Joint Announcement of a Firm Intention to acquire 100% of Torre, Cash Dividend Declaration and Cautionary Withdrawal
Torre Industries Limited Mainstreet 1641 Proprietary Limited
(Incorporated in the Republic of South (Incorporated in the Republic of South Africa)
Africa) (Registration number 2018/420756/07)
(Registration number 2012/144604/06) (“Consortium” or “Offeror”)
Share Code: TOR
(“Torre” or “the Company”)
JOINT ANNOUNCEMENT OF A FIRM INTENTION TO ACQUIRE 100% OF TORRE, CASH DIVIDEND
DECLARATION AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1.1 The board of directors of Torre (“Board”) advises Torre shareholders (“Torre Shareholders”)
that it has received a firm intention to make an offer (“Offer”) from Main Street 1641 (Pty)
Ltd (registration number: 2018/420756/07), a special purpose vehicle established by Ethos
Mid-Market Fund I GP Proprietary Limited, acting in its capacity as the General Partner of
the Ethos Mid Market Fund I (A) Partnership and the Ethos Mid Market Fund I (B)
Partnership (“EMMF”) and Apex Partners Proprietary Limited (“Apex”), collectively (the
“Consortium” or “Offeror”), to acquire 100% of the total issued ordinary share capital in
Torre (“Shares” or “Torre Shares”) by way of 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 between Torre and its shareholders (the "Scheme") and a
subsequent delisting of the Company from the Main Board of the stock exchange operated
by the JSE Limited ("JSE") in terms of paragraph 1.17(b) of the JSE Listings Requirements,
(the “Delisting”). The Scheme and the Delisting are collectively referred to herein as the
1.2 The contents hereof constitute a firm intention by the Offeror to make an offer to Torre
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
1.3 Torre Shareholders will receive the following:
1.3.1 a cash dividend of R0.35 per Torre Share, as detailed in paragraph 5 below, which is
equivalent to an aggregate cash consideration of R179,968,987 for all the Torre Shares
1.3.2 a cash consideration of R1.05 per Torre Share, which is equivalent to an aggregate cash
consideration of R539,906,960 for all the Torre Shares (“Cash Payment”), payable on the
date on which the Scheme becomes operative; and
1.3.3 a maximum deferred, top-up cash payment of up to R0.10 per Torre Share, which is
equivalent to a maximum cash consideration of R51,419,711 for all the Torre Shares,
subject to the achievement of performance targets and in the amount detailed in
paragraph 6 below (“Top-up Payment”), if the Scheme becomes operative,
(the Cash Payment and Top-up Payment are collectively referred to herein as the “Offer
1.4 The Cash Dividend and Offer Consideration represent a material premium relative to the
traded price of the Torre Shares on the JSE. Specifically, the Cash Dividend and Offer
Consideration translates to a 44.67% premium to the 30-day volume weighted average
traded price of the Torre Shares on the JSE as at 7 November 2018, being the last practicable
date prior to the date of the Offer.
2. NATURE OF TORRE AND THE OFFEROR
2.1 Torre is a JSE Main Board listed industrial group which provides value added sales and
rentals of branded capital equipment, the distribution of high-quality aftermarket parts and
the delivery of critical support services to its customers’ expansion programmes.
2.2 The Offeror is a newly incorporated private company and has not conducted any business
since incorporation. The Offeror is owned collectively by EMMF, a majority BEE owned mid-
market private equity fund and Apex, an investment banking firm established in September
2017 by a former executive of Torre.
3.1 The Consortium believes that the underlying businesses within Torre and its subsidiaries
(the “Torre Group“) have limited synergies and require different capital structures, strategic
goals and leadership in order to operate optimally and deliver improved operational
3.2 Accordingly, pursuant to the Transaction and after the Delisting, the Consortium intends to
separate the Torre Group in two, namely:
3.2.1 the Torre Analytical Services businesses, comprising: the Wearcheck, AMIS and
Set Point Labs divisions (“TAS”), which will be retained by EMMF; and
3.2.2 the Torre Industrial businesses, comprising: the SA French, Manhand, Torre Parts
and Components, Tractor and Grader Suppliers, Letaba Pumps, Elephant Lifting
and Torre Logistics divisions (“TI”), which will be retained by Apex.
3.3 The Consortium believes that the Transaction and subsequent separation of TAS and TI will
unlock value by allowing the businesses to operate independently and receive focused
management attention, strategy implementation and enhanced empowerment credentials.
4. MECHANICS OF THE OFFER
4.1 The Offer constitutes an "affected transaction" as defined in section 117(1)(c) of the
Companies Act. The Offer will be implemented by way of the Scheme.
4.2 The Offer is subject to the fulfilment or waiver (as the case may be) of the conditions set out
in paragraph 7 below.
4.3 In the event that the Scheme becomes operative, the listing of Torre’s Shares on the Main
Board of the JSE will be terminated, and Torre Shareholders will be deemed to have sold all
of their Torre Shares for the Offer Consideration.
5. CASH DIVIDEND DECLARATION
5.1 Notice is hereby given that a special dividend of 35 cents per Torre Share has been declared
out of cash and cash equivalent reserves of the Company. The issued share capital of the
Company as at the declaration date was 514 197 105 Torre Shares. The income tax number
of the Company is 9698735157.
5.2 Withholding tax on dividends at a rate of 20% will be deducted for all shareholders who are
not exempt in terms of the legislation. This will result in a final net cash dividend of 28 cents
per Torre Share to non-exempt shareholders. Salient dates associated with the dividend are
set out below.
Declaration announcement released Monday, 12 November 2018
Last date to trade CUM dividend Tuesday, 27 November 2018
Trading EX dividend Wednesday, 28 November 2018
Record date Friday, 30 November 2018
Dividend payment date Monday, 3 December 2018
5.3 No dematerialisation or rematerialisation of share certificates will be allowed during the
period Wednesday, 28 November 2018 to Friday, 30 November 2018 (both dates inclusive).
6. THE TOP-UP PAYMENT
6.1 The Offeror shall pay the Top-Up Payment to the Torre Shareholders subject to TAS
achieving "Actual Sustainable EBITDA" for the period 1 July 2018 to 30 June 2019 in excess
of the Top-Up Floor, as set out below.
6.2 The Top-Up Payment shall be paid in accordance with the following formula:
(Actual Sustainable EBITDA - Top Up Floor)
__________________________________________ × R0.10 = Top Up Payment
(Top Up Cap - Top Up Floor)
Actual Sustainable EBITDA means the actual, delivered sustainable Earnings
before Interest, Tax, Depreciation and Amortisation (“EBITDA”) excluding once-off
expenses or income (e.g. retrenchment costs, once off non-repeatable earnings,
earnings from discontinued contracts, etc.) generated by the Wearcheck, AMIS
and Set-Point Lab divisions for the period from 1 July 2018 to 30 June 2019.
Top Up Floor means R82 928 000, representing the budgeted EBITDA expected to
be generated by the Wearcheck and AMIS divisions for the period from 1 July 2018
to 30 June 2019.
Top Up Cap means R95 625 000, being the budgeted EBITDA expected to be
generated by the Wearcheck, AMIS and Set-Point Lab divisions for the period from
1 July 2018 to 30 June 2019.
6.3 If Wearcheck and AMIS do not achieve "Actual Sustainable EBITDA" in excess of the Top-Up
Floor, then the Top-Up Payment shall not be payable. The Top-Up Payment shall be a
maximum amount of R0.10 per Torre Share, irrespective of whether the Actual Sustainable
EBITDA achieved exceeds the Top-Up Cap.
6.4 The Actual Sustainable EBITDA shall be determined from Torre's management accounts for
the financial year ending 30 June 2019 (“FY19”), and the Consortium will notify the Top-up
Participants (as defined in paragraph 6.5 below) of the amount of the Top-Up Payment
(“Top-up Notice”) by no later than 15 July 2019.
6.5 To the extent that the Top-up Payment becomes payable, then this payment will be made
to the Torre Shareholders on the Torre share register on the record date of the Scheme
(“Top-up Participants”), by no later than 31 July 2019, or such later date to the extent
paragraph 6.6 applies.
6.6 The Scheme will include a dispute mechanism to the determination of the Top-up Payment
permitting Top-up Participants collectively holding more than 50% of the Torre Shares to
provide the Consortium with a joint notice within 10 calendar days after receipt of the Top-
up Notice setting out their reasons therefor, in which event the determination shall be
referred to an independent auditor for determination, whose decision shall be final and
binding upon the parties. If no such dispute notice is timeously delivered, the Top-up Notice
shall be final and binding upon the parties and the Top-Up Payment shall be paid on
15 August 2019.
7. SCHEME CONDITIONS
7.1 The implementation of the Scheme is subject to the fulfilment of the conditions ("Scheme
Conditions") that, on or before 28 February 2019, or such other date as stated in the below
and/or agreed to between Torre and the Consortium:
7.1.1 an independent board of directors of Torre, being those directors of Torre who act
independently as contemplated in the Companies Regulations, namely LE Mthimunye
(Chair), CS Seabrooke and MM Ngoasheng (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
7.1.2 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, the South African Competition Commission and competition
authorities in other jurisdictions (either unconditionally or subject to conditions
acceptable to Torre and the Consortium), as may be required;
7.1.3 the approval of the Scheme by the requisite majority of Torre Shareholders as
contemplated in section 115(2)(a) of the Companies Act (being not less than 75% of the
votes exercised by shareholders present or represented by proxy and entitled to vote) at
the general meeting of Torre Shareholders to be convened for purposes of approving the
Scheme (the “Torre General Meeting”), and:
22.214.171.124 to the extent applicable, 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
126.96.36.199 if applicable, Torre not treating the aforesaid resolution as a nullity, as contemplated
in section 115(5)(b) of the Companies Act;
7.1.4 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 Scheme, in terms
of section 121(b) of the Companies Act; and
7.1.5 in relation to any objections to the Scheme received from Torre Shareholders:
188.8.131.52 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 Torre General
Meeting, shareholders holding no more than 10% of all Offer Shares eligible to be voted
at the Torre General Meeting give such notice and vote against the resolutions
proposed at the Torre General Meeting; or
184.108.40.206 if shareholders holding more than 10% of all Offer Shares eligible to vote at the Torre
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 Torre
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 Torre General Meeting, in respect of more than 10% of the Offer
Shares eligible to be voted at the Torre General Meeting; and
7.1.6 the counterparties to certain material contracts consenting to the change of control, if
required in the material contract, as a result of the implementation of the Scheme.
7.2 The conditions in paragraphs 7.1.1, 7.1.2, 7.1.3, 7.1.4, and 7.1.6 above are regulatory in
nature and cannot be waived.
7.3 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.
8. SHAREHOLDING IN TORRE AND ACTING AS PRINCIPAL
8.1 As at the date of this announcement, the Consortium and its shareholders do not
beneficially, directly or indirectly, hold or control any shares in Torre nor does it or its
shareholders have any options to purchase any Torre shares or beneficial interest therein.
8.2 The Offeror is acting as principal and not as agent in respect of the Transaction and it is not
acting in concert with any parties, other than its shareholders, for purposes of the
implementation of the Transaction.
9. IRREVOCABLE UNDERTAKINGS
9.1 The Consortium approached the major Torre Shareholders to procure irrevocable
undertakings from Torre Shareholders holding at least 75% of the voting rights entitled to
be exercised in respect of any resolutions required to approve the Transaction and which
undertakings the Consortium deemed necessary to proceed with the Offer.
9.2 The following Torre Shareholders provided the Consortium with irrevocable undertakings to
vote in favour of any and all resolutions required to approve the Transaction, where such
Torre Shareholder is so permitted, as well as undertook to accept the Offer:
Total Number of % prior to the % voting on the
Torre Shareholder Torre shares held Offer^ Scheme resolution^
Partners Limited 293,458,414 57.07% 57.07%
Proprietary Limited 129,464,571 25.18% 25.18%
Total 422,922,985 82.25% 82.25%
^ based on 514 197 105 Torre Shares being the issued share capital of Torre prior to the date
of this announcement.
10. CONFIRMATION OF FINANCIAL RESOURCES
In accordance with Regulation 111(4) and Regulation 111(5) of the Companies Regulations,
Absa Bank has provided an irrevocable bank guarantee to the Board and the TRP which
confirms that, in aggregate, the Consortium has sufficient cash resources, in terms of
Regulation 111, to satisfy payment of the maximum Offer Consideration, totalling
R595,017,232.75, which includes the Cash Payment, Top-up Payment and such amount
required to settled the employee incentive scheme shares as referred to paragraph 12.3 of
11. INDEPENDENT EXPERT
11.1 The Independent Board has, in accordance with section 114(3) of the Companies Act and
regulation 90(1) of the Companies Regulations and paragraph 1.14(d) of the Listings
Requirements of the JSE, appointed BDO Corporate Finance Proprietary Limited as the
independent expert ("Independent Expert”) to provide it with independent opinion in
regard to the fairness and reasonableness of the Offer and to make appropriate
recommendations to the Board for the benefit of Torre Shareholders.
11.2 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 Offer
and a number of factors (including the empowerment requirements and operational
requirements of the Torre Group), the Independent Board is, subject to the advice it receives
from the Independent Expert, supportive of the Transaction, which it believes is in the
interests of Torre and its stakeholders.
12.1 The parties have agreed to provide undertakings usual for a transaction of this nature from
the date of acceptance of the firm intention offer letter by the Independent Board
(“Signature Date”) until the date on which the Scheme becomes operative.
12.2 The directors of Torre shall resign from the Board with effect from the date on which the
Scheme becomes operative.
12.3 The Consortium will fund the obligations of the Torre employee share incentive scheme
(“Employee Scheme”), amounting to R3,690,562 as calculated by the Company, which will
be triggered as a result of the Scheme on such terms and conditions as stipulated in the
Employee Scheme and as may be required in terms of the Companies Regulations.
13.1 Torre has provided the Consortium with an undertaking from the Signature Date until
28 February 2019 (or such later date as may be agreed) ("Exclusivity Period") not to solicit
and/or negotiate a "Competing Transaction", being any proposal or transaction for the
merger, amalgamation, business combination, takeover bid, sale or other disposition of all
or a majority of the equity in and/or business and/or assets of Torre or any of its material
subsidiaries, or any other transaction which could reasonably be considered to be likely to
materially prejudice or frustrate the Transaction or its implementation.
13.2 Should Torre receive an unsolicited proposal in respect of a Competing Transaction
("Competing Proposal") during the Exclusivity Period which the Independent Board
determines in good faith constitutes, or would reasonably be expected to result in, a more
favourable offer (from a financial perspective) to the Torre shareholders, the Company has
undertaken to notify the Consortium thereof and afford the Consortium a period of not less
than 10 business days to revise the terms of the Offer on terms which are at least as
favourable (from a financial perspective) as the terms of the Competing Proposal and
provide the Consortium an opportunity to match the Competing Proposal.
14. RESPONSIBILITY STATEMENT
14.1 The Independent Board and the Board accept responsibility for the information contained
in this announcement. To the best of their knowledge and belief, such information
contained in this announcement is true and nothing has been omitted which is likely to
affect the importance of such information.
14.2 The Consortium, as the offeror, accepts responsibility for the information contained in this
announcement. To the best of their knowledge and belief, such information contained in
this announcement is true and nothing has been omitted which is likely to affect the
importance of such information.
15. DOCUMENTATION AND SALIENT DATES
Further details of the Scheme and Delisting will be included in a circular relating to the
Transaction, which will contain, inter alia, a notice of the Torre General Meeting, a form of
proxy and a form of acceptance, surrender and transfer ("Circular"). The Circular is expected
to be posted on or about 20 December 2018. The salient dates in relation to the Scheme and
the Delisting will be published on SENS and in the press prior to the posting of the Circular.
16. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
16.1 Shareholders are referred to the cautionary and renewal of cautionary announcements
published on 9 July 2018, 20 August 2018 and 2 October 2018 relating to the possible
repurchase of Torre Shares and delisting by Torre (“Potential Buyback”).
16.2 In light of this Transaction, Torre has made a decision not to pursue the Potential Buyback.
Accordingly, the cautionary announcement relating to the Potential Buyback is hereby
withdrawn and caution is no longer required to be exercised by Torre Shareholders when
dealing in Torre Shares.
12 November 2018
Legal Adviser to EMMF
Webber Wentzel Incorporated
Corporate Finance Advisor to the Consortium
Apex Partners Proprietary Limited
Torre Transaction Sponsor and Advisor
Questco Proprietary Limited
BDO Corporate Finance Proprietary Limited
Date: 12/11/2018 02:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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