KAP INDUSTRIAL HOLDINGS LIMITED - KAP Concludes BBBEE Transaction In Respect Of Its South African Logistics Business

KAP Concludes BBBEE Transaction In Respect Of Its South African Logistics Business

KAP INDUSTRIAL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration Number 1978/000181/06)
Share code: KAP
ISIN: ZAE000059564
(“KAP”)

KAP CONCLUDES BBBEE TRANSACTION IN RESPECT OF ITS SOUTH AFRICAN LOGISTICS BUSINESS

1.   Introduction


     The board of directors of KAP is pleased to announce that agreement has been reached
     between KAP, Sakhumzi Foundation Empowerment Trust (“Sakhumzi”) (in the process of being
     formed) and the FWG Pieters Trust (“Pieters Trust”), in terms of which Sakhumzi and Pieters Trust will,
     through two wholly owned subsidiaries, subscribe for newly issued share capital in Unitrans Supply
     Chain Solutions (Pty) Ltd (“USCS”), an indirectly wholly owned subsidiary of KAP, housing it’s South
     African contractual logistics and supply chain operations (“the BBBEE Transaction”). As part of the
     BBBEE Transaction, USCS will acquire the equity in Xinergistix (Pty) Ltd (“Xinergistix”) not already
     owned by USCS from an entity associated with the Pieters Trust, being the CGL Custodian Trust No
     124 (“CGL Trust”)(collectively the “Xinergistix Transactions”).


2.   Rationale for the Transactions


     KAP is a diversified industrial group, operating in southern Africa, with leading industry positions in
     the wood based panel, automotive components, bedding, polymers, logistics and passenger
     transport sectors. KAP subscribes to the principles of transformation through broad based black
     economic empowerment (“BBBEE”) and as a result of its diversified nature, pursues its objectives
     in this regard in various ways.


     USCS provides logistics and supply chain solutions to various sectors of the economy, including
     petroleum, chemical, mining, cement, food and general freight. KAP believes that, in addition to
     the extensive BBBEE initiatives already in place in USCS, it is imperative for the continued growth
     of its logistics and supply chain operations to introduce direct BBBEE ownership in USCS.


     To this end, KAP has identified a broad based empowerment trust, Sakhumzi, and the founder
     and co-owner of the Xinergistix business, Francois Pieters, as preferred BBBEE partners for USCS. It

                                                                                                           
     is anticipated that the implementation of the Transaction will result in USCS’ ownership structure
     changing to >51% black owned and >30% black women owned.


3.     The BBBEE Transaction


3.1.   Terms of the BBBEE Transaction


       Sakhumzi will, through its wholly owned subsidiary, Unitrans Express Deliveries (Pty) Ltd (“UED”),
       subscribe for 21.98% newly issued share capital in USCS for a value of R591 million. UED will be
       funded by the KAP Group through the issue to a KAP Group subsidiary of an equivalent value of
       preference shares in UED (“the UED Transaction”).


       Pieters Trust will, through its wholly owned subsidiary, Unitrans Express Logistics (Pty) Ltd (“UEL”)
       subscribe for 23.02% newly issued share capital in USCS for a value of R620 million. UEL will be
       funded by the KAP Group through the issue to a KAP Group subsidiary of an equivalent value of
       preference shares in UEL (“the UEL Transaction”).


       In addition and as part of the BBBEE Transaction, USCS will acquire 46.9% interest in Xinergistix from
       the CGL Trust, for a consideration of R145 million. USCS currently owns 50.1% of the equity in
       Xinergistix. The remaining 3% is held by a minority and will be repurchased by Xinergistix as part of
       the Xinergistix Transactions, resulting in USCS owning 100% of the equity in Xinergistix after
       implementation of the Xinergistix Transactions. The consideration payable for the interest in
       Xinergistix will be paid in equal proportions of cash and an issue of shares in KAP.


       All of the transactions mentioned are indivisible and will only be implemented once all the
       conditions precedent are fulfilled or waived (as the case may be) in respect of the relevant
       transaction.


3.2.   Effective Date of the BBBEE Transaction


       The BBBEE Transaction will be implemented on the first business day of the calendar month
       following that in which the final condition precedent (as defined in paragraph below) is fulfilled
       or waived (“Effective Date”), it being anticipated that the Closing Date will occur on or before 31
       August 2018.

                                                                                                           
3.3.   Conditions Precedent


       The BBBEE Transaction is subject to the fulfillment or waiver (where applicable) of, inter alia, the
       following conditions precedent by no later than 31 August 2018, or such later date as the parties
       may agree in writing:


       3.3.1.   the board of directors of KAP, Unitrans Holdings (Pty) Ltd and USCS passing the resolutions
                required to give effect to the BBBEE Transaction, including all steps required to implement
                the BBBEE Transaction;


       3.3.2.   the directors and shareholders of UEL and UED passing the resolutions required to give
                effect to the UED Transaction and the UEL Transaction, including all steps required to
                implement the aforementioned transaction;


       3.3.3.   the sale of the remaining interests in Xinergistix to USCS being approved in accordance
                with the provisions of the Competition Act No 89 of 1998, as amended, or in the event
                that such approval is given subject to any condition/s, that the seller and the purchaser
                confirm in writing by such date that such condition/s is or are acceptable to them;


       3.3.4.   the JSE approving the listing on the JSE of the KAP shares to be issued as consideration
                for the Xinergistix Transactions; and


       3.3.5.   all such other statutory and regulatory approvals and requirements as may be necessary
                to implement the BBBEE Transaction having been obtained, which specifically includes
                KAP shareholders’ approval of the financial assistance provided to UEL in the form of the
                preference share in terms of a section 60 round robin resolution.


3.4.   Value of net assets and profits attributable to Xinergistix and USCS


       As at 30 June 2017, being the last audited reporting period of KAP, the net assets of USCS
       amounted to R592 million. The profits attributable to the net assets of USCS for the 12 months
       ended 30 June 2017 amounted to R100 million.


       As at 30 June 2017, being the last audited reporting period of Xinergistix, the net assets of Xinergistix
       amounted to R192 million. The profits attributable to the net assets of Xinergistix for the 12 months
       ended 30 June 2017 amounted to R15 million.

                                                                                                          
18 May 2018
Stellenbosch
JSE Sponsor and corporate advisor: PSG Capital Proprietary Limited




                                                                     

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