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Joint Firm Intention Announcement and Withdrawal of Cautionary Announcement
Buildmax Limited Business Venture Investments No 2021 Proprietary Limited
Incorporated in the Republic of South Africa Incorporated in the Republic of South Africa
(Registration number: 1995/012209/06) (Registration number: 2017/231201/07)
Share code: BDM ISIN: ZAE000167318 ("Offeror")
("Buildmax")
JOINT FIRM INTENTION ANNOUNCEMENT IN RESPECT OF AN OFFER BY THE OFFEROR TO
ACQUIRE ALL OF THE ISSUED ORDINARY SHARES OF BUILDMAX (OTHER THAN TREASURY
SHARES AND SHARES ALREADY HELD BY PERSONS ACTING IN CONCERT WITH THE
OFFEROR), PROPOSED DELISTING OF BUILDMAX AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. Introduction
Further to the cautionary announcement published on the Stock Exchange News Service
("SENS") on 17 August 2017 and renewed on 29 September 2017 and 10 November 2017,
the board of directors of Buildmax ("Buildmax Board") and the Offeror are pleased to
announce that the Offeror has made an offer to Buildmax ("Offer") to acquire 100% of the
issued ordinary share capital of Buildmax, excluding Buildmax shares held by persons acting
in concert with the Offeror and treasury shares ("Offer Shares"). The Offer will be
implemented by way of a scheme of arrangement ("Scheme") in terms of section 114 of the
Companies Act 71 of 2008, as amended, ("Companies Act") and paragraph 1.16(b) of the
JSE Limited Listings Requirements ("Listings Requirements"), to be proposed by the
Buildmax Board between Buildmax and the holders of Offer Shares ("Buildmax
Shareholders") ("Proposed Transaction").
2. Information about the Offeror
The Offeror is a newly incorporated private company and has not conducted any business
since its incorporation. It is a special purpose vehicle through which the Offer will be
implemented and its primary purpose is to house the Offer Shares acquired pursuant to the
Offer for the benefit of the Offeror’s shareholders, comprising amongst others, members of
Buildmax's management and a broad-based black economic empowerment company. The
Offeror confirms that it is the ultimate proposed purchaser of the Offer Shares.
Vuwa Investments Proprietary Limited (a BEE shareholder of which Bulelani Ngcuka, a
director of Buildmax, is the largest shareholder) (who acts in concert with the Offeror) is the
beneficial owner of 12,233,182 Buildmax shares, which represents 6.75% of the issued
ordinary share capital of Buildmax. Justin Colling (a member of Buildmax’s management)
(who acts in concert with the Offeror) is the beneficial owner of 18,170,100 Buildmax shares,
which represents 10% of the issued ordinary share capital of Buildmax.
3. Salient terms of the Scheme
The consideration payable by the Offeror to Buildmax Shareholders in terms of the Scheme
will be 15 cents per Offer Share, to be settled in cash ("Scheme Consideration").
If the Scheme becomes operative, Buildmax Shareholders will have disposed of the Offer
Shares to the Offeror for the Scheme Consideration, and the listing of all of Buildmax’s shares
on the main board of the securities exchange operated by the JSE Limited ("JSE") will be
terminated.
4. Rationale for the Scheme
The Offeror believes that it is unsustainable for Buildmax to maintain its listing on the JSE as
the costs of the listing are a significant drag on the financial performance of Buildmax and are
unduly restrictive to the ordinary course operations of Buildmax. Accordingly, the Offeror
believes that the following benefits can be achieved through the implementation of the
Proposed Transaction:
4.1 having management shareholders who have significant financial exposure to
Buildmax and who have committed themselves to a 5-year lock-in period. Christie
Els, the Group Financial Director of Buildmax, will however leave Buildmax to pursue
other opportunities should the Scheme become operative;
4.2 the delisting will result in significantly reduced head office costs, which are material to
Buildmax in light of its financial performance, and greater organisational flexibility for
quick decision making;
4.3 simplified operating structures and reporting lines;
4.4 one of the Brait funds, the largest shareholder of Buildmax, has reached the end of its
fund life and will therefore be forced to dispose of its shares in Buildmax in the near
future. Apart from the likely effect on the trading price of Buildmax Shares, this will
leave Buildmax without a shareholder of reference, which has been a key factor in the
continued support provided by Buildmax's debt providers;
4.5 the size of the major shareholder’s equity interest and the implication of the major
shareholder’s fund mandate exit requirement which will negatively impact the
near-term pricing of Buildmax’s securities;
4.6 access to different or alternate sources of funding due to the changes proposed;
4.7 Buildmax’s debt to equity gearing introduces financial risk and may limit the ability of
the business to borrow further;
4.8 an opportunity to refinance the existing debt on less onerous terms which will result in
significant savings for Buildmax; and
4.9 through improved profitability, the preservation of jobs which may otherwise be at
risk.
5. Suspensive conditions to the posting of the Circular to Buildmax Shareholders
The posting of the combined circular to Buildmax Shareholders in relation to the Scheme
("Circular") will be subject to the fulfilment of the following conditions:
5.1 the independent board of Buildmax recommending to Buildmax Shareholders, without
qualification, that they vote in favour of the Scheme; and
5.2 all requisite approvals being received from the JSE, the Financial Surveillance
Department of the South African Reserve Bank and the Takeover Regulation Panel
("TRP") for the posting of the Circular.
The condition in paragraph 5.1 may be waived by the Offeror.
6. Suspensive conditions to the implementation of the Scheme
The implementation of the Scheme will be subject to the fulfilment or waiver (in whole or in
part) of the following conditions by not later than 31 March 2018:
6.1 the approval of the Scheme by the requisite majority of Buildmax Shareholders, as
contemplated in section 115(2) of the Companies Act, and (i) to the extent required,
the approval of the implementation of such resolution by the Court in terms of section
115(3) of the Companies Act; and (ii) if applicable, Buildmax not treating the aforesaid
resolution as a nullity as contemplated in section 115(5)(b) of the Companies Act;
6.2 within 30 business days following the date of approval of the Scheme by Buildmax
Shareholders at the Buildmax Shareholders' meeting convened to approve the
Scheme ("Scheme Meeting"), Buildmax Shareholders validly exercise appraisal
rights, by giving demands in terms of section 164(7) of the Companies Act, in respect
of no more than 6% of the issued ordinary shares of Buildmax, provided that, in the
event that Buildmax Shareholders give notice objecting to the Scheme as
contemplated in section 164(3) of the Companies Act and vote against the resolution
proposed at the Scheme Meeting to approve the Scheme in respect of no more than
6% of the issued ordinary shares of Buildmax, this condition shall be deemed to have
been fulfilled at the time of the Scheme Meeting;
6.3 the unconditional written approval of the Proposed Transaction having been obtained
from:
6.3.1 the TRP (in terms of a compliance certificate to be issued in terms of the
Companies Act); and
6.3.2 the competition authorities in terms of the Competition Act 89 of 1998, as
amended, ("Competition Act"),
or, to the extent that any such approvals are subject to conditions, the Offeror
confirming in writing to Buildmax that such condition is acceptable (acting reasonably)
to Buildmax;
6.4 receipt by Buildmax or its operating subsidiaries of consents or waivers from the
counter-parties to specified client contracts to which Buildmax or its operating
subsidiaries are a party, in respect of any rights they may have or any events of
default which may be triggered by the Proposed Transaction; and
6.5 written approval of the Proposed Transaction by the senior lenders of Diesel Power
Open Cast Mining Proprietary Limited.
The conditions in paragraphs 6.2 and 6.4 are for the benefit of the Offeror and may be waived by the
Offeror in its sole discretion by notice in writing to Buildmax. The remainder of the conditions in
paragraph 6 cannot be waived by the parties.
7. Key shareholder support
The Offeror has received an irrevocable undertaking from Brait IV SA Partnership, Brait IV
Investment, L.P. and CAS 2 Trust (collectively, "Brait"), who collectively hold 73,405,442
Offer Shares (constituting 49.472% of the Offer Shares and 40.488% of the issued shares of
Buildmax), to vote in favour of the Scheme.
In addition, Coronation Asset Management Proprietary Limited, who holds 19,345,128 Offer
Shares (constituting 16.64% of the Offer Shares), has given the Offeror a letter of support in
terms of which they express support for the Proposed Transaction.
8. Guarantees and confirmations to the TRP
The Offeror has delivered to the TRP a cash confirmation issued by Schindlers Attorneys,
Conveyancers and Notaries for the maximum possible Scheme Consideration in compliance
with regulations 111(4) and 111(5) of the regulations published in terms of sections 120 and
223 of the Companies Act ("Takeover Regulations").
9. Termination of Buildmax’s listing
Should the Scheme become operative, an application will be made to the JSE to terminate
the listing of Buildmax’s shares on the JSE with effect from the operative date.
10. Independent Board, Independent Expert report and recommendations
Buildmax has convened an independent board, comprised of independent non-executive
directors Mr Colin Wood, Mr Colin Brayshaw and Mr David Lamola ("Independent Board"),
to consider the terms and conditions of the Proposed Transaction. Buildmax Independent
Board has appointed BDO Corporate Finance Proprietary Limited as the independent expert
("Independent Expert"), as required in terms of section 114(2) of the Companies Act and as
contemplated in regulation 90 of the Takeover Regulations, to provide it with external advice
in relation to the Proposed Transaction and to make appropriate recommendations to the
Buildmax Independent Board in the form of a fair and reasonable opinion.
The contents of the Independent Expert's advice and the final view and recommendation of
the Independent Board will be detailed in the Circular, however having considered the
proposal by the Offeror and a number of factors including the historical cash flows and
operations of Buildmax, the costs of a continued listing on the JSE and risk factors relevant to
Buildmax and its underlying businesses, the Independent Board is supportive of the Proposed
Transaction which it believes to be in the interests of Buildmax and its stakeholders.
11. Offer letter
The letter from the Offeror to the Buildmax Board dated 21 November 2017, which sets out
the terms of the Offer ("Offer Letter"), contains provisions relating to the implementation of
the Proposed Transaction and certain undertakings by Buildmax. In particular, Buildmax
undertakes that (subject to the directors' fiduciary duties and applicable provisions of the
Companies Act and/or Takeover Regulations, where applicable) until the Scheme Meeting, it
will not solicit, initiate or encourage other corporate actions proposals ("Alternative
Proposal") likely to frustrate the Proposed Transaction, and will not participate in discussions
or negotiations or approve or agree to any Alternative Proposal unless it is more favourable to
Buildmax Shareholders (taking into account, inter alia, the financial terms of the Proposed
Transaction, the likelihood of such a transaction being completed within a reasonable period
of time and the financing risks relating thereto) ("Superior Proposal").
Buildmax will promptly notify the Offeror of any Alternative Proposal which is made and will
provide an opportunity to the Offeror to match any Superior Proposal.
No break fee is payable by Buildmax should the Proposed Transaction not proceed, however
the Buildmax Board has agreed pay the legal fees of the Offeror in relation to the Proposed
Transaction up to an aggregate amount of R450,000 (excluding VAT and disbursements) if
the Proposed Transaction is unsuccessful.
12. Documentation
Details of the Scheme will be included in the Circular to be sent to Buildmax Shareholders,
which will contain, inter alia, details of the Proposed Transaction, a notice of the Scheme
Meeting, a form of proxy, and a form of surrender and transfer. Subject to the fulfilment of the
conditions contained in paragraph 5 above, it is estimated that the Circular will be posted to
Buildmax Shareholders on or about 27 November 2017. Buildmax Shareholders are advised
to refer to the Circular for the full terms of the Proposed Transaction.
The salient dates and times pertaining to the Proposed Transaction will be released on SENS
and published in the press at the time of posting of the Circular.
In order to provide certainty to Buildmax, the Buildmax Shareholders and other stakeholders
as soon as possible, the Circular will be posted and the Scheme Meeting convened as soon
as possible taking into account the required timelines for giving of notice of the Scheme
Meeting. It is likely that as a result the Scheme Meeting will be convened over the December
period, and Buildmax apologises for any inconvenience to the Buildmax Shareholders as a
result. Facilities will be made available for electronic participation in the Scheme Meeting for
those not able to attend in person.
13. Withdrawal of cautionary announcement
Following the release of this firm intention announcement, the cautionary announcement
published on 17 August 2017 and renewed on 29 September 2017 and 10 November 2017 is
hereby withdrawn and caution is no longer required to be exercised by Buildmax
Shareholders when dealing in their respective shares.
14. Responsibility statements
The board of directors of the Offeror accepts responsibility for the information contained in this
firm intention announcement to the extent that it relates to the Offeror. To the best of their
knowledge and belief, the information contained in this firm intention announcement is true
and nothing has been omitted which is likely to affect the importance of the information.
The Buildmax Board and the Independent Board each accept responsibility for the information
contained in this firm intention announcement to the extent that it relates to Buildmax. To the
best of their knowledge and belief, the information contained in this firm intention
announcement is true and nothing has been omitted which is likely to affect the importance of
the information.
Benoni
23 November 2017
Sponsor to Buildmax
Sasfin Capital (a member of the Sasfin Group)
Legal Adviser to Buildmax
Webber Wentzel
Legal Advisor to the Offeror
DLA Piper South Africa Services Proprietary Limited
Independent Expert
BDO Corporate Finance Proprietary Limited
Date: 23/11/2017 12:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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