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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               
     ESOR LIMITED                                                               
     (Incorporated in the Republic of South Africa)                             
Registration number: 1994/000732/06)                                       
     (JSE code: ESR & ISIN: ZAE000078408)                                       
     ("Esor" or "the company")                                                  
AFRICA (PROPRIETARY) LIMITED ("FRANKI")                                    
     1.   INTRODUCTION                                                          
          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                           
          Main assumptions:                                                     
          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       
               inflation; and                                                   
*    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   
                    growth levels;                                              
*    gross profit margins increase as a result of higher margins 
                    of the acquired company;                                    
               *    there will be continuity in Franki"s existing management and
                    trading policies;                                           
*    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.                                                
     4.   DOCUMENTATION                                                         
          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.                 
       Commission Application                                                   
     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                                             

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