Esor Limited - Proposed Acquisition Of Franki Africa (Proprietary) Limited Release Date: 25/08/2006 15:34:13 Code(s): ESR
Esor Limited - Proposed Acquisition Of Franki Africa (Proprietary) Limited
And Placement Of Shares With Strategic Empowerment Consortium
(Incorporated in the Republic of South Africa)
Registration number: 1994/000732/06)
(JSE code: ESR & ISIN: ZAE000078408)
("Esor" or "the company")
PROPOSED ACQUISITION OF FRANKI AFRICA (PROPRIETARY) LIMITED AND PLACEMENT
OF SHARES WITH STRATEGIC EMPOWERMENT CONSORTIUM
Shareholders are referred to the cautionary announcements dated 5 July 2006
and 16 August 2006.
Esor has, subject to the conditions precedent set out below, purchased all
the issued shares in and claims on loan account against Franki Africa
(Proprietary) Limited ("Franki") from the shareholders of Franki ("the
Sellers") ("the proposed acquisition"). The shareholders of Franki are
Franki Executive Holdings, Investec Bank Limited, FT Dudley, D Brindle, GG
Robertson, JP Maree and a Consortium of the current executive directors of
Franki ("Executive Directors").
A broad based empowerment consortium including Esor-Franki staff (the "BEE
Consortium") has agreed to subscribe for part of the new ordinary shares to
be issued in terms of a specific issue of shares for cash to fund the
proposed acquisition, which will result in an empowerment shareholding of
more than 26% in Esor.
In terms of the Listings Requirements of the JSE Limited ("JSE") the
proposed acquisition is classified as a category 1 transaction.
Esor provides geotechnical engineering services to customers in the
construction industry, executing projects for parastatals, local government
and corporations either as partners of a consortium or as the primary
contractor for underground construction projects. The company operates
from its premises in Durban and Germiston, executing projects in South
Africa. Franki as a specialist geotechnical engineering contractor serves
the construction markets locally, in Africa and the Indian Ocean Islands.
The acquisition will expand Esor"s product and services offering, as well
as the company"s geographical footprint, both nationally and in Franki"s
area of operations in Africa. The subscription for new shares by the BEE
Consortium establishes Esor as a prominent empowered construction company
with levels of black ownership, directors and employment equity above the
requirements set out in the Construction Charter. The company views its
empowerment credentials as a significant asset that will provide
opportunities to do business with government, parastatals and the private
3. DESCRIPTION OF FRANKI"s BUSINESS
Franki is a geotechnical engineering contractor serving the building, civil
and infrastructural construction markets. The Company comprises of three
Divisions located in Johannesburg, Cape Town and Durban. The divisions are
strategic business units that oversee specific geographical areas of
operation. The Company"s Head Office provides functional support to each
of the Divisions, whilst an internal geotechnical investigation and design
service are also provided.
Franki divisions offer geotechnical investigation services, design and
construct services for the products and techniques provided by the company,
as well as a full range of services for the marine construction market that
supported the construction of numerous facilities for the fishing industry.
Franki also provides Piling, Underpinning and Lateral Support Services.
4. TERMS AND CONDITIONS OF THE PROPOSED ACQUISITION
On 25 August 2006 Esor purchased, subject to the fulfilment of the
conditions precedent in 6 below, all the issued share capital in and claims
on loan account against Franki, with effect from 1 August 2006. The
purchase consideration is R 170 million and a maximum of 10 375 000 Esor
shares which will be issued to the Executive Directors at an issue price of
160 cents per share if certain profit warranties are achieved over the next
The purchase price is payable as to R 126.8 million in cash with the
balance being issued in 30 826 667 Esor shares at 160 cents
per share. The purchase price will bear interest at the prime overdraft
rate from 15 August 2006 until the payment date.
Esor has completed a due diligence investigation on Franki to its
5. FUNDING OF THE PROPOSED TRANSACTION
The cash portion of the purchase price will be funded through capital
raised in terms of a specific issue of 88 125 000 new ordinary Esor shares
for cash at 160 cents per share, by the placement of 65.5 million shares
with the BEE consortium and 22.5 million shares with institutions.
6. CONDITIONS PRECEDENT TO THE ACQUISITION
The proposed transaction is subject to the fulfilment of inter alia the
following conditions precedent:
- Esor obtaining all the necessary regulatory approvals;
- approval by Esor"s shareholders for the proposed acquisition and the
specific issue of shares for cash.
7. PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects are provided for illustrative
purposes only to provide information about how the acquisition of Franki
and the issue of Esor ordinary shares may have impacted on Esor"s results
and financial position. Due to the nature of the unaudited pro forma
financial information, it may not give a fair presentation of the group"s
results and financial position after the acquisition of Franki and the
issue of Esor ordinary shares.
The unaudited pro forma financial effects are based on the unaudited pro
forma financial information after the capital raising and private placing
as disclosed in the prospectus dated 2 March 2006, as well as the issue of
shares to the Share Incentive Trust, to make the comparison more
meaningful. Esor applied to the JSE for the listing of an additional 3 000
000 new ordinary shares on 14 March 2006. The application was approved and
the shares listed with effect from 14 March 2006. These shares were issued
to the Share Incentive Trust for allocation to qualifying Esor employees.
The audited 28 February 2006 financial effects have been included in terms
of the JSE Listings Requirements. The directors of Esor are responsible
for the preparation of the unaudited pro forma financial effects.
Audited Unaudited Pro Forma %
28 February pro forma unaudited Change
2006 after the after the
private 28 February
placing and 2006
Earnings per 13.3 10.9 15.8 19
Headline 12.7 10.4 15.6 23
Net asset value 36.9 44.3 98.4 166
Net tangible 36.9 44.3 49.8 35
asset value per
Shares in issue 100 000 123 000 245 139
(1) The unaudited pro forma financial effects on the results were prepared
on the basis that the acquisition of Franki and the issue of Esor
ordinary shares were completed on 1 March 2005.
(2) The unaudited pro forma financial effects on the financial positions
were prepared on the basis that the acquisition of Franki and the
issue of Esor ordinary shares were completed on 28 February 2006.
(3) Assumed that 122 139 167 new ordinary Esor shares will be issued in
terms of the transaction. 3 187 500 of the new ordinary shares will be
issued to the Designated Advisor in lieu of their fees, 65 625 000 to
the BEE consortium, 20 400 000 to the Seller in settling part of the
purchase consideration, 22 500 000 to institutions and 10 426 667 to
the Franki executive management in terms of the profit incentive. The
new shares will be issued at 160 cents per share.
(4) Assumed that profit targets will be met and additional 10 426 667
shares were issued to the executive management on 1 March 2005 (for
NAV and NTAV calculations) and 28 February 2006 (for EPS and HEPS
(5) Goodwill of approximately R119 million will arise on the acquisition.
A circular with full particulars of the proposed acquisition, as well as
Revised Listings Particulars of Esor and a notice of a general meeting of
shareholders, will be mailed to the shareholders within the next 28 days.
25 August 2006
Designated adviser Exchange Sponsors
Auditors RSM Betty & Dickson
Attorneys Fluxmans Inc.
Attorneys for Competition Brink Cohen Le Roux Inc.
Warning: The listing of ordinary shares in the company is on ALTx.
Investors are advised of the risks of investing in a company listed on
ALTx. Investors are advised that the JSE does not guarantee the viability
or the success of a company listed on ALTx. In terms of the Listings
Requirements, the company is obliged to appoint and retain a Designated
Adviser, which is required to, inter alia, attend all board meetings held
by the company to ensure that all the Listings Requirements and applicable
regulations are complied with, approve the Financial Director of the
company and guide the company in a competent, professional and impartial
manner. If the company fails to retain a Designated Adviser, it must make
arrangements to appoint a new Designated Adviser within 10 business days,
failing which the company faces suspension of trading of its securities.
If a Designated Adviser is not appointed within 30 days of its suspension,
the company faces the termination of its listing without the prospect of an
appropriate offer to minority shareholders.
Date: 25/08/2006 03:34:19 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department