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Terms announcement of an acquisition of a minimum 26.25% and maximum 34.50% interest in Torre Industries Ltd
STELLAR CAPITAL PARTNERS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/015580/06)
Share code: SCP ISIN: ZAE000198586
(“SCP” or the “Company”)
TERMS ANNOUNCEMENT REGARDING THE ACQUISITION OF A MINIMUM 26.25%
AND MAXIMUM 34.50% INTEREST IN TORRE INDUSTRIES LIMITED
("TORRE")
1. INTRODUCTION
SCP is pleased to announce that it has agreed terms (“the
Transaction”) with a consortium of Torre shareholders (“the
Vendor Consortium”) to acquire an interest in Torre, comprising
26.25% of Torre’s issued share capital. The Transaction
envisages the following salient terms:
1.1. The purchase of an aggregate amount of 132 946 039 Torre
shares from the Vendor Consortium for a total consideration
of R690 370 175 (“the Consideration”).
1.2. The Consideration shall be settled partly (82.26%) through
the issue of new SCP shares at R2.00 per share and partly
(17.74%) in cash, being amounts of R567 919 805 and
R122 450 370 respectively.
1.3. On closing of the Transaction, SCP will hold not less than
132 946 039 Torre shares, totaling an amount of 26.25% of
Torre’s issued share capital.
1.4. In addition SCP intends to approach certain other Torre
shareholders with an offer to acquire their Torre shares for
an equivalent consideration of 2.6 SCP shares for every 1
Torre share. In total SCP intends to acquire up to
174 739 128 Torre shares or 34.5% of the issued share
capital of Torre.
2. BACKGROUND TO TORRE
Torre is an industrial group that specialises in the value added
distribution of branded capital equipment and industrial
consumable products, as well as the provision of support services
and specialised financial solutions to a diversified customer base
across Africa. Torre employs approximately 1500 people in 7
business units and serves several end-markets including the
automotive, mining, construction, manufacturing and agricultural
sectors. Torre has an established presence across South Africa and
in 11 other African countries. Torre’s strategy intends to remain
a predominantly Africa focused business and has identified
significant growth opportunities on the continent.
In November 2012 Torre listed on the Johannesburg Stock Exchange
(“JSE”) via a “mirror listing” and, since inception, has delivered
strong returns to shareholders with -
- a current market capitalisation of approximately R2.5 billion;
and
- a compound annual growth rate in share price since listing in
excess of 75%.
Torre’s December 2014 interim results reported a 118% increase in
headline earnings and a maiden dividend of 3.5 cents per share was
paid in March 2015.
3. RATIONALE FOR THE TRANSACTION
The Transaction presents an opportunity for SCP to achieve
immediate scale in its investment portfolio while at the same time
enhancing quality via the introduction of a dividend paying asset
with highly attractive growth prospects.
4. TERMS OF THE TRANSACTION
The terms of the Transaction envisage that:
4.1. SCP will acquire a minimum of 132 946 039 unencumbered and
freely transferable Torre shares (“Sale Shares”) from the
Vendor Consortium for a total consideration of R690 370 175.
4.2. The consideration payable by SCP to the Vendor Consortium
shall be settled partly in cash (“Cash Consideration”) and
partly through the issue of ordinary shares in SCP (“Share
Consideration”).
4.3. The Cash Consideration, totaling an amount of R122 450 370,
will be funded from cash reserves and short-term expected
cash inflows with interest accruing on the Cash Consideration
from 1 September 2015 until settlement thereof.
4.4. The Share Consideration will be settled by way of the issue
of 283 959 903 new SCP shares at an issue price of R2.00 per
share, which represents a discount of less than 3% of the 30
day Volume Weighted Average Price of an SCP share as at 3
July 2015.
4.5. Any additional Torre shares that are acquired will be settled
through the issue of new SCP shares at an equivalent
consideration of 2.6 SCP shares for every 1 Torre share. The
Company will confirm the maximum number of shares to be
acquired in due course.
The effective date of the Transaction is expected to be no later
than 31 October 2015.
5. CONDITIONS PRECEDENT
The implementation of the Transaction will be subject to the
fulfilment of the conditions precedent that:
5.1. by no later than 31 July 2015, SCP board and/or investment
committee approval (as applicable) has been obtained;
5.2. by no later than 31 August 2015, the boards, shareholders
and/or lenders of certain of the Vendor Consortium’s members
have approved the Transaction, to the extent required;
5.3. by no later than 31 October 2015, certain of the members of
Vendor's Consortium have completed a diligence investigation
in respect of the valuation of the Company; and
5.4. by no later than 31 October 2015, all requisite SCP
shareholder and regulatory approvals have been obtained from,
inter alia, the JSE, the Takeover Regulation Panel and the
South African Reserve Bank (to the extent required),
including any additional approvals required as a result of
the implementation of the Transaction constituting a reverse
takeover in terms of the JSE Listings Requirements.
6. FINANCIAL INFORMATION OF TORRE
As per Torre's latest unaudited 6 month results, released on 31
December 2014, Torre had recorded year-to-date –
- revenue of R562 402 000;
- earnings before interest, tax, depreciation and amortisation of
R87 234 000; and
- profit after tax of R48 972 000.
7. CATEGORISATION, REVERSE TAKEOVER AND CIRCULAR
The Transaction will result in a Reverse Takeover under the
Listings Requirements and consequently require approval from 50%
of SCP shareholders eligible and entitled to vote on the
Transaction. Accordingly, shareholders are cautioned that the
Transaction will be subject to the JSE confirming that the Company
complies with all the requirements for a new listing on the Main
Board of the JSE as an investment holding entity.
The settlement of the share portion of the Consideration will
result in SCP issuing more than 30% of its share capital, and
accordingly will also require approval from 75% of SCP
shareholders eligible and entitled to vote thereon in terms of the
Companies Act. No. 71 of 2008, as amended.
The Vendor Consortium are all deemed public shareholders and
accordingly no fairness opinion or additional related party
approvals will be required.
A circular to SCP shareholder detailing the Transaction, pro forma
effects and a notice of general meeting will, subject to approval
by, inter alia, the JSE, be posted to shareholders in due course.
Details of the salient dates in respect of the Transaction will be
communicated to shareholders.
8. RESPONSIBILTY STATEMENT
The Board accepts responsibility for the information contained
in this announcement. To the best of its knowledge and belief,
the information contained in this announcement is true and
nothing has been omitted which is likely to affect the
importance of the information included.
Rosebank, Johannesburg
6 July 2015
Corporate Finance Adviser and Sponsor: Stellar Advisers
Proprietary Limited
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