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Acquisition of Mosegedi & Associates (Pty) Ltd, Update on Issue of Shares for Cash and Withdrawal of Cautionary
VISUAL INTERNATIONAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2006/030975/06)
(“the Company” or “Visual”)
ISIN Code: ZAE000187407 Share code: VIS
ACQUISITION OF MOSEGEDI & ASSOCIATES PROPRIETARY LIMITED, UPDATE ON ISSUE OF
SHARES FOR CASH AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. ACQUISITION
1.1. Introduction
Shareholders are advised that the Company has entered into an agreement with
Messrs P. Pheelwane, L. Matlholwa and V. Mokgatlha (“Mosegedi Shareholders”)
regarding a transaction whereby Visual will acquire 50.1% of the issued share
capital of Mosegedi & Associates Proprietary Limited (“Mosegedi”) for a minimum
price of R13 780 000 and a maximum price of R31 242 700 in two phases
(“Acquisition”). The consideration will be settled through the issue of up to a
maximum of 50.1% of the shares in Visual calculated with reference to the
commencement of negotiations between the parties in October 2016. The
Mosegedi Shareholders are not related parties to Visual at the date of entering
into this agreement. The effective date of the transaction is 1 March 2017.
1.2. Background to Mosegedi
Mosegedi was established eleven years ago, first operating for two years as a
close corporation and then as a proprietary company for the following nine years.
Mosegedi was established with a mission to provide engineering, programme
management and management consulting services aligned with the
Government’s vision and policies for the development of Previously
Disadvantaged Individuals (PDI’s), professionals and marginalised communities.
Mosegedi offers expertise in turnkey housing development, civil engineering,
programme and project management and management consulting. Currently
Mosegedi is managing the development of affordable housing in three provinces,
Northern Cape, Northwest and Eastern Cape with building contract work in these
provinces to the value of more than R500m, the execution of which has been sub-
contracted.
1.3. Rationale of the transaction
Visual and Mosegedi intend to create a black empowered, diversified property
development group. Visual has a solid balance sheet and Mosegedi has a solid
pipeline of business, the combination of which is expected to unlock value for
both entities.
1.4. Details and terms of the transaction
The Acquisition will be executed in two phases as follows:
a) In phase one of the agreement (“Phase One”) the Company will issue
106 000 000 Visual shares at the closing market price on 27 February 2017,
being 13 cents per share, to the Mosegedi Shareholders as consideration for
the acquisition of 31.2% of Mosegedi, which will result in the Mosegedi
Shareholders holding approximately 31.4% in the increased issued share
capital of Visual.
b) In phase two of the agreement (“Phase Two”), Visual will acquire an additional
18.9% of Mosegedi for a maximum amount of R17 462 700, subject to the
achievement by Mosegedi of the profit warranty detailed in paragraph 1.5
below, to be settled by the issue of up to 116 418 000 shares in Visual at a
market price of 15 cents per share. Mosegedi’s performance relative to the
profit warranty will determine the final number of shares to be issued to the
Mosegedi shareholders in terms of Phase Two.
1.5. Profit warranty
The Mosegedi shareholders warrant that Mosegedi’s total net pre-tax profit will be
a minimum of R55.4 million for the year ending 28 February 2018, which profit
warranty has been based on Mosegedi’s various building contracts that are
currently in progress and/or new contracts that are expected to be awarded
during 2017.
Should the net profit of R55.4 million not be achieved, the total number of Visual
shares to be issued to Mosegedi shareholders per Phase Two will be reduced
proportionately by the same percentage as the actual profit is less than the
warranted profit. Visual will hold a shareholding of 50.1% in Mosegedi.
1.6. Other matters and options
Shareholders are also referred to the announcement published on 14 October
2016 whereby the Company secured a loan from Tokoza Cape Flowers Proprietary
Limited, which was repaid on 23 December 2016. The loan agreement provided
for an option to subscribe, in whole or in part, for 25 million Visual shares for cash at
a subscription price of 15 cents per share (“the Tokoza Option”). The Tokoza
Option will require shareholder approval.
In the event of the Tokoza Option, or a portion thereon, being exercised, the
Mosegedi Shareholders will have an option to:
(i) simultaneously subscribe for the same number of Visual shares, as
subscribed for in terms of the Tokoza option, at the Volume weighed
average price (VWAP) of Visual’s shares on the date of the exercise of the
option less 10% (“the Mosegedi Option”); or
(ii) Should the Mosegedi shareholders have sufficient reason to believe that
Mosegedi’s net pre-tax profit will be a minimum of R55.4 million for the year
ended 28 February 2018, the Mosegedi Shareholders may postpone their
decision to exercise their option until 1 March 2018; and if Visual’s auditors
verify that Mosegedi’s net pre-tax profit is a minimum of R55.4 million for the
year ending 28 February 2018, then the Mosegedi Shareholders will have an
option to subscribe, at 15 cents per Visual share, on or before 1 March 2018
for the same number of Visual shares as per the Tokoza option being
exercised (“the Mosegedi 15 cents Option”).
The Mosegedi Option or the Mosegedi 15 cent Option (the “Mosegedi Options”)
will require shareholder approval in General Meeting.
1.7. Conditions precedent
Phase One shares will be issued to the respective parties on or as soon as possible
after the effective date.
Phase Two and the Mosegedi options will require JSE, TRP and Visual shareholder
approval. The Visual shares to be issued in relation to Phase Two will be issued to
the Mosegedi shareholders as soon as possible after the confirmation in writing by
Visual’s auditors to the JSE that Mosegedi’s net pre-tax profit is a minimum of R55.4
million for the year up to 28 February 2018.
1.8. Further aspects
After completion of Phase One, Mosegedi shareholders will have the right to
nominate two non-executive directors to the Board of Visual.
1.9. Financial information
Per the unaudited management accounts of Mosegedi as at 31st October 2016:
- the net asset value of Mosegedi as at 31st October 2016 was R6.1m; and
- for the 8 months to 31st October 2016, Mosegedi generated pre-tax profits
of R5.9m.
It should be noted that the terms of the Mosegedi acquisition provide for Visual to
oversee the audits for the year ended 29 February 2016 and the year ending 28
February 2017, which results will be audited in accordance with full IFRS.
1.10. Categorisation and documentation
Phase One is category 2 transaction in terms of the JSE Listings Requirements and
shareholder approval is accordingly not required.
Phase Two, the Tokoza option and the Mosegedi Options will require JSE and
shareholder approval, with Phase Two being a category 1 transaction. In
addition, Phase Two will be conditional on the waiver of an offer to minorities in
the event of a change in control and will require TRP approval as well as the
approval of Visual’s shareholders.
A circular to shareholders, incorporating revised listing particulars, will be prepared
and is required to be posted to shareholders within 60 days of this announcement,
in accordance with the JSE Listings Requirements. A report on historical
information will be required on Mosegedi and shareholders will be advised if an
extension of time has to be requested from the JSE due to the audit for
29 February 2016 and 28 February 2017 being required in accordance with full
IFRS.
1.11. Irrevocable undertakings
Visual will, on or before the effective date, procure the irrevocable undertakings
to vote in favour of the acquisition from RAL Trust and CKR Investment Trust as well
as waiver of mandatory offer in accordance with the Regulations to the
Companies Act from the abovementioned Trusts.
2. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the previously published cautionary announcements
dated 14 October 2016, 24 November 2016 and 6 January 2017 and are advised that
the cautionary announcement is now withdrawn.
Johannesburg
1 March 2017
Designated Advisor
Arbor Capital Sponsors Proprietary Limited
Date: 01/03/2017 09:22:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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