Acquisition of trading assets and liabilities of EBTSA Proprietary Limited & MMD Steel Products Close Corporation HUDACO INDUSTRIES LIMITED (Incorporated in the Republic of South Africa) (Registration number 1985/004617/06) Share code: HDC & ISIN: ZAE000003273 (“Hudaco”) ANNOUNCEMENT REGARDING THE ACQUISITION OF THE TRADING ASSETS AND LIABILITIES OF EBTSA (PROPRIETARY) LIMITED AND MMD STEEL PRODUCTS CLOSE CORPORATION (“ETERNITY”) 1. INTRODUCTION Shareholders are advised that Hudaco has signed an Agreement to acquire the trading assets and liabilities of Eternity with effect from 1 August 2017 (“the effective date”) (“the Transaction”) from EBTSA (Proprietary) Limited and MMD Steel Products Close Corporation. 2. DESCRIPTION OF ETERNITY Eternity is a leading supplier of batteries, high frequency chargers, and related battery management equipment to the traction battery market in Southern Africa. The company also designs, builds and manages battery bays for warehouses and distribution centres in Southern Africa. Battery tanks and changeover equipment are manufactured locally while cells and chargers are sourced from UAE and Austria. Eternity employs over 320 staff in four locations in South Africa as well as at the premises of several clients. The business generates revenue of R148 million per year. 3. RATIONALE FOR THE TRANSACTION Hudaco specialises in the importation and distribution of selected high quality branded consumer-related and industrial products, mainly in the southern African region. One of Hudaco’s key strategies is to acquire new businesses in similar fields of activity when the opportunity arises. The acquisition of Eternity is consistent with Hudaco’s strategy of diversifying its portfolio to further reduce the percentage of its income that is derived from the mining and manufacturing sectors. The business of Eternity is an ideal fit for the consumer-related products segment of Hudaco in that it focuses on supplying quality, branded products and services, while providing significant value-add for the customer, which is an area of core competency of Hudaco. Hudaco will be able to utilise its experience and expertise in value- added distribution to enhance Eternity’s position, resulting in long term benefits to shareholders. 4. DETAILS OF THE TRANSACTION 4.1 Purchase consideration The purchase consideration will be a multiple of the average annual profit after tax (but excluding interest received) of Eternity for the three years ending 31 July 2020. If the business grows profits at 30% per annum for the three year earn-out period, which is considered a realistic prospect, the total consideration will be R200 million. The maximum consideration is R248 million, which would require compound annual growth of 43% over the three years. The consideration will be funded from cash generation, existing and (if necessary) new facilities and paid as follows: - an initial amount of R68 million payable in cash on the effective date; - three tranches payable in cash on 4 October 2018, 2019 and 2020, based on actual average levels of profitability achieved in each of those years. 4.2 Management The two executive shareholders, Michael Coleman and Ryan Fourie (“the shareholders”), have entered into service contracts for a period of three years and restraint of trade agreements in favour of Hudaco for a period of three years after their employment ceases. 4.3 Conditions precedent The Transaction is subject to the satisfactory completion of a due diligence. All other conditions have been fulfilled, including approval by the Competition Commission, signing of service agreements and main supplier approvals. 4.4 Value of net assets and profit attributable to Eternity The shareholders have committed to deliver a minimum of R28 million net trading assets on the effective date, which assets produced R21 million net profit after taxation in Eternity’s last financial year ending 28 February 2017. 5 CATEGORISATION The Transaction has been classified as a category 2 transaction in terms of Section 9 of the JSE Limited Listing Requirements and, accordingly, shareholder approval is not required. Johannesburg 1 August 2017 Sponsor Nedbank Corporate and Investment Banking Date: 01/08/2017 02:56:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.