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Disposal of M-Tec and withdrawal of cautionary announcement
JASCO ELECTRONICS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 1987/003293/06)
Share Code: JSC ISIN: ZAE000003794
("Jasco" or “the Group”)
DISPOSAL OF M-TEC AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1 INTRODUCTION
Shareholders are advised that Jasco, has entered into a heads of agreement (“the Agreement”) with
Jasco Cables Investments Proprietary Limited’s (“Jasco Cables”), a wholly owned subsidiary of Jasco,
Community Investment Holdings Proprietary Limited (“CIH”), a related party, and Malesela Holdings
No.1 Proprietary Limited (“MH1”), a wholly owned subsidiary of CIH. In terms of the Agreement MH1
will acquire Jasco Cables’ 51.1% shareholding in Malesela Taihan Electric Cable Proprietary Limited
(“M-TEC”) for an aggregate purchase price of R60 million (the “Transaction”), in line with the valuation
prepared by an independent expert.
2 BACKGROUND AND RATIONALE FOR THE DISPOSAL
In 2013 shareholders were advised that the management of Jasco would take decisive action of its
investment in M-TEC if there was no improvement in performance and subsequently placed the
investment under review. As a result of M-TEC’s sustained poor performance, Jasco Cables entered
into discussions with Taihan Electric Wire Co. Limited (“Taihan”), who owns the remaining 48.9%
interest in M-TEC, regarding a process for the disinvestment by Jasco Cables of its interest in M-TEC.
Due to subsequent unexpected changes to the executive management at Taihan during November
2013 all negotiations were delayed and the disinvestment process effectively placed on hold.
Shareholders were advised in the cautionary announcement released on the Securities Exchange
News Service of the JSE Limited (“SENS”) on 2 July 2015 that Jasco Cables were in the advanced
stages of negotiations with CIH regarding the disinvestment of its interest in M-TEC.
The disposal of M-TEC is in line with Jasco management’s continued focus on addressing
underperforming business units and exiting from non-core and low value-adding businesses. In addition
to this, the Group will benefit by utilising the proceeds from the Transaction to strengthen its balance
sheet, reduce its interest cost, and free up significant executive management time to focus on the core
operations of Jasco.
3 BACKGROUND TO CIH AND MH1
CIH is a 100% black–owned investment holding company that was established in 1995 by Dr Anna
Mokgokong and Joe Madungandaba. CIH has significant interests in the healthcare, ICT, logistics,
mining, infrastructure, power and energy sectors. CIH is currently a major shareholder of Jasco through
its direct and indirect holding (through Afrocentric Investment Corporation Limited) of 17.6%.
4 BACKGROUND TO M-TEC
M-TEC is a manufacturer and supplier of non-ferrous products in South Africa including power cables,
aluminium overhead conductors, bare copper wire, strip products as well as optical fibre cable.
5 KEY TERMS OF THE TRANSACTION
5.1 Sale of shares and shareholding
Jasco, through Jasco Cables, is the owner of the ordinary shares and the preference shares in
M-TEC, representing a 51.1% shareholding in M-TEC.
5.2 The Purchase Consideration
The purchase price of the preference shares is an amount equal to R40,588,235 and the
purchase price of the ordinary shares is an amount equal to R19, 411,765. The aggregate
purchase price for the Jasco Cables’ 51.1% shareholding in M-TEC is R60,000,000 (“the
Purchase Consideration”)
The Purchase Consideration will be settled as follows:
- an initial payment of R20, 000,000;
- monthly payments of interest accrued will be paid from 1 January 2016 to 30 June 2016;
- R40, 000,000 will be repaid in monthly instalments of capital and interest commencing
from 1 July 2016 and ending 31 December 2018, with an option to extend this repayment
period by one year;
- MH1 will have the right to make lump sum payments to Jasco at any time during the
payment period without notice or penalty.
The Purchase Consideration will be secured by a pledge of the MH1 shareholding in M-TEC
subsequent to the Transaction as well as a pledge of the CIH shareholding in Jasco.
5.3 Suspensive Conditions
The conclusion of the Transaction is subject to the fulfilment of certain suspensive conditions
which include, but are not limited to:
- to the extent necessary, the Transaction is approved in terms of the Competition Act, Act
89 of 1998;
- to the extent necessary, a compliance certificate or exemption granted by Takeover
Regulation Panel in respect of the Transaction;
- obtaining the required Jasco shareholder approval in terms of the JSE Listing
Requirements for a Category 1 disposal;
- the approval of the respective Boards of Directors of Jasco, Taihan and CIH;
- a written waiver from existing shareholders of M-TEC of the pre-emptive rights in terms of
the shareholders agreement between M-TEC, Jasco Cables and Taihan; and
- the delivery of a written consent from Investec Bank by CIH to Jasco Cables, approving
the pledge of the CIH shares in Jasco Holdings
- such other suspensive conditions as may be necessary in relation to the Transaction.
6 EFFECTIVE DATE
The Agreement is effective as of 30 June 2015. All the suspensive conditions must be satisfied and a
binding memorandum of agreement concluded by no later than 30 November 2015, failing which, the
Agreement will be of no force and effect.
7 PROFIT AND NET ASSET VALUE ATTRIBUTABLE TO M-TEC
Jasco’s 51.1% share of the value of the net assets of M-TEC as per the most recently published results
of Jasco, being the unaudited results for the six months ended 31 December 2014, is R183, 268,951.
Jasco’s 51.1% share of the unaudited profits attributable to the net assets of M-TEC for the six months
ended 31 December 2014 is R1, 242,823. The carrying value of Jasco’s investment in MTEC at 31
December 2014 is R119,000,000.
8 CATEGORISATION OF THE TRANSACTION
The Transaction constitutes a category 1 disposal to a related party for Jasco in terms of the Listings
Requirements of the JSE Limited. The Transaction is therefore subject to Jasco shareholder approval
and a circular will be issued to shareholders in due course.
9 WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are hereby advised that the cautionary announcement which was released on SENS on
2 July 2015 is hereby withdrawn and therefore caution is no longer required to be exercised when
dealing in the Group’s securities.
Midrand
17 July 2015
Sponsor
Grindrod Bank Limited
Legal Advisor to Jasco
Norton Rose Fulbright
Date: 17/07/2015 11:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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