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Announcement regarding the proposed investment by Sabvest in Mandarin Industries Limited and ITL (SA) (Pty) Limited
SABVEST LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1987/003753/06
ISIN: ZAE000006417 Ordinary shares
ISIN: ZAE000012043 N Ordinary shares
(“Sabvest” or “the Company”)
ANNOUNCEMENT REGARDING THE PROPOSED INVESTMENT BY SABVEST IN
MANDARIN INDUSTRIES LIMITED AND ITL (SA) (PTY) LIMITED (“ITL Group”)
1. Introduction
Sabvest released a trading statement today advising shareholders of the increases in
NAV per share, HEPS per share and EPS per share expected to arise from fair value
adjustments pursuant to the disposal by SA Bias Industries (Pty) Limited (“SA Bias”),
Sabvest’s largest investee company, of its International Trimmings and Labels (“ITL”)
division (which includes ITL South Africa Pty Ltd) (“ITL SA”) collectively referred to as the
ITL Group for a cash consideration of approximately $186,9m (R2,3bn at current
prevailing exchange rates), subject to adjustments for net cash/debt, to a consortium of
investors led by Mr Peter Kennedy Gain. The effective date of the disposal is
31 December 2017.
Sabvest has undertaken to invest directly in the new ITL Group. The new investment will
be for 30% of the equity shares and pro rata shareholders loans and is expected to be
effective by 31 January 2018.
2. Nature of the business of ITL Group
The ITL Group is a designer, manufacturer and distributor of apparel labeling and
identification products and supply chain management solutions. Included in the product
range are graphic tags and labels, care labels, screen printed labels, heat transfers,
woven labels, QR Code labels, RFID tickets, ribbons and tapes, bows and specialised
labels. The ITL Group operates from its factories and marketing offices in the United
Kingdom, Canada, China, India, Sri Lanka, Turkey, Bangladesh, Vietnam, Mexico, North
America and South Africa for supply to the clothing industry worldwide.
3. Rationale for the investment
Sabvest was previously invested in the ITL Group indirectly through S A Bias. The ITL
Group is an attractive investment opportunity in an international and South African group
of companies with good growth prospects.
4. Investment consideration
4.1 The investment in Mandarin Industries Limited BVI, the new holding company of the
offshore ITL Group business, will be $34m (R418m at current exchange rates).
4.2 The equity investment in ITL SA (Pty) Limited through a holding company will be
R33m. In addition Sabvest will invest R60m in preference share capital with an initial
coupon of 8% p.a.
4.3 The investment amounts will be funded from Sabvest’s cash resources after receipt
of an expected cash dividend from SA Bias derived from the transaction proceeds.
5. Conditions precedent to the investments
The investments are not subject to the fulfillment or waiver of any conditions precedent
as the transactions referred to in 1 became unconditional on 31 December 2017.
6. Financial effects for Sabvest
6.1 There will be no effect on NAV per share as the investment amount and the fair
values of the investments will be the same on the date of investment.
6.2 There will be no effect on HEPS or EPS as the projected increase in valuation in the
first accounting period for fair value purposes is expected to be approximately equal
to the interest foregone on the cash balances from which the investment will be
funded.
7. Financial profile of ITL Group
The following information relates to the audited PAT that would have been attributable to
the 30% equity and loan investment by Sabvest in ITL Group if it had been held for the
2016 financial year.
7.1 ITL International $3,6m (R44m).
7.2 ITL South Africa R6m.*
(*normalised by excluding SA Bias group charges)
8. Categorisation of the investment
The investment has been categorized as a category 1 transaction in terms of section
9.5(a) of the JSE Listings Requirements. Although the size of the investments exceeds
30% of Sabvest’s market capitalization at the date of the announcement no circulars or
shareholders’ approval are required in terms of Sabvest’s Investment Policy as approved
by the JSE Limited and Sabvest shareholders.
Sandton
2 January 2018
Financial adviser and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
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