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TRANSPACO LIMITED - Acquisition of the Future Packaging and Machinery Group and Withdrawal of Cautionary

Release Date: 18/12/2017 09:45
Code(s): TPC     PDF:  
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Acquisition of the Future Packaging and Machinery Group and Withdrawal of Cautionary

TRANSPACO LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1951/000799/06)
Ordinary share code: TPC
Ordinary share ISIN: ZAE000007480
(“Transpaco” or “the Company”)




THE ACQUISITION OF THE BUSINESS OF THE FUTURE PACKAGING AND MACHINERY
GROUP AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT (“THE ACQUISITION”)




1. Introduction

   Transpaco has entered into an agreement to acquire the Sale Shares of the Future
   Packaging and Machinery Group comprising Future Packaging and Machinery (Pty) Ltd,
   Future Packaging and Machinery Cape (Pty) Ltd and Future Packaging and Machinery
   (Kwa-Zulu Natal) (Pty) Ltd ("FPM") from the Sellers who have agreed to sell the Sale
   Shares to Transpaco with effect from the Effective Date, 28 February 2018, on certain
   terms and subject to certain conditions.


2. Overview of FPM

   FPM was established in the early nineties and currently operates as a supplier of industrial
   and general packaging products including the outsourcing of packaging services. FPM
   offers corrugated board and paper products, plastic flexible materials , general packaging
   materials, protective packaging, stationery, labelling & barcoding products, packaging
   machinery, coding & marking applications, safety, cleaning & chemicals products and
   materials handling components.

   FPM markets its products nationally through three major distribution centres,
   Johannesburg, Cape Town and Durban and two smaller depots in Bloemfontein and
   Nelspruit.


3. Rationale for the Acquisition

   FPM has achieved consistent growth in sales and profitability since inception. Transpaco
   seeks access to the large customer base that FPM currently services and it’s extensive
   product range to add to Transpaco’s existing offering. FPM is an attractive target business
   prospect for Transpaco to expand its business. Furthermore, FPM satisfies all the criteria in
   Transpaco’s expansion strategy, namely:

   -   A good track record, being highly profitable and cash generative;
   -   products and services well known and understood by Transpaco;
   -   an experienced and self-sufficient management team (senior management having on
       average in excess of 30 years’ experience in operating the business);
   -   strong growth prospects, arising from its established position in South Africa and
       opportunities to further expand municipal, industrial, wholesale,retail,agricultural and
       export markets;
   -   an opportunity to grow an existing leg of a Transpaco operation; and
   -   expand current product offering to existing Transpaco customers.

   In addition, the Acquisition has the following attractive features and benefits for Transpaco:

   -   Impressive distribution facilities operating efficient packaging supply services with
       sound standard operating procedures;
   -   scalable business model which allows for significant growth through sales and
       marketing expansion without excessive capex requirements; and
   -   anticipated earnings enhancement.

4. Purchase consideration

   The maximum estimated purchase consideration payable for FPM is R105,0 million
   depending on the final values to be determined subsequent to the finalisation of the
   audited financial statements as at 28 February 2018. The purchase consideration for FPM
   includes a premium of R37,2 million to the book value of the net assets being acquired in
   terms of the Transaction.

   Transpaco will be financing the Transaction through a combination of existing facilities and
   cash resources.


5. Net assets and profits of FPM

   The value of the net assets to be acquired as at 28 February 2018 (being the date on
   which the transaction is based) is anticipated to be R67,8 million.

   For the financial year ending 28 February 2018 FPM is projecting to generate turnover of
   R461,0 million and NPAT of R20,0 million.

   The above statements are based on management forecasts, prepared on IFRS for
   smme’s, which have not been audited by Transpaco’s auditors and is provided for
   information only.


6. Conditions precedent

   The Acquisition is subject to standard suspensive conditions applicable to a transaction of
   this nature including Competition Commission approval.


7. Closing date

   The closing date of the Acquisition is estimated to be 1 May 2018.


8. JSE categorisation

   The Acquisition is categorised as a category 2 transaction in terms of section 9.5(a) of the
   JSE Listings Requirements and accordingly no shareholder approval is required.


9. Withdrawal of cautionary announcement

   Shareholders are advised that, as a result of the publication of this announcement, the
   cautionary announcement is now withdrawn and caution is no longer required to be
   exercised by shareholders when dealing in their shares.


Johannesburg
18 December 2017



Legal advisors to Transpaco
Edward Nathan Sonnenbergs Incorporated


Sponsor to Transpaco
Investec Bank Limited

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