HUDACO INDUSTRIES LIMITED - Announcement regarding the renewal of a lease agreement with a related party

Announcement regarding the renewal of a lease agreement with a related party

HUDACO INDUSTRIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1985/004617/06)
Share code: HDC & ISIN: ZAE000003273
(“Hudaco” or the “Company”)

ANNOUNCEMENT REGARDING THE RENEWAL OF A LEASE AGREEMENT WITH A RELATED PARTY

1. INTRODUCTION

   Shareholders are advised that Hudaco Trading (Pty) Limited, an 85% held subsidiary of Hudaco, via its
   Ambro Steel division (“Ambro Steel”), has renewed its lease agreement (“Lease Agreement”) with
   Dufomo Investments Proprietary Limited (“Dufomo”) in terms of which Ambro Steel will continue to
   lease premises located at the corner of Lamp and Snapper Roads, Wadeville, Germiston (the
   “Premises”) from Dufomo as set out in section 3 below (the "Lease Renewal”).

   Mr GR Dunford, the chief executive officer of Hudaco, is an 82% shareholder of Dufomo, which owns
   the Premises.

2. RATIONALE FOR THE LEASE RENEWAL

   The rationale for the Lease Renewal is to provide continuity to Ambro Steel’s business, which has been
   renting the Premises for over 26 years. The buildings and structures on the Premises were purposely
   built to suit the requirements of Ambro Steel, which already occupied the Premises before being
   acquired by Hudaco during 2008. The Premises provide Ambro Steel with the cranage and heavy-duty
   power that it needs to operate. Alternative properties with the appropriate installations are difficult
   to source. The Premises are located in the well-established industrial node of Wadeville, which is
   accessible to Ambro Steel’s customers and staff.

3. DETAILS AND TERMS OF THE LEASE RENEWAL

   In terms of the Lease Agreement, Ambro Steel will lease the Premises comprising office, factory and
   warehouse space, measuring 5 374m2 in aggregate, with effect from 1 March 2020 (“Commencement
   Date”) for a period of 3 years from the Commencement Date (“Initial Period”). The monthly rentals
   payable in respect of the Premises for the Initial Period, which includes an annual escalation of 8%, is
   set out in the table below:

    Period                                                                               Monthly rental
                                                                                        (excluding VAT)
   
    1 March 2020 to 28 February 2021                                                        R287 710.92
    1 March 2021 to 28 February 2022                                                        R310 727.79
    1 March 2022 to 28 February 2023                                                        R335 586.02
                                                                                            R934 024.73

   There are no outstanding conditions precedent relating to the Lease Renewal.

4. FINANCIAL INFORMATION

   Hudaco incurs lease expenses of the amount set out in paragraph 3 above. The rental payable is
   deductible for tax purposes. The Lease Renewal has no effect on net assets.

5. CATEGORISATION AND SMALL RELATED PARTY TRANSACTION

   The entering into of the Lease Renewal is a “small related party transaction” in terms of section 10.7
   of the JSE Listings Requirements as Hudaco will be transacting with a “related party”, being Dufomo
   and accordingly no shareholder approval is required provided that an independent expert has
   confirmed that the terms of the Lease Renewal are fair insofar as Hudaco shareholders are concerned.

   The board of directors of Hudaco appointed Merchantec Capital (the “Independent Expert”) to
   provide an independent fairness opinion on the Lease Renewal (the “Fairness Opinion”) in compliance
   with paragraph 10.7(b) of the JSE Listings Requirements. The Independent Expert has considered the
   terms and conditions of the Lease Renewal and is of the opinion that the Lease Renewal is fair insofar
   as Hudaco shareholders are concerned. The Fairness Opinion is available for inspection at the
   registered office of the Company, Building 9, Greenstone Hill Office Park, Emerald Boulevard,
   Greenstone Hill, Edenvale, for a period of 28 days from the date of this announcement and may be
   obtained on request from Hudaco’s Group Company Secretary at reanaw@hudaco.co.za.

Johannesburg
22 May 2020

Corporate advisor and Sponsor
Nedbank Corporate and Investment Banking

Independent Expert
Merchantec Capital

Date: 22-05-2020 04:05:00
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