Esor - Circular regarding the proposed acquisition of Franki Release Date: 06/11/2006 12:36:02 Code(s): ESR
Esor - Circular regarding the proposed acquisition of Franki
(Incorporated in the Republic of South Africa)
Registration number: 1994/000732/06)
(JSE code: ESR & ISIN: ZAE000078408)
("Esor" or "the company")
CIRCULAR TO ESOR SHAREHOLDERS REGARDING THE PROPOSED ACQUISITION OF FRANKI
AFRICA (PROPRIETARY) LIMITED ("FRANKI")
Shareholders are referred to the announcements on SENS dated 25 August
2006 and 9 October 2006 in terms of which it was announced that Esor
has purchased, subject to the fulfilment of the conditions precedent,
the entire issued share capital in and shareholders" claims against
Franki in terms of the Sale of Shares Agreement.
The purchase consideration is R 170 million plus a maximum further
amount of R 16.7 million to be discharged by way of an issue of
ordinary shares at an issue price of 160 cents per share to the
executive management of Franki if certain profits are achieved over
the next two years.
The purchase price is payable as to R 137.7 million in cash and the
balance by way of an issue of Esor shares at an issue price of 160
cents per share. The cash portion of the consideration will be funded
by the placement of 65.625 million ordinary shares with a broad based
black economic empowerment consortium and 22.5 million ordinary shares
with institutions at a subscription price of 160 cents per ordinary
In terms of paragraph 21.9 of the Listings Requirements, the company
is required to issue revised listing particulars.
2. PROFIT FORECAST OF THE ENLARGED ESOR GROUP
The forecast income statement of the enlarged Esor group, which
includes the acquisition of Franki, for the financial year ending 28
February 2007, the preparation of which is the responsibility of the
directors, are set out below. RSM Betty & Dickson (Durban) have
provided an independent reporting accountants" report on the forecast,
which is included in the circular. The accounting policies to be
applied by the group in the future were applied consistently in
arriving at the forecast income statement and agree to the disclosed
accounting policies and to IFRS ("International Financial Reporting
Standards") for the respective accounting period.
The forecast income statement of the enlarged Esor group is as
Year ending 28 February 2007
Revenue (Rand `000) 254 501
Gross profit 65 179
Other income 35
Operating expenses (23 314)
EBITDA 41 900
Depreciation (12 540)
Profit before interest and taxation 29 360
Net interest received 2 075
Profit before taxation 31 435
Taxation (9 116)
Earnings attributable to ordinary 22 319
Weighted average shares in issue 152 494 416
Earnings per share (cents) 14.64
Headline earnings per share (cents) 14.64
Dividend per share (cents) 1.97
1. The effective date of the acquisition is 22 November 2006. The 28
February 2007 forecast therefore includes approximately four
months of Franki"s forecast results.
2. The forecast financial information is on the assumption that
circumstances which affect the company"s business but which are
outside the control of the directors, will not materially alter
in such a way as to affect the trading of the company, more
* costs will increase in line with the expected rate of
* an effective rate of taxation of 29% will be achieved.
3. Assumptions that are within the control of the directors" are:
* revenue will increase in accordance with existing organic
* gross profit margins increase as a result of higher margins
of the acquired company;
* there will be continuity in Franki"s existing management and
* a dividend policy of 40% of after taxation profits have been
adopted effective from the effective transaction date.
3. GENERAL MEETING
Forming part of the circular is a notice convening a general meeting
of shareholders to be held at the company"s offices at 30 Activia
Road, Activia Park, Germiston, Johannesburg on Thursday, 23 November
2006 commencing at 11:00, at which meeting the ordinary resolutions
required to implement the acquisition of Franki will be proposed for
consideration and if deemed fit, approved.
The directors have considered the terms and conditions of the
acquisition of Franki and are of the opinion that the acquisition will
be to the benefit of all shareholders. Accordingly, the directors
recommend that shareholders vote in favour of the resolutions to be
proposed at the general meeting.
The directors, who directly and indirectly hold ordinary shares
representing 55.30% of the issued share capital, have signed
irrevocable undertakings to support the implementation of the
acquisition of Franki.
The circular with full particulars of the proposed acquisition, as
well as the Revised Listings Particulars of Esor and a notice of a
general meeting of shareholders, were mailed to the shareholders
6 November 2006
Lead Transaction Sponsor PSG Capital Limited
Designated adviser Exchange Sponsors
Auditors and Reporting RSM Betty & Dickson (Durban)
accountants to Esor
Auditors and Reporting KPMG Inc.
accountants to Franki
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: 06/11/2006 12:36:10 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department