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Terms announcement regarding acquisition and withdrawal of cautionary
TORRE INDUSTRIES LIMITED
Incorporated in the Republic of South Africa
(Registration number: 2012/144604/06)
Share code: TOR ISIN: ZAE000188629
(“Torre” or “the Company” or “the Group”)
TERMS ANNOUNCEMENT REGARDING THE ACQUISITION OF ELEPHANT
LIFTING EQUIPMENT (PTY) LTD AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement published on 12
November 2014, Torre, via its wholly-owned subsidiary Torre
Holdings Proprietary Limited, is pleased to announce that it
has concluded an agreement to acquire 100% of the issued
ordinary share capital of Elephant Lifting Equipment
Proprietary Limited (“Elephant Lifting”) for a maximum
consideration of R180,000,000 (the “Acquisition”) with effect
from 1 January 2015 (the “Effective Date”).
2. THE ACQUISITION
2.1 NATURE OF THE BUSINESS OF ELEPHANT LIFTING
Elephant Lifting was founded in 1982 and has grown into one of
the largest and most technically able suppliers, designers and
manufacturers of lifting equipment in Africa.
Elephant Lifting serves a high quality customer base in the
mining, oil & gas, construction and project engineering,
procurement and construction management industries.
Long-standing relationships with suppliers of best-in-class
brands together with in-house technical engineering expertise
and state of the art production capabilities enable Elephant
Lifting to supply both internationally and locally
manufactured hoisting products, as well as specialized
attachments and cranes per order.
Elephant Lifting has also established partnership arrangements
with distributors in various parts of Africa that allow it to
service customers across the continent.
Following the completion of the Acquisition, it is envisaged
that Elephant Lifting will over time be combined with SA
French under the umbrella brand of “Torre Heavy Lifting”.
2.2 RATIONALE FOR THE ACQUISITION
The Rationale for the Acquisition is as follows:
- Strategic fit – the transaction is in line with Torre’s
strategy of growth via acquisition and is in an area of
core competency and focus, namely the heavy lifting
market. The transaction also diversifies and reduces the
cyclical risk inherent in the SA French business;
- Customer solutions – Elephant Lifting has a complementary
customer base to a number of Torre business units and it
is expected that collaboration between these entities and
Elephant Lifting will allow the Group to serve its
customers even more effectively going forward;
- Margin and earnings accretive – the Acquisition will
immediately enhance the Group’s consolidated margin and
earnings;
- Strong management – a proven, high quality management team
will join Torre and add strength in depth; and
- Increased African exposure – Elephant Lifting is expanding
its African sales at a rapid pace and this can be further
accelerated via integration with the Group’s on the ground
African network.
2.3 PURCHASE CONSIDERATION
The total purchase consideration for 100% of the shares and
claims in Elephant Lifting totals R180,000,000. The purchase
consideration will be settled via existing and new bank
facilities and via the issue of new Torre shares.
Torre has entered into separate sale of shares and claims
agreements (“Sale Agreements”) with the different shareholders
of Elephant Lifting. Terms of the Sale Agreements are outlined
below:
Majority Shareholders
The two founding partners of Elephant Lifting (“Majority
Shareholders”) collectively own 85% of the issued share
capital of Elephant Lifting in equal proportions.
Torre has agreed to acquire the shares and claims in Elephant
Lifting held by the Majority Shareholders for a total
consideration of R153,000,000 (“Majority Sale Agreement”), to
be settled as follows:
- 70% is payable upfront in cash;
- 15% is settled upfront through the issue of new Torre
shares at the volume weighted average price per share
(“VWAP”) as at 31 December 2014; and
- the remaining 15% (the “Retention”) is payable is cash
after the first anniversary of the date on which the
Acquisition closes, which will take place on the 3rd
business day after the later of the Effective Date or the
date of fulfilment of all conditions precedent (the
“Closing Date”). In the event of any impairments,
provisions or write offs to assets owned by Elephant
Lifting at the Closing Date, the Retention will be reduced
Rand for Rand by an amount equivalent to such impairment,
provision or write-off.
Minority Shareholders
The minority shareholders of Elephant Lifting hold the
remaining 15% of the issued share capital of Elephant Lifting
(collectively “the Minority Shareholders”).
Torre has agreed to acquire the shares and claims in Elephant
Lifting held by the Minority Shareholders for a total
consideration of R27,000,000 (“Minority Sale Agreements”), to
be settled through a combination of cash and new Torre shares,
part upfront, and part deferred over the first and second
anniversaries of the Closing Date.
2.4 WARRANTIES
The warranties contained in both the Majority and Minority
Sale Agreements are standard for transactions of this nature.
2.5 CONDITIONS PRECEDENT
The Majority Sale Agreement and the Minority Sale Agreements
are inter-conditional. In addition, the Acquisition is subject
to the fulfilment of the following conditions precedent by not
later than 31 January 2015:
- Elephant Lifting to rectify all documents evidencing
ownership of Elephant Lifting as at date of signature of
the Majority Sale Agreement;
- approval from the Torre board of directors;
- approval from the Elephant Lifting board of directors;
- Torre providing Elephant Lifting with written notice that
it is satisfied with the results of the due diligence
investigation;
- all Elephant Lifting shareholders to waive their rights of
pre-emption and alienation in terms of an Elephant Lifting
shareholders agreement;
- approval from the South African Competition Authorities in
terms of the Competition Act, No 89 of 1998;
- JSE and any other regulatory authorities approval, to the
extent required;
- written consent from counterparties to material contracts
held with Elephant Lifting with respect to the Acquisition
and change in control of Elephant Lifting;
- Grant Walton (current CEO of Elephant Lifting) and Keith
Roux to enter into service contracts with Torre; and
- Elephant Lifting to enter into new supply agreements with
each of its key suppliers.
2.6 CATEGORISATION
The Acquisition is a category 2 transaction in terms of the
JSE Listings Requirements.
3. NET ASSETS AND PROFITS OF ELEPHANT LIFTING
The value of the net assets that are the subject of the
Acquisition as at 31 October 2014 was R86 765 852. The
normalized profit after tax attributable to the net assets
that are the subject of the Acquisition for the year ended 31
March 2014 was R26 781 011, which has been extracted from the
audited financial statements of Elephant Lifting.
4. INTEGRATION INTO THE TORRE GROUP AND ALIGNMENT OF MEMORANDUM
OF INCORPORATION (“MOI”)
After the Closing Date, the parties to the Sale Agreements
shall procure that Elephant Lifting is integrated into the
Torre Group in accordance with the terms of the Sale
Agreements.
Subsequent to the Closing Date, Torre will review the MOI of
Elephant Lifting to ensure that it does neither frustrate nor
relieve Torre in any way from compliance with its obligations
in terms of the Listings Requirements.
5. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The cautionary announcement dated 12 November 2014 was in
relation to the Acquisition and is accordingly withdrawn.
Johannesburg
20 November 2014
Corporate Adviser and Sponsor
AfrAsia Corporate Finance Proprietary Limited
Legal Advisor to Torre
Cliffe Dekker Hofmeyr Inc.
Date: 20/11/2014 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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