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Announcement regarding the renewal of lease agreements 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 LEASE AGREEMENTS WITH A RELATED PARTY
1. INTRODUCTION
Shareholders are advised that Hudaco has renewed certain lease agreements with Dufomo
Investments Proprietary Limited (“Dufomo”) in terms of which the Company will continue to lease
premises from Dufomo as set out in section 3 below (the "Lease Renewals”).
Mr GR Dunford, chief executive of Hudaco, is an 82% shareholder of Dufomo, which owns the premises
currently occupied by Gear Pump Manufacturing, Joseph Grieveson and Dosco Precision Hydraulics,
all business within an 85% held subsidiary of Hudaco.
2. RATIONALE FOR THE LEASE RENEWALS
The rationale for the Lease Renewals is to provide continuity to the businesses mentioned in section
1 above, which have been renting these respective premises from Dufomo for over 15 years. The
buildings and structures on these premises were purposely built to suit the requirements of the
respective businesses and the businesses had already occupied these premises before being acquired
by Hudaco during 2013.
3. DETAILS AND TERMS OF THE LEASE RENEWALS
A table setting out details and the terms of the Lease Renewals is set out below:
Lessee Location Area Tenure Monthly Annual Renewal
(m2) lease Escalation clauses
payments
Gear Pump 15 Moody Ave, 3 831 2 years, 3 R191 550.00 8% 3 year renewal
Manufacturing1 Epping 1, Cape months option, with
Town commencing rental to be
1 April 2019, reset to market
terminating
30 June 2021
Joseph 332 Aberdare 3 661 2 years, 3 R250 226.27 8% 3 year renewal
Grieveson2 Drive, Phoenix months, option, with
Industrial Park, commencing rental to be
Phoenix, Durban 1 April 2019, reset to market
terminating
30 June 2021
Dosco 6 Impangela Rd, 2 400 3 years, R148 928.16 8% 3 year renewal
Precision Sebenza Ext 6, commencing option, with
Hydraulics3 Edenvale May 2019, rental to be
terminating reset to market
30 April
2022
Notes:
1. The premises of Gear Pump Manufacturing, a manufacturer and assembler of cast iron hydraulic
gear pumps, comprise of 373m² of offices, inclusive of offices located in the factory and 2 469m²
of factory and warehouse, 828m² of foundry and 161m² of ablutions space.
2. The premises of Joseph Grieveson, a manufacturer of ferrous and non-ferrous castings, comprise
of offices, warehouse and foundry space, measuring 3 661m².
3. The premises of Dosco Precision Hydraulics, a supplier and repairer of hydraulic pumps and
motors to the mining, industrial, mobile, marine and forestry industries, comprise of 515m2 of
offices and 1 885m2 of warehouse space (including mezzanine of 153m2). The property is split into
2 units, with unit 1 measuring 600m2 and unit 2 measuring 1 800m2.
There are no outstanding conditions precedent relating to the Lease Renewals.
4. FINANCIAL INFORMATION
Hudaco incurs lease expenses of the amount set out in paragraph 3 above. The lease payments are
deductible for tax purposes. There are no assets attributable to the Lease Renewals.
5. CATEGORISATION AND SMALL RELATED PARTY TRANSACTION
The entering into of the Lease Renewals is a “small related party transaction” in terms of paragraph
10.7 of the JSE Limited (“JSE”) Listings Requirements, as Hudaco will be transacting with a “related
party”, being Dufomo and accordingly no shareholder approval is required, but an independent
fairness opinion must be obtained.
The board of directors of Hudaco has appointed Merchantec Capital (the “Independent Expert”) to
provide an independent fairness opinion on the Lease Renewals (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 Renewals and is of the opinion that the Lease
Renewals are 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
29 May 2019
Corporate advisor and Sponsor
Nedbank Corporate and Investment Banking
Independent Expert
Merchantec Capital
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