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Acquisition Of Retail Fuel Operations And Properties
KAAP AGRI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2011/113185/06)
Share code: KAL
ISIN: ZAE000244711
(“Kaap Agri” or “the Company”)
ACQUISITION OF RETAIL FUEL OPERATIONS AND PROPERTIES
1. Shareholders are advised that, on 9 November 2017, subsidiaries
of the Company entered into a transaction with C-Max Investments
71 Proprietary Limited (“C-Max”), a 100% black-owned company, and
Bird Fuel Trading Proprietary Limited (“BFT”) to acquire certain
of their assets, comprising three retail fuel operations,
situated in Gauteng and in Limpopo, and two accompanying retail
fuel related properties (“Acquisition”).
2. The Acquisition forms part of Kaap Agri’s growth strategy for its
TFC brand, comprising its retail fuel operations, including its
convenience and quick service restaurant offering. It is
anticipated that the Acquisition will result in fuel sales at TFC
sites, which amounted to approximately 90.7 million litres for
the most recent financial year ended 30 September 2017, increasing
by approximately 20 million litres per annum.
3. The Company believes that the retail fuel operations and
properties being acquired under the Acquisition are high-quality
assets that will complement TFC’s existing retail fuel operations
and national footprint. In addition, as detailed below, the
Acquisition will result in the introduction of black-owned C-Max
as a shareholder of Kaap Agri’s TFC subsidiaries, thereby
enhancing black economic empowerment within the Kaap Agri group.
4. It is anticipated that the Acquisition will, subject to the
fulfilment of the conditions precedent detailed in paragraph 12
below (“Conditions Precedent”), be implemented on or before
28 February 2018 (“Implementation Date”), with a deemed effective
date, as between the parties, of 1 December 2017.
ACQUISITION TERMS
5. In terms of the Acquisition –
5.1. the abovementioned retail fuel businesses (“Acquisition
Operations”) will be acquired by the Company’s subsidiary, TFC
Operations Proprietary Limited (“TFC Opco”), from C-Max and BFT
(collectively, the “Sellers”) for a combined purchase
consideration of R65 013 771; and
5.2. the abovementioned retail fuel properties will be acquired by
the Company’s subsidiary, TFC Properties Proprietary Limited
(“TFC Propco”), from the Sellers for a combined purchase
consideration of R67 001 936,
with the purchase consideration, including 0% VAT, to be settled
through the issue of shares in TFC Opco and TFC Propco to the
Sellers on the Implementation Date.
6. The value of the net assets that are being acquired by the TFC
Companies under the Acquisition will amount to R132 015 707,
while the profit after tax attributable to those assets amounts
to R8.7 million, taking into account earnings before interest and
tax (“EBIT”) of R12,1 million, based on unaudited management
accounts for the 12 months ended 31 July 2017, Kaap Agri being
satisfied with the quality of such accounts. Two of the three
operational retail fuel businesses acquired, have been
operational for less than 6 months, thereby limiting their
contribution during the above 12 month period. The assets acquired
under the Acquisition are expected to make a meaningful
contribution in future to the earnings of the TFC Companies, with
a projected normalised EBIT contribution of approximately R20.8
million per annum from these assets upon reaching operational
maturity. This forecast has not been reviewed or reported on by
Kaap Agri’s auditor in terms of the JSE Listings Requirements.
7. In order to arrive at the desired shareholding ratio, as detailed
in paragraph 10 below, BFT will subscribe for additional TFC Opco
shares for a cash amount of R13 132 203, such cash to be utilised
to repurchase a portion of C-Max’s shareholding in TFC Opco for
an amount of R17 906 629.
8. Upon implementation of the Acquisition, the Company’s wholly-
owned subsidiary, Kaap Agri Bedryf Limited, will subscribe for
additional shares in both TFC Opco and TFC Propco (collectively,
the “TFC Companies”) for a combined cash subscription price of
R51 815 814.
9. In addition, Empowerment and Transformation Investments
Proprietary Limited (“ETI”), a B-BBEE entity which is 100% owned
by the Kaap Agri Bedryf Employee and Farmworker BEE Trust, will,
upon implementation of the Acquisition, also subscribe for
additional shares in both TFC Companies for combined cash
subscription price of R49 013 846, in order to maintain its
current 12% shareholding in those companies. ETI’s subscription
will be facilitated through preference share funding by Kaap Agri
to ETI.
10. Following implementation of the Acquisition, both TFC Companies
will remain subsidiaries of Kaap Agri, with the Company’s
effective shareholding in each of the TFC Companies being 61.5%.
ETI will hold 12% of the issued shares in each TFC Company, with
each Seller holding 13.25%.
11. The Acquisition agreements contain warranties that are standard
for a transaction of this nature.
CONDITIONS PRECEDENT
12. The Acquisition is subject to fulfilment of, inter alia, the
following conditions precedent (“Conditions Precedent”):
12.1. that, by not later than 30 November 2017 –
12.1.1. all board approvals and, to the extent applicable,
shareholder approvals and ratification required to enter into
and implement the Acquisition have been obtained by the
parties;
12.1.2. Kaap Agri Bedryf’s designated adviser confirms to the
satisfaction of Kaap Agri Bedryf that C-Max is a 100% black-
owned company and meets the applicable black ownership
criteria of the Department of Energy (“DOE”) and the
Department of Trade and Industry (“DTI”);
12.1.3. the DOE has confirmed that it is satisfied that the
transaction will result in the TFC Companies complying with
the ownership requirements prescribed by the Liquid Fuels
Charter; and
12.1.4. Kaap Agri Bedryf, TFC Opco and the Sellers have concluded a
management agreement in respect of the Acquisition
Operations, in terms of which TFC Opco will manage such
operations from 1 December 2017 until the Implementation Date
and such agreement has become unconditional as to its terms;
and
12.2. that, by not later than 28 February 2018, the Sellers, to the
extent applicable, receive the necessary DOE approvals to
transfer or procure the transfer of the Acquisition Operations
to TFC Opco, as contemplated in this Agreement.
13. Subject to any statutory requirements, the parties may by written
agreement waive the fulfilment (wholly or in part) of any or all
of the Conditions Precedent.
14. The approval of the Competition Authorities to the Acquisition
has already been obtained.
CATEGORISATION
15. The Acquisition qualifies as a Category 2 acquisition for the
Company in terms of the JSE Listings Requirements and does not
require shareholder approval.
10 November 2017
Malmesbury
Transaction adviser and sponsor
PSG Capital
Attorneys
Cliffe Dekker Hofmeyr
Date: 10/11/2017 04:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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