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ESR - Esor Limited - Acquisition of the business conducted by Geo Compaction

Release Date: 21/07/2008 15:08:03      Code(s): ESR
ESR - Esor Limited - Acquisition of the business conducted by Geo Compaction    
Dynamics (Pty) Limited and renewal of cautionary announcement                   
ESOR LIMITED                                                                    
(Incorporated in the Republic of South Africa)                                  
(Registration number: 1994/000732/06)                                           
JSE code: ESR & ISIN: ZAE000078408                                              
("Esor" or "the company")                                                       
ACQUISITION OF THE BUSINESS CONDUCTED BY GEO COMPACTION DYNAMICS (PTY) LIMITED  
AND RENEWAL OF CAUTIONARY ANNOUNCEMENT                                          
1.   INTRODUCTION                                                               
Franki Africa (Pty) Limited ("Franki"), a wholly owned subsidiary of Esor, has  
entered into an agreement ("the agreement") in terms of which it has acquired   
the business conducted by Geo Compaction Dynamics (Pty) Limited ("Geo           
Compaction") (excluding certain assets and liabilities) from Geo Compaction for 
R18.045 million ("the transaction").                                            
2.   BACKGROUND INFORMATION                                                     
Geo Compaction was established in 2002. It specialises in geotechnical          
contracting services to the civil engineering industry, including dynamic       
compaction, percussion piling and permanent and temporary lateral support.      
3.   RATIONALE FOR THE TRANSACTION                                              
The Geo Compaction business in conjunction with the Esor`s existing service     
offering will enhance the Esor`s market share in terms of its expanded skills   
and plant base. Esor has previously successfully undertaken projects with Geo   
Compaction in Joint Venture relationships.                                      
4.   PURCHASE CONSIDERATION                                                     
The purchase consideration is R18.045 million to be settled in cash as follows: 
an initial amount of R14.025 million on the closing date as defined in the      
agreement; and                                                                  
R4.02 million not later than 31 October 2008.                                   
5.   EFFECTIVE DATE                                                             
The effective date as per the agreement is 1 May 2008 subject to the successful 
fulfilment of the conditions precedent set out in paragraph 7 below.            
6.   UNAUDITED PRO FORMA FINANCIAL EFFECTS                                      
The unaudited pro forma financial effects set out below are provided for        
illustrative purposes only to assist the shareholders of Esor to assess the     
impact of the transaction on the earnings per share ("EPS"), diluted earnings   
per share ("DEPS"), headline earnings per share ("HEPS"), net asset value per   
share ("NAVPS") and net tangible asset value per share ("NTAVPS") of Esor. These
unaudited pro forma financial effects have been disclosed in terms of the JSE   
Listings Requirements and because of their nature may not give a fair           
presentation of Esor`s results and financial position after the transaction. The
unaudited pro forma financial effects are the responsibility of the directors of
Esor and are presented in a manner consistent with the accounting policies      
adopted by Esor.                                                                
                              Before    After    Change                         
    EPS (cents)               51.7      55.3     7.0%                           
    DEPS (cents)              50.7      54.3     7.1%                           
HEPS (cents)              51.3      54.9     7.0%                           
    NAVPS(cents)              160.3     160.3    -                              
    NTAVPS (cents)            121.4     116.7    (3.94%)                        
    Weighted average number   224 560   224 560                                 
of shares in issue                                                          
    (`000)                                                                      
    Diluted weighted average  228 677   228 677                                 
    number of shares in                                                         
issue (`000)                                                                
    Shares in issue at        247 904   247 904                                 
    period end (`000)                                                           
Notes:                                                                          
1    The information set out in the "Before" column is extracted from Esor`s    
    audited consolidated results for the year ended 29 February 2008.           
2    EPS, DEPS and HEPS effects set out in the "After" column are based on the  
    following assumptions and information:                                      
-    the transaction was effective 1 March 2007;                            
    -    the purchase price of R18.045 million was paid in full on 1 March 2007 
         and funded by Esor utilising existing cash resources, with the         
         resultant reduction in interest earned calculated at 9% per annum (pre 
tax);                                                                  
    -    estimated transaction costs of R1.0 million have been expensed to the  
         income statement; and                                                  
    -    the total adjusted after tax profit attributable to the business       
acquired is 9.258million for the year based on the audited annual      
         financial statements of Geo Compaction for the year ended 30 April     
         2008.                                                                  
3    NAVPS and TNAVPS effects set out in the "After" column are based on the    
following assumptions and information:                                      
    -    the transaction was effective 29 February 2008;                        
    -    the purchase price of R18.045 million was paid on 29 February 2008 in  
         the manner described in note 2 above; and                              
-    the revaluations and allocations that may arise from the application   
         of IFRS 3 (Business Combinations) have not been made as this will only 
         be finalised in due course. The pro forma financial information has    
         thus been prepared on the basis that the excess of the effective       
purchase price over the net asset value of R6.552 million acquired     
         will comprise goodwill of R12.495 million, which goodwill is not       
         amortised.                                                             
7.   CONDITIONS PRECEDENT                                                       
The transaction is conditional, inter alia, upon the following outstanding      
conditions precedent:                                                           
Geo Compaction ceding and assigning its current contracts to Franki; and        
compliance with any regulatory obligations to the extent required by law to     
effect the transaction.                                                         
Warranties and indemnities as are normal in transactions of this nature have    
been provided.                                                                  
8.   RENEWAL OF CAUTIONARY ANNOUNCEMENT                                         
Shareholders are advised that negotiations unrelated to the above announcement  
are still in progress, which, if successfully concluded, may have a material    
effect on the price of the company`s securities. As a result, shareholders      
should continue to exercise caution when dealing in the company`s securities    
until a further announcement is made.                                           
Johannesburg                                                                    
21 July 2008                                                                    
Designated Adviser                                                              
Exchange Sponsors (Pty) Limited                                                 
Transaction Adviser                                                             
Vunani Corporate Finance                                                        
Legal advisors                                                                  
Kim Warren,Rambau & Assoc.                                                      
Date: 21/07/2008 15:08:02 Supplied by www.sharenet.co.za                     
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