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Disposal of Torre’s 55% interest in Kanu Equipment Limited
TORRE INDUSTRIES LIMITED
Incorporated in the Republic of South Africa
(Registration number 2012/144604/06)
Share code: TOR
ISIN: ZAE000188629
(“Torre” or the “Company”)
Disposal of Torre’s 55% interest in Kanu Equipment Limited
1. Introduction
Shareholders are advised that Torre has, through its wholly?owned subsidiary Torre International
Holdings Limited (“Torre International”), reached agreement with African Agriculture Fund
(“AAF”), a private equity fund managed by Phatisa Fund Managers Limited (“Phatisa”) and
Kanthu Nkhama Capital Proprietary Limited (“Kanthu”) in terms of which AAF will, jointly with
Kanthu, acquire Torre’s 55% shareholding in and shareholder loan claims against Kanu
Equipment Limited (“Kanu”) for a total consideration of US$26 725 000 (the “Transaction”).
Torre has also agreed with AAF and Kanu that working capital balances due to Torre by Kanu,
totalling approximately US$4 200 000, will be settled over the course of a 12?month period,
bringing the total proceeds payable to Torre to US$30 925 000.
2. The Transaction
2.1. Nature of the business of Kanu
Kanu, a private company incorporated in Mauritius, is currently held 55% by Torre, 40% by AAF
and 5% by a management consortium (“Management”). Kanu specialises in the supply of quality
earthmoving, forestry, agricultural and construction equipment across Southern, Central and
West Africa with operations in Zimbabwe, Botswana, Ghana, Republic of Congo, Sierra Leone,
Ivory Coast, Cameroon, Liberia and Mauritius.
2.2. Nature of the business of Phatisa and AAF
Phatisa is an African private equity fund manager, operating across sub?Saharan Africa, with
offices in Mauritius, South Africa, Kenya, Zambia and West Africa (opening 2017) and a European
presence. Phatisa has two funds under management, totalling more than US$285 million,
focused on food and affordable housing.
Phatisa’s African Agriculture Fund ? a US$246 million fund – commenced operations in January
2011 and has committed investments in excess of US$209 million, from Sierra Leone in West
Africa to Mauritius in East Africa. This reflects a total of nine portfolio companies across a
diverse range of agri and food related businesses.
2.3. Rationale for the Transaction
The Transaction realises significant cash proceeds for Torre which will result in the elimination of
the Company’s external debt and a significant net cash position once all proceeds have been
received. It is anticipated that these proceeds will be reinvested in the Company’s core South
African operations or returned to shareholders.
Following the completion of the Transaction, Kanu will be majority owned by AAF, a specialist
investor that is focussed on the African markets in which Kanu operates.
2.4. Transaction terms
AAF will subscribe for an additional 25.9% in Kanu for US$11 775 000 (“Subscription Proceeds”)
on the effective date of the Transaction (anticipated to be no later than 30 April 2017)
(“Effective Date”). Kanu will simultaneously use the Subscription Proceeds to buy?back 25.9% of
its issued share capital from Torre International. On the same date, Kanthu will swap its 2.1%
shareholding in Torre, valued at US$1 500 000 for a 3.3% interest in Kanu.
On the Effective Date, AAF will also acquire the remaining shareholder loan in Kanu from Torre
International for US$1 725 000. The total cash consideration of US$13,500,000 will be
transferred by AAF on execution of the Transaction agreements into an escrow account and
released once all the conditions precedent have been satisfied.
Torre International’s remaining 25.8% shareholding in Kanu, will be bought back by Kanu for
US$11 725 000 on loan account (“Vendor Loan”). The Vendor Loan, secured by all of the shares
in Kanu that have been disposed of by Torre, will bear interest at 5% per annum and is repayable
within 12 months of the Effective Date.
On implementation of the Transaction, AAF will hold 88.8% of Kanu, Kanthu will hold 4.5% and
Management will hold the remaining 6.7%.
Should the Vendor Loan not be repaid or successfully refinanced within 12 months of the
Effective Date, and should Kanu underperform on its 2017 financial year forecast, Kanu will have
the option to extend the Vendor Loan for a final 12 months at an interest rate of 10% per
annum.
2.5. Warranties
The Transaction implementation agreements will include standard warranties for a transaction
of this nature and will be subject to a comprehensive disclosure schedule.
2.6. Conditions precedent
The Transaction is subject to the fulfilment of the following outstanding conditions precedent,
by no later than 30 April 2017:
- AAF being satisfied with the results of the due diligence investigation into Kanu;
- Approval of the Transaction by Phatisa and AAF;
- Approval of the Transaction by the shareholders of Torre and by the directors of Kanu;
- Approval of the JSE Limited, the Financial Surveillance Department of the South African
Reserve Bank and the Competition Authorities, to the extent required; and
- Conclusion of the Transaction implementation agreements to the satisfaction of all
parties.
2.7. Categorisation
The Transaction is a Category 1 transaction in terms of the JSE Limited Listing Requirements and
accordingly, Torre shareholder approval is required. A circular, containing further details of the
Transaction and convening a general meeting of Torre shareholders to consider and, if deemed
fit, approve the resolutions necessary to give effect to the Transaction, will be posted to
shareholders in due course.
2.8. Net assets and profits of Kanu
The value of the net assets of Kanu at 30 June 2016 was R471 million and the net profit after tax
attributable to Kanu for the year ended 30 June 2016 was R56 million.
2.9. Other
As a consequence of the Transaction, which will result in the disposal of the majority of the
Company’s non?South African operations, the Board has decided to initiate a strategic review on
the future direction of Torre. The results of this review are anticipated to be announced with the
interim results on or about 28 February 2017.
Johannesburg
22 November 2016
Sponsor
RAND MERCHANT BANK (A division of First Rand Bank)
Date: 22/11/2016 11:03:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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