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Disposal of equity interest in Aberdare Group to Hengtong
Allied Electronics Corporation Limited
(Registration number 1947/024583/06)
(Incorporated in the Republic of South Africa)
Share code: AEL ISIN: ZAE000191342
Share code: AEN ISIN: ZAE000191359
(“Altron” or “the Company”)
- DISPOSAL BY POWER TECHNOLOGIES PROPRIETARY LIMITED (“POWERTECH”)
OF 75% OF ITS EQUITY INTEREST IN ABERDARE CABLES PROPRIETARY LIMITED
(“ABERDARE CABLES”); AND
- DISPOSAL BY ABERDARE CABLES INTERNATIONAL HOLDINGS PROPRIETARY
LIMITED (“ABERDARE INTERNATIONAL”), A WHOLLY OWNED SUBSIDIARY OF
POWERTECH, OF 100% OF ITS EQUITY INTEREST IN ABERDARE HOLDINGS
EUROPE BV LIMITED (“ABERDARE EUROPE”),
(COLLECTIVELY REFERRED TO AS “THE ABERDARE GROUP”) TO HENGTONG
OPTIC – ELECTRIC INTERNATIONAL CO. LIMITED OR ITS NOMINEE (“HENGTONG”)
PROPOSED TRANSACTION
INTRODUCTION
Shareholders are advised that on 2 December 2015 (“signature date”), Powertech entered into a
binding heads of agreement (“the binding heads”) with Hengtong whereby Powertech will dispose
of 75% of its shareholding in Aberdare Cables and Aberdare International will dispose of 100% of
its shareholding in Aberdare Europe to Hengtong, on terms and conditions more fully set out in
the binding heads and as summarised below (collectively “the Disposal”).
The salient terms and conditions of the Disposal as set out in the binding heads are as follows:-
- with effect from the signature date up to and including the earlier of the date on which formal
agreements (“transaction agreements”) are signed or the binding heads is terminated,
Powertech, as well as other member companies of the Powertech group, their agents,
officers and employees will be restricted from soliciting, initiating, encouraging or pursuing
any third party negotiations pertaining to or associated with the Disposal;
- the purchase price payable by Hengtong to Powertech and payment dates will be as
described below;
- Alcon Marepha (Pty) Ltd, CBI Electric Aberdare ATC Telecom Cables (Pty) Ltd and
Aberdare Cables Asia Limited will be excluded from the Disposal;
- the Disposal will include Aberdare Cables’ 70% equity interest in Aberdare Intelec
Mozambique Limitada and Aberdare International’s 100% equity interest in Aberdare
Europe including the latter’s wholly owned subsidiaries, namely Cables de Comunicaciones
Zaragoza S.L. and Alcobre – Condutores Electricos S.A.;
- Izingwe Aberdare Cables (Pty) Ltd (“Izingwe”), the present minority BEE shareholder of
Aberdare Cables will be entitled to remain as a 30% shareholder of Aberdare Cables or, at
its election, to dispose of that many shares which it holds in Aberdare Cables to Hengtong
in proportion to the percentage of shares which Powertech is selling in Aberdare Cables to
Hengtong;
- following the Disposal, Powertech will retain a 17.5% shareholding in Aberdare Cables for a
period of at least two years following the entering into of any transaction agreements
including, inter alia, BEE agreements, share purchase agreements, shareholder agreements
and memoranda of incorporation. Following the initial two year period, Powertech will be
entitled to put and dispose of its remaining shareholding in Aberdare Cables to Hengtong
on the same basis as the disposal of the initial 75% shareholding forming part of the
Disposal;
- the Disposal will be subject to certain conditions precedent more fully described below and
in the binding heads plus transaction agreements;
- standard warranties, indemnities and restraints that are customary for a transaction of this
nature will be provided by Powertech;
- disputes pertaining to the Disposal will be resolved by arbitration in accordance with the
commercial rules of the Arbitration Foundation of Southern Africa; and
- the binding heads and transaction agreements will be subject to the law of South Africa.
NATURE OF BUSINESS OF THE ABERDARE GROUP
The Aberdare Group, which forms part of the wider Altron group, is a leading cable manufacturer
which has been in existence since 1946.
Aberdare Cables is the largest cable manufacturer in Southern Africa. It specialises in the
manufacture of low and medium voltage electrical cables for application in power generation,
power transmission, power distribution, rural electrification, rail, petrochemical, mining, ports,
airports, wholesale, construction and domestic building environments.
Aberdare Cables has three manufacturing sites and six customer service centres in South Africa.
It also has international manufacturing and sales sites in Portugal, Spain, Namibia and
Mozambique. This footprint enables the business to support a customer base in South Africa,
Africa, Europe and South America.
The Aberdare Group offers cable design, product development, as well as installation support,
commissioning and diagnostic testing through its Engineering Services business. In addition
comprehensive value added services such as Key Account Management, Customer Relationship
Management, product and application training, laboratory testing and a Technical Help desk is
offered.
RATIONALE FOR THE DISPOSAL
Hengtong, a leading Chinese power and fibre optic cable manufacturer and listed on the Shanghai
Stock Exchange, is the fourth largest cable manufacturer in China and among the top hundred
largest cable manufacturers in the world. The company considers the Aberdare Group an
attractive platform to expand its international business in those key markets where the Aberdare
Cables operates, namely South Africa, Africa and Europe.
In recent years, Aberdare Cables has recognised the importance and benefit which it will derive
from having a strong international strategic partner to assist it in driving its growth strategy and
expanding into local and international markets. Hengtong is well suited to play this role by
supporting the Aberdare Cables group through a process of technology innovation, product
expansion, systems development and technical expertise plus knowhow.
In addition to the aforegoing, the Aberdare Group will be provided with access to the operating
experience and financial backing of Hengtong plus insight into the strategies and workings of a
market leading cable manufacturer.
EFFECTIVE DATE OF THE DISPOSAL
The Disposal by Powertech of 75% of its shareholding in Aberdare Cables and the disposal by
Aberdare International of 100% of its shareholding in Aberdare Europe to Hengtong will become
effective following the fulfilment of the last of the conditions precedent set out below and in the
binding heads plus transaction agreements.
PURCHASE CONSIDERATION
The purchase consideration payable by Hengtong as a result of the Disposal will be based on an
equity value of R1 billion in respect of the Aberdare Group. In addition thereto, Hengtong will
assume the Aberdare Group debt which amounted to approximately R232 million as at 31 August
2015 (“the Purchase Consideration”).
The Purchase Consideration will be payable by Hengtong to Powertech following the fulfilment of
the last of the conditions precedent set out below and in the binding heads plus any transaction
agreements.
Hengtong will be entitled to adjust the Purchase Consideration in accordance with an agreed
formula to be agreed between the parties and included in the transaction agreements, which takes
into account various factors including cash, debt and working capital.
CONDITIONS PRECEDENT TO THE DISPOSAL
The Disposal is subject to the fulfilment or waiver, as the case may be, of, inter alia, the following
conditions precedent, namely:
- the unconditional approval of the Disposal by the Competition Authorities in terms of the
Competition Act, 1998 as amended, by not later than 120 days from the date of filing;
- the approval of the Disposal by Altron’s shareholders in general meeting and as per the JSE
Listings Requirements;
- the approval of the Disposal, to the extent necessary, by any regulatory authorities in South
Africa and China including, without limitation, the South African Reserve Bank, the Takeover
Regulation Panel and any Peoples Republic of China approvals within 90 days from the
signature date;
- the conclusion of a confirmatory due diligence exercise by Hengtong by not later than 31
January 2016, the findings of which are to their satisfaction; and
- the conclusion of binding transaction agreements between the parties including relevant
board approvals to sign such agreements, within 90 days from the signature date.
APPLICATION OF THE DISPOSAL PROCEEDS
The Purchase Consideration realised as a result of the Disposal will be used to reduce the overall
Altron group debt.
CATEGORISATION OF THE DISPOSAL AND SHAREHOLDER APPROVAL
In terms of the JSE Listings Requirements the Disposal is classified as a Category 1 transaction
and will require Altron shareholder approval. Accordingly a circular to shareholders will be posted
within 60 days of the date of this announcement containing, inter alia, a notice of general meeting.
By order of the board of the Company
Johannesburg
2 December 2015
Investment Bank and Sponsor
Investec Bank Limited
Date: 03/12/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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