE INVESTMENTS LIMITED - Small Related Party Transaction: Acquisition By GPI Of A Further 35% Of Mac Brothers

Release Date: 20/10/2014 17:30
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Small Related Party Transaction: Acquisition By GPI Of A Further 35% 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 35.00% 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 20 October 2014(“the
     Agreement”) with, inter alia, Ranmac Management and
     Holdings (Proprietary) Limited (“Ranmac”), Nadesons
     Investments (Proprietary) Limited (“Nadesons Investments”)
     and Razia Khan (collectively referred to as “the
     Sellers”), in terms of which the Sellers have agreed to
     sell 35.00% of the total issued ordinary share capital of
     Mac Brothers (“the Sale Shares”) to the Company (“the
     Acquisition”).

     Following the successful implementation of the
     Acquisition, Mac Brothers will be a wholly-owned
     subsidiary of GPI.

2.   DETAILS OF THE BUSINESS OF MAC BROTHERS

     Mac Brothers was established in 2002 and is today, 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 the Mac Brothers factory taking advantage of an
     abundance of local stainless steel and well trained local
     artisans and engineers. Mac Brothers has 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 as well as a large number of South Africa's finest
     and world renowned restaurants. Mac Brothers is also a
     patron sponsor of the South African Chefs Association and
     is 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.
     Mac Brothers 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®
     Restaurants 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 seek 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.
     As a large percentage of the component parts of a slot
     machine consist of stainless steel, GPI intends to utilise
     Mac Brothers’ expertise and resources for this purpose and
     thereby reduce the overall manufacturing costs of slot
     machines.

4.    SMALL RELATED PARTY TRANSACTION

4.1   Due to one of the Sellers, namely Nadesons Investments,
      being 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 20 October 2014 the
      Acquisition is classified as a “small related party
      transaction” in terms of section 10.7 of the JSE Listings
      Requirements 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
      to provide written confirmation of the fairness of the
      Acquisition to GPI shareholders and to the JSE.
      Shareholders will be advised in due course regarding
      Mazars’ independent expert opinion, once same is
      finalised.

4.4   This announcement is made for information purposes only
      and no action is required by GPI shareholders with regard
      to the Acquisition, subject to the approval of the
      independent expert opinion by the JSE and the opinion
      confirming that the Acquisition is fair to GPI
      shareholders.

5.    PURCHASE CONSIDERATION

      The total consideration payable by the Company to the
      Sellers for the purchase of the Sale Shares is the
      aggregate of R23 755 017.85 to be paid to the Sellers
      through a combination of cash and the issue of new GPI
      Shares, which will be issued at the volume-weighted
      average price (“VWAP”) per GPI share for the 30 (thirty)
      day trading period immediately preceding the signature
      date of the Agreement (“GPI Shares”), as set out below:

      i)   Ranmac – an amount of R13 574 320.62 payable in GPI
           Shares;
      ii) Nadesons Investments – an amount of R6 787 117.08
           payable in cash; and
      iii) Razia Khan – an amount of R3 393 580.16 payable in
           cash.
6.    CONDITIONS PRECEDENT

      The Acquisition is subject to the fulfillment of the
      following outstanding conditions precedent:

6.1. that on or before 31 October 2014, the parties comply, to
     the extent necessary by law, with the JSE Listings
     Requirements (including in relation to the issue of GPI
     Shares to Ranmac on the closing date); and

6.2. that on or before 31 October 2014, excess cash will be
     declared as a dividend by Mac Brothers to the current
     shareholders of Mac Brothers (“the Dividend”).

7.    OTHER SIGNIFICANT TERMS OF THE AGREEMENT

      The Agreement provides for warranties and indemnities that
      are normal for a transaction of this nature.

8.    MAC BROTHERS FINANCIAL INFORMATION

      The total value of the net assets of Mac Brothers, which
      are the subject of the Acquisition, were R43 231 418 as at
      30 June 2014.

      The profits attributable to the net assets of Mac Brothers
      that are the subject of the Acquisition were R6 550 293
      for the year ended 28 February 2014. However subsequent to
      its year end Mac Brother changed its financial year end to
      30 June 2014 and the losses for the four month period
      ending 30 June 2014 were R479 756.

9.   EFFECTIVE DATE OF THE ACQUISITION

     In terms of the Agreement, the effective date of the
     Acquisition will be the 3rd (third) business day following
     the date on which all the conditions precedent set out in
     paragraph 6 above have either been fulfilled or waived,
     which is expected to be before 31 October 2014 and/or,
     should the condition precedent referred to in paragraph 6.2
     above be waived, the date on which the Dividend is declared
     or paid, whichever is the later.

Cape Town
20 October 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

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