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CONTROL INSTRUMENTS GROUP LIMITED - Acquisition of up to 100% of the total issued ordinary shares in Control Instruments & withdrawal of cautionary

Release Date: 03/02/2014 17:25
Code(s): CNL     PDF:  
 
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Acquisition of up to 100% of the total issued ordinary shares in Control Instruments & withdrawal of cautionary

CONTROL INSTRUMENTS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1964/003987/06)
Share Code: CNL
ISIN: ZAE000001665
(“Control Instruments” or “the Group”)

NOTICE OF FIRM INTENTION RECEIVED TO ACQUIRE UP TO 100% OF THE TOTAL
ISSUED ORDINARY SHARES IN CONTROL INSTRUMENTS AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT




1. INTRODUCTION


1.1 Shareholders are referred to the cautionary announcements dated 29 November 2013,
    13 December 2013 and 14 January 2014 issued by the Group and specifically the
    announcement issued by Torre Industrial Holdings Limited (“Torre”) on 31 January 2014.


1.2 The board of directors is pleased to announce that it has entered into an agreement with
    Torre thereby giving effect to a firm intention by Torre to make an offer to acquire up to
    100% of the total issued ordinary shares in Control Instruments not already owned by
    Torre, being 91 761 265 shares (the “Offer Shares”), by way of:


    1.2.1      a scheme of arrangement in terms of section 114(1)(c) of the Companies Act,
               No. 71 of 2008, as amended (the "Companies Act"), to be proposed by the
               board of directors of Control Instruments between Control Instruments and its
               shareholders other than Torre (the "Control Instruments Shareholders") (the
               "Scheme"); or


    1.2.2      an offer by Torre if the Scheme is not proposed or fails, at the election of
               Torre, to the Control Instruments Shareholders to acquire the Offer Shares
               (the “General Offer”),


    (the "Proposed Offer").


1.3 The Proposed Offer constitutes a firm intention by Torre to make an offer to Control
    Instruments Shareholders as contemplated in Chapter 5 of the Companies Act and
    Chapter 5 of the Companies Regulations, 2011, promulgated under the Companies Act
    (which includes the Takeover Regulations issued pursuant to sections 120 and 223 of
    the Companies Act) (the “Companies Regulations”).


1.4 Control Instruments Shareholders will, if the Scheme becomes operative or upon
    acceptance of the General Offer, as may be applicable, receive a cash consideration of
    R1.40 per Control Instruments Share (the “Offer Consideration”) disposed of, which is
    equivalent to an aggregate cash consideration of R128 465 771 for all the Offer Shares
    and represents a premium of:



    1.4.1      19.66% to the closing price of the Offer Shares on the securities exchange
               operated by the JSE Limited ("JSE") as at 29 November 2013, being the date
               of the publication by Control Instruments of the first cautionary
               announcement related to the Proposed Offer ("First Cautionary"); and


    1.4.2      44.33% to the volume weighted average price ("VWAP") of the Offer Shares
               on the securities exchange operated by the JSE for the 30 trading days up to
               and including 29 November 2013, being the date of publication of the First
               Cautionary.



2. RATIONALE FOR THE PROPOSED OFFER

2.1 Nature of the business of Control Instruments


    Control Instruments’ main subsidiaries are Control Instruments Automotive Proprietary
    Limited and Control Instruments Automotive Plastics Proprietary Limited, which
    manufacture and/or market, sell and distribute premium branded automotive aftermarket
    products (including the brand names Gabriel, Autocom, Echlin, VDO, Textar, Mag-
    Brakes, Warn, Hi-Lift, VisionX and Truck-Lite), and manufacture and sell automotive
    battery cases, directly and/or indirectly into sub-Saharan Africa. The automotive
    aftermarket is the secondary market of the automotive industry concerned with the
    supply of automotive products after the sale of the vehicle to the end-user.


2.2 Nature of the business of Torre


     Torre is a listed industrial group which provides equipment, engineering and financing
     solutions to its customers in selected global markets. Torre is currently comprised of
     three operating segments, namely: the Plant and Equipment segment, consisting of SA
     French Limited, Forktech Proprietary Limited and imminently Kanu Equipment Limited;
     the Engineering Services and Supplies segment, consisting of Tractor and Grader
     Supplies Limited and, upon implementation of the Proposed Offer, Control Instruments;
     and the Financial Solutions segment, consisting of Torre Capital Limited. Torre is
     committed to achieving ongoing, controlled growth via a combination of organic and
     acquisitive expansion in its targeted markets.


2.3 Torre considers the Proposed Offer consistent with its long term growth strategy and
     believes the following benefits can be achieved as a result of the implementation of the
     Proposed Offer:

     - Immediate scale and earnings power for Torre via the consolidation of 100% of the
        operations of Control Instruments;
     - Opportunity to unlock significant value by consolidating certain functions, improving
        operating efficiencies and reducing operating expenses;
     - Addition of attractive range of self-owned and exclusively distributed products;
     - Strong management team; and
     - Diversification into the automotive aftermarkets part sector.


2.4 The Proposed Offer will, if implemented by way of the Scheme, or if accepted in respect
    of the General Offer, afford Control Instruments Shareholders an opportunity to realise
    their investment in Control Instruments.


3.   MECHANICS OF THE PROPOSED OFFER


3.1 The Proposed Offer constitutes an "affected transaction" as defined in section 117(1)(c)
    of the Companies Act. The Proposed Offer will be implemented either by way of the
    Scheme or, in the event that the Scheme is not proposed or fails and Torre so elects, by
    way of the General Offer (refer paragraph 3.4 below).


3.2 Torre's firm intention to make the Proposed Offer is subject to the fulfilment or waiver (as
    the case may) of the suspensive conditions set out in paragraph 4.1 below.


3.3 The implementation of the Scheme will be subject to the fulfilment or waiver (as the case
    may) of the suspensive conditions set out in paragraph 5.2 below (the "Scheme
    Conditions"). In the event that the Scheme becomes operative, the listing of Control
    Instruments’ shares on the Main Board of the JSE will be terminated, and Control
    Instruments Shareholders will be deemed to have sold their Offer Shares for the Offer
    Consideration, thereby constituting Control Instruments a wholly owned subsidiary of
    Torre.


3.4 In the event that the Scheme is not proposed or fails, Torre may, at its election, make the
    General Offer to Control Instruments Shareholders, which General Offer will be subject
    to the suspensive conditions set out in paragraph 6.1 below. To the extent that the
    General Offer is implemented, following the approval of the Delisting Resolution (as
    referred in paragraph 6.1.2 below), only Control Instruments Shareholders who have
    accepted the General Offer will sell their Offer Shares to Torre for the Offer
    Consideration. Those Control Instruments Shareholders who do not accept the General
    Offer will remain shareholders in Control Instruments, which will become an unlisted
    subsidiary of the Torre Group.


4. OFFER CONDITIONS


4.1 Torre’s firm intention to make the Proposed Offer, and accordingly also the posting of a
    circular in respect of the Proposed Offer (the "Circular") is subject to the fulfilment of the
    suspensive conditions (“Offer Conditions”) that, on or before 28 February 2014:-


    4.1.1      the independent board of directors of Control Instruments, being those
               directors of Control Instruments who act independently as contemplated in the
               Companies Regulations, namely Messrs Peter Surgey, Sam O’Leary and
               Prof. Alex Watson (the "Independent Board"), has retained an independent
               expert in terms of section 114(2) of the Companies Act and regulation 90 of
               the Companies Regulations, and such expert has prepared and issued a
               report in terms of section 114(3) of the Companies Act on the Offer
               Consideration and the fairness and reasonableness thereof;


    4.1.2      the Independent Board recommends to the Control Instruments
               Shareholders to vote in favour of (i) the Scheme, and (ii) the Delisting
               Resolution and to accept the General Offer, as may be applicable;


     4.1.3     to the extent applicable, all requisite regulatory approvals have been obtained
               from the JSE, the Takeover Regulation Panel (the “TRP”), the Financial
               Surveillance Department of the South African Reserve Bank to make the
               Proposed Offer (either unconditionally or subject to conditions acceptable
               to Torre); and


     4.1.4     in respect of the proposal of the Scheme only, Control Instruments has
               concluded an unconditional agreement (save for any condition requiring that
               the Scheme becomes unconditional) with all holders of options to acquire
               Control Instruments shares in terms of the Control Instruments Share
               Incentive Scheme ("Options"), to waive all their rights in respect of the Options
               and the Control Instruments Share Incentive Scheme, on such terms and
               conditions as may be acceptable to Torre and Control Instruments, failing
               which Torre shall make such comparable offer as may be required by the TRP
               in terms of the Companies Regulations, 2011.


4.2. The conditions in paragraphs 4.1.1 and 4.1.3 above are regulatory in nature and cannot
     be waived . Torre and Control Instruments may, by agreement and to the extent they are
     permitted to do so in terms of the Companies Act and the Companies Regulations,
     extend the time period within which the Offer Conditions are to be fulfilled by providing
     Control Instruments with written notice thereof. Torre may, in its discretion, waive either
     or both of the conditions set out in paragraph 4.1.2 and/or 4.1.4 above on written notice
     to Control Instruments.



5.   THE SCHEME

5.1 Under the terms of the Proposed Offer, if the Scheme is implemented, all Control
    Instruments Shareholders will receive the Offer Consideration of R1.40 per Offer Share
    and Torre will acquire all the issued shares in Control Instruments which it does not
    already own. The Offer Consideration is calculated on the assumption that Control
    Instruments will not conduct any capital reduction, make any distributions, dividends or
    similar payments to or for the benefit of shareholders of Control Instruments
    ("Distribution") between 1 January 2014 and the settlement date of the Offer
    Consideration. In the event that Control Instruments makes any such Distribution, the
    Offer Consideration will be adjusted downwards by the amount of the Distribution on a
    per share basis.


5.2 The implementation of the Scheme is subject to the fulfilment or, if appropriate, waiver (in
    whole or in part), by Torre of the following suspensive conditions by no later than 30
    April 2014 or such later date/s as may be agreed to between Torre and Control
    Instruments:-


    5.2.1      to the extent applicable, all requisite regulatory approvals required for the
               Scheme have been obtained from the JSE, the TRP, the Financial
               Surveillance Department of the South African Reserve Bank and the South
               African Competition Commission (either unconditionally or subject to
               conditions acceptable to Torre);


    5.2.2      the approval of the Scheme by the requisite majority of Control Instruments
               Shareholders as contemplated in section 115(2)(a) of the Companies Act
               (being not less than 75% of the votes exercised by shareholders present and
               entitled to vote) at the general meeting of Control Instruments shareholders to
               be convened for purposes of approving the Scheme (the “CI General
               Meeting”), and:


               5.2.2.1     to the extent required, the approval of the implementation of such
                           resolution by a court in terms of section 115(2)(c) and/or section
                           115(3) of the Companies Act; and


               5.2.2.2     if applicable, Control Instruments not treating the aforesaid
                           resolution as a nullity, as contemplated in section 115(5)(b) of the
                           Companies Act;


    5.2.3      the receipt of unconditional approval from the TRP in terms of a compliance
               certificate or exemption to be issued in terms of the Companies Act in relation
               to the Scheme;


    5.2.4      in relation to any objections to the Scheme by Control Instruments
               Shareholders:


               5.2.4.1     if shareholders give notice objecting to the Scheme, as
                          contemplated in section 164(3) of the Companies Act, and vote
                          against the resolutions proposed at the CI General Meeting,
                          shareholders holding no more than 10% of all Offer Shares eligible
                          to be voted at the CI General Meeting give such notice and vote
                          against the resolutions proposed at the CI General Meeting; or


               5.2.4.2    if shareholders holding more than 10% of all Offer Shares eligible
                          to vote at the CI General Meeting give notice objecting to the
                          Scheme, as contemplated in section 164(3) of the Companies Act,
                          and vote against the resolutions proposed at the CI General
                          Meeting, the relevant shareholders do not exercise their appraisal
                          rights afforded to them in terms of section 164 of the Companies
                          Act, by giving valid demands in terms of sections 164(5) to 164(8)
                          of the Companies Act within 30 (thirty) business days following the
                          CI General Meeting, in respect of more than 10% of the Offer
                          Shares eligible to be voted at the CI General Meeting; and


     5.2.5     the counterparties to the list of material contracts agreed to between Torre and
               Control Instruments, as confirmed by email on Friday, 31 January 2014
               (“Material Contracts”), consenting to the change of control as a result of the
               implementation of the Scheme.


5.3 The Scheme Conditions in:


     5.3.1     paragraphs 5.2.1, 5.2.2 and 5.2.3 above are regulatory in nature and cannot
               be waived; and


     5.3.2     paragraphs 5.2.4 and 5.2.5 above have been inserted for the benefit of Torre,
               which will be entitled, in its sole discretion, to waive fulfilment of such Scheme
               Conditions, in whole or in part, on written notice to Control Instruments.


5.4 An announcement will be published on SENS as soon as practicable after all the
    Scheme Conditions have been fulfilled or waived, as the case may be.



6.   GENERAL OFFER


6.1 Should the Scheme not be proposed or fail (but subject to the fulfilment or waiver,
    where appropriate, of the Offer Conditions), Torre may, at its election, make an offer to
    the Control Instruments Shareholders to acquire all of their Offer Shares for the Offer
    Consideration, subject to the fulfilment or waiver of the following suspensive conditions
    by no later than 30 April 2014 or such later date/s as may be agreed to between Torre
    and Control Instruments:


    6.1.1     to the extent applicable, all requisite regulatory approvals required for the
              General Offer have been obtained from the JSE, the TRP, the Financial
              Surveillance Department of the South African Reserve Bank and the South
              African Competition Commission (either unconditionally or subject to
              conditions acceptable to Torre);


    6.1.2      approval by the requisite majority of Control Instruments Shareholders at the
               CI General Meeting of the termination of Control Instruments’ listing on the
               Main Board of the JSE in terms of section 1.14(a) of the Listings
               Requirements of the JSE (the “Delisting Resolution”);


    6.1.3      approval by the board of directors of Control Instruments of the termination of
               Control Instruments’ listing on the Main Board of the JSE;


    6.1.4      the receipt of unconditional approval from the TRP in terms of a compliance
               certificate or exemption to be issued in terms of the Companies Act in relation
               to the General Offer; and


    6.1.5      the counterparties to the Material Contracts consenting to the change of
               control as result of the implementation of General Offer.


6.2 The conditions in:


    6.2.1      paragraphs 6.1.1 and 6.1.4 above are regulatory in nature and cannot be
               waived; and


    6.2.2     paragraph 6.1.2, 6.1.3 and 6.1.5 above has been inserted for the benefit of
              Torre, which will be entitled, in its sole discretion, to waive fulfilment of such
              conditions, in whole or in part, on written notice to Control Instruments.


6.3 If the General Offer is made, Control Instruments Shareholders will only be able to
     accept the General Offer in respect of all of their Offer Shares.



7.   SHAREHOLDING IN CONTROL INSTRUMENTS AND ACTING AS PRINCIPAL


7.1 Torre currently beneficially and indirectly owns 47 675 489 Offer Shares, representing
    34.54% of the issued share capital of Control Instruments (excluding treasury shares)
    (“Torre’s Control Instruments Shares”).


7.2 Torre is acting as principal and not as agent in respect of the Proposed Offer and it is not
    acting in concert with any other parties for purposes of the implementation of the
    Proposed Offer.



8.   CONFIRMATION OF FINANCIAL RESOURCES

In accordance with Regulation 111(4) and Regulation 111(5) of the Companies Regulations,
Cliffe Dekker Hofmeyr Incorporated has provided Control Instruments and the TRP with an
irrevocable cash confirmation and Standard Bank of South Africa Limited has provided
Control Instruments and the TRP with an irrevocable bank guarantees, which confirm that, in
aggregate, Torre has sufficient cash resources held in Escrow and by way of bank guarantee
in terms of Regulation 111, to satisfy payment of the Offer Consideration in full.


9.   IRREVOCABLE UNDERTAKINGS


The Company has been informed by Torre that it has received irrevocable undertakings from
the following Control Instruments Shareholders to vote in favour of the Scheme and the
Delisting Resolution, as may be applicable, in respect of their entire shareholding in Control
Instruments, to the extent they are permitted to do so in terms of the Companies Regulations
and the Listings Requirements of the JSE:
                                                                              Delisting
                                                      Scheme                  Resolution


                                                      % of issued             % of issued
                                  % of total issued   share capital of        share capital of
                                  share capital of    Control                 Control
                Total Number of   Control             Instruments             Instruments
Control         Control           Instruments         prior to the            prior to the
Instruments     Instruments       prior to the        Proposed Offer          Proposed Offer
Shareholder     shares held       Proposed Offer      eligible to vote*       eligible to vote*


Torre                47 675 489     34.54%                  -                       34.54%


Kanthu Nkhama        28 000 000     20.29%                31.00%                    20.29%

Automotive
Proprietary
Limited


Westbrooke           19 918 150     14.43%                22.05%                    14.43%

Capital
Management
Special
Opportunities
En Commandite
Partnership

Flagship Unit         7 616 044      5.52%                8.43%                      5.52%
Trusts

Niall Brown           5 735 287      4.16%                6.35%                      4.16%

Total               108 944 970     78.94%               67.83%                     78.94%

 * Excluding 1 424 712 treasury shares


In terms of section 115(4) of the Companies Act, Torre’s Control Instruments Shares will be
excluded from voting on the resolution to approve the Scheme at the CI General Meeting.



10. TERMINATION OF CONTROL INSTRUMENTS’ LISTING

In the event that the Scheme becomes operative or the General Offer is implemented,
application will be made to the JSE to terminate the listing of all of the Control Instruments
shares from the Main Board of the JSE.



11.   OPINIONS AND RECOMMENDATIONS


11.1 In accordance with section 114(3) of the Companies Act and regulation 90(1) of the
     Companies Regulations, the Independent Board is required to retain an independent
     expert acceptable to the TRP for the purposes of providing external advice in regard to
     the Scheme and the General Offer and to make appropriate recommendations to the
     board of directors of Control Instruments for the benefit of Control Instruments
     Shareholders. The substance of such external advice and the views of the Independent
     Board in this regard will be detailed in the Circular.


11.2 Similarly, in accordance with paragraph 1.14(d) of the Listings Requirements of the
     JSE, the board of directors of Control Instruments is required to retain an independent
     expert acceptable to the JSE for the purposes of providing external advice in regard to
     the fairness of the Offer Consideration insofar as same relates to the termination of
     Control Instruments’ listing on the Main Board of the JSE, in the event that the Scheme
     is not proposed or fails but the General Offer is made. The substance of such external
     advice and the views of the board of directors of Control Instruments in this regard will
     be detailed in the Circular.


12.   DOCUMENTATION AND SALIENT DATES


Further details of the Scheme and the General Offer will be included in the Circular, which
will contain, inter alia, a notice of the CI General Meeting, a form of proxy and a form of
acceptance, surrender and transfer. Each of the Scheme and the General Offer will
constitute a separate affected transaction for purposes of the Companies Regulations and
the Circular will distinguish between them and accordingly contain, inter alia, separate
disclosures regarding each of the Scheme and the General Offer. The Circular is expected
to be posted on or about 28 February 2014. The salient dates in relation to the Scheme and
the General Offer will be published on SENS and in the press prior to the posting of the
Circular.


13.    RESPONSIBILITY STATEMENT


The Independent Board and the board of directors of Control Instruments accept
responsibility for the information contained in this announcement insofar as it relates to
Control Instruments. To the best of their knowledge, the information contained in this
announcement is true and this announcement does not omit anything likely to affect the
import of the information.


14.   WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT


The Control Instruments Cautionary Announcement is hereby withdrawn and caution is no
longer required to be exercised by Control Instruments Shareholders when dealing in Offer
Shares.


Johannesburg
3 February 2014

Sponsor
Investec Bank Limited

Legal advisor
Bowman Gilfillan Inc

Date: 03/02/2014 05:25:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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