NUTRITIONAL HOLDINGS LIMITED - Change in Strategy, Acquisition of VSS and Withdrawal of Cautionary Announcement

Change in Strategy, Acquisition of VSS and Withdrawal of Cautionary Announcement

NUTRITIONAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 2004/002282/06)
Share code: NUT ISIN: ZAE000156485
(“NUT” OR “THE COMPANY”)

CHANGE IN STRATEGY, ACQUISITION OF VENLAI STRATEGIC SOLUTIONS
PROPRIETARY LIMITED (“VSS”) AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT

CHANGE IN STRATEGY

Shareholders are referred to the announcement released on SENS
on 30 September 2016 wherein the Company announced the
subscription by Ontario Private Equity Proprietary Limited
(“Ontario”) for 200 000 000 ordinary NUT shares for a total
consideration of R4 million and in which the Company renewed
the cautionary announcement relating to the discussions with
Ontario with a view to reverse list certain companies within
Ontario’s portfolio into NUT.

The board of directors of NUT (“Board”) has resolved to
diversify the Company’s exposure to include investments
outside of the food manufacturing sector and to invest in a
broader range of sectors within the industrial and
manufacturing sectors. In line with this strategy the Board
has continued to engage with Ontario and to investigate the
acquisition by NUT of various companies within the Ontario
group, the businesses of which fall outside of the food
manufacturing sector.

The first step in fulfilling this revised strategy is the
proposed acquisition by the Company of VSS.

ACQUISITION OF VSS

1.   Introduction

     Shareholders are advised that the Company has entered into
     an agreement (“Agreement”) with Ontario Renewable Energy
     Proprietary Limited (“Seller”) on 4 November 2016 in terms
     of which the Company will acquire 100% of the issued share
     capital of VSS (“Sale Shares”) as well as all of the
     Seller’s loan claims against VSS (“Sale  Claims”)
     (“Acquisition”).

2.   Description of VSS’ business

     VSS carries on the business of an acredited distributor of
     Bosch branded renewable energy and security solutions to a
     large base of commercial and industrial clients.
3.   Rationale for the Acquisition

     The Board has, over the last few years, attempted to
     improve NUT shareholder value organically and via potential
     acquisitions and mergers with limited success. The Ontario
     opportunity for the reverse listing of certain energy
     assets into NUT has therefore provided the Board with an
     opportunity to diversify the Company’s exposure outside of
     the food sector, which has proven to be very challenging
     for a smaller ALT-X listed entity such as NUT. It has
     become evident to management that it would require
     substantial resources to be able to compete against the
     bigger food manufacturers.

     Unfortunately the Board does not believe that the Company
     has access to the required reserves to be able to grow its
     food business and compete with the more established players
     in this market segment, hence the decision to pursue a more
     diversified investment and business strategy.

     The Acquisition will be the first step towards the revised
     long-term strategy of the Company.

4.   Acquisition Consideration, Closing Date and Effective Date

     The consideration payable by NUT to the Seller for the Sale
     Shares and Sale Claims, in terms of the Agreement, is an
     amount of R9 000 000 (“Purchase Consideration”).

     The Purchase Consideration will be settled by NUT through
     the issue of 300 000 000 ordinary NUT shares at the deemed
     issue price of 3 cents per share (“Consideration Shares”).
     The Consideration Shares will be issued on the date on
     which all the conditions precedent contained in the
     Agreement have been fulfilled and after the 2018 PAT (as
     defined below) has been determined (“Closing Date”).

     Notwithstanding the Closing Date, possession, effective
     control, ownership of and risk in and benefit attaching to
     the Sale Shares and Sale Claims shall be given to the
     Company on 1 November 2016 (“Effective Date”).

5.   Profit warranty

     The Purchase Consideration has been calculated based on the
     assumption that VSS will have a net profit after taxation
     (before the deduction of any administration fees charged by
     NUT from time to time) for the financial year ending
     28 February 2018 (“2018 PAT”), of no less than R9 000 000,
     as calculated in accordance with IFRS and evidenced by the
     audited annual financial statement of VSS as at
     28 February 2018, as signed off by the registered auditors
     of the NUT.

     In the event that the 2018 PAT is less than R9 000 000, NUT
     shall have the right to either cancel the Agreement or to
     reduce the Purchase Consideration with an amount equal to
     the difference between the 2018 PAT and R9 000 000.

     To the extent that the 2018 PAT is equal to or more than
     R9 000 000, the Purchase Consideration will not be adjusted
     and the Consideration Shares will be issued and allotted to
     the Seller.

6.   Additional  terms of the Agreement, Warranties and
     Indemnities

     For the period between the Effective Date and the Closing
     Date ("Interim Period”), the Seller and the Company shall
     each be entitled to appoint a single director to the board
     of directors of NUT.

     The Seller provides detailed warranties and indemnities to
     the Company (including warranties in relation to conduct of
     the Business during the Interim Period) that are standard
     for a transaction of this nature

7.   Conditions precedent

     The Acquisition is subject to the following conditions
     precedent (“Conditions Precedent”):

     Within fourteen 14 days from the date of signature of the
     Agreement:

     i)    all documentation required or necessary, whether
           contractually or regulatory, for the transfer of the
           Sale Shares and the cession of the Sale Claims, the
           changes to the board of directors of VSS (as set out
           in the Agreement) and all other documentation
           necessary to give effect to the terms and conditions
           of the Agreement, have been signed; and

     ii) the financial statements, books of account and
         accounting records of VSS have been made available to
         the Company.

8.   Financial Effects

     The value of the net assets attributable to the Sale Shares
     and the Sale Assets amounts to R2 345 000 and the
     attributable profit for the seven month period ending 30
     September 2016 of the current financial year amounts to
     R1 064 231.

     The financial information contained in this announcement
     has not been reviewed or reported on by the Company’s
     auditors.

9.   Categorisation of the Acquisition

     The Acquisition qualifies as a category 2 acquisition for
     the Company in terms of the JSE Listings Requirements.

10. Schedule 10 of the JSE Listings Requirements

     To the extent necessary, the Board shall, as soon as
     possible after the Effective Date, procure that the
     memorandum of incorporation of VSS is amended to ensure
     that the Company continues to comply with its obligations
     in terms of the JSE Listings Requirements.

WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

NUT shareholders are advised that, whereas the terms of the
Company’s revised long term strategy has been declared and the
details of the Acquisition have now been announced, caution is
no longer required to be exercised by shareholders when
dealing in their NUT shares.

7 November 2016
Umhlanga

Designated Advisor and Transaction Advisor
PSG Capital Proprietary Limited

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