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CONSOLIDATED INFRASTRUCTURE GROUP LIMITED - Acquisition of Wearne Muldersdrift quarry business, property and mining right

Release Date: 05/12/2019 14:01
Code(s): CIL     PDF:  
 
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Acquisition of Wearne Muldersdrift quarry business, property and mining right

CONSOLIDATED INFRASTRUCTURE GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2007/004935/06)
JSE share code: CIL ISIN: ZAE000153888
(“CIG” or the “Company” or the “Group”)


ACQUISITION OF WEARNE MULDERSDRIFT QUARRY BUSINESS, PROPERTY AND MINING RIGHT

1. Introduction

   Shareholders are advised that on 3 December 2019 (the “Signature Date”), Drift Supersand Proprietary Limited
   (“Drift Supersand”), a wholly-owned subsidiary of CIG (the “Purchaser”), entered into various agreements with
   Wearne Aggregates Proprietary Limited, a wholly-owned subsidiary of WG Wearne Limited (the “Seller”) to
   acquire:

   -      the Wearne Muldersdrift Business, comprising the aggregates business conducted by the Seller (the “Sale of
          Business Agreement”);
   -      the letting enterprise conducted by the Seller, including the property (being portions Re/226, 227, 266, 267,
          285, 286 and 287 of the Farm Rietfontein 189-IQ; and Portions 57, 58, 171, 182 and 185 of the Farm
          Rietfontein 180-IQ (the “Property”) on which the letting enterprise is conducted (“Sale of Properties
          Agreement”); and
   -      the mining right granted to the Seller (the “Mining right”) in terms of sections 22 and 23 of the mineral and
          Petroleum Resources Development Act, 28 of 2002 (“MPRDA”) in respect of the Property (“Sale of Mining
          Right Agreement”), (collectively the “Transactions”), for an aggregate consideration of R50 000 000,
          payable in cash in accordance with the terms of the Transactions, as further set out below.

2. Rationale for the Transactions

   The Wearne Muldersdrift Business is a granite quarry situated in Muldersdrift that produces sand, stone and other
   normal aggregates for the road and building industry and also produces building and river sand (the “Aggregates”).
   The Wearne Muldersdrift Business includes plant and equipment and stock but specifically excludes the Seller’s
   cash, cash equivalents, debtors and any assets in relation to the Wearne ready-mix business.

   The Transactions are expected to be earnings and cash flow accretive to the Group, as a result of the operational
   synergies between the Wearne Muldersdrift Business and the adjacent Drift Supersand. Both operations mine the
   same orebody with the same physical rock properties, thus enhancing the synergies and operational flexibility
   between the two operations.


3. Salient terms and conditions precedent of the Transactions

   3.1.           Sale of Business Agreement
                  Subject to the fulfilment or waiver (as the case may be) of conditions precedent set out hereunder and
                  with effect from the date on which all of the conditions precedent are fulfilled or waived (the
                  “Effective Date”), the Purchaser will acquire the the Wearne Muldersdrift Business from the Seller,
                  as a going concern, for an aggregate purchase price of R9 000 000.
           
                  The Seller will appoint the Purchaser as its exclusive contractor to mine and dispose of the Aggregates
                  on the Property on the Sellers behalf, as contemplated in section 101 of the MPRDA, for the period
                  ending on the date on which the Mining Right is registered in the Purchaser’s name or the third
                  anniversary of the Effective Date, whichever occurs first (the “Contract Mining Period”) and the
                  Purchaser shall lease the property from the Seller for the duration of the Contract Mining Period.

                  The Sale of Business Agreement remains subject to the following conditions precedent:

                  -        within 7 days following the Signature Date, the purchase price of R9 000 000 shall be paid
                           to an escrow agent, to be held in trust pending the fulfilment or waiver of the conditions
                           precedent.
                  -        within 7 days of receipt of payment, the Seller shall advertise the sale of Wearne Muldersdrift
                           Business to the Purchaser, in compliance with section 34 of the Insolvency Act 24 of 1936;
                           and
                  -        settlement of all creditor claims within 31 days from the date on which the sale of Wearne
                           Muldersdrift Business to the Purchaser is advertised in compliance with section 34 of the
                           Insolvency Act 24 of 1936.

                 The Sale of Business Agreement contains warranties and indemnities that are customary for a transaction of this nature.

  3.2.           Sale of Properties Agreement
                 Subject to the fulfilment or waiver (as the case may be) of the suspensive conditions set out hereunder and
                 with effect from the date of transfer of the property into the name of the Purchaser (the “Date of Transfer”),
                 the Purchaser shall acquire the letting enterprise conducted by the Seller, together with the Property on which
                 the letting enterprise is conducted, as a going concern, for an aggregate purchase price of R32 500 000.

                 On the first anniversary of the Date of Transfer, the Purchaser will purchase Portion 11 of the Farm Reitvallei
                 180-Q for an additional purchase price of R500 000, provided that the said property is not occupied by
                 unlawful occupants at the time.

                 The Sale of Properties Agreement remains subject to the following suspensive conditions:

                 -        within 120 days of the Signature Date, all regulatory approvals as may be required having
                          been obtained;
                 -        approvals of the board of directors of the Seller and the Purchaser being obtained;
                 -        the Debt Restructuring Agreement entered into between CIG and its bankers and lenders for
                          the rescheduling or restructuring of the debt of CIG and its subsidiaries and approval of the
                          Property purchase by such bankers and lenders, as defined in the Sale of Properties
                          Agreement has been concluded;
                 -        the section 11 application having been lodged with the Department of Minerals and
                          Resources in accordance with the provisions of the MPRDA; and
                 -        within 14 days of fulfillment or waiver of the last of the suspensive conditions the Seller shall
                          advertise the sale of the letting enterprise, together with the Property, in compliance with
                         section 34 of the Insolvency Act 24 of 1936.

                Should the Sale of Properties Agreement fail as a result of non-fulfilment or non-waiver of the suspensive
                conditions set out above, and the Seller elects to dispose of the letting enterprise and the Property during the
                course of the Contract Mining Period, the Purchaser shall, upon receipt of notice of the Sellers intention to
                dispose of the letting enterprise and the Property, have a right of pre-emption for a period of 30 days to
                purchase the letting enterprise and the Property.

               The Sale of Properties Agreement contains warranties and indemnities that are customary for a transaction of
               this nature.

   3.3.        Sale of Mining Right Agreement
               Subject to the fulfilment or waiver (as the case may be) of the suspensive conditions set out hereunder and
               with effect from the date on which all of the conditions precedent are fulfilled or waived which date will be
               no later than the third anniversary of the Signature Date (the “Fulfilment Date”), the Seller shall acquire the
               Mining Right for a purchase price of R8 000 000 (plus interest thereon at the prime rate as quoted by the
               Standard Bank of South Africa Limited from the first anniversary of the Signature Date to the Fulfilment Date
               resulting in the maximum amount of interest payable being for a period of not more than two years.

               The Sale of Mining Right Agreement remains subject to the following suspensive conditions:

                  -         by no later than the first anniversary of the Signature Date, the Sale of Properties Agreement
                            becomes unconditional; and
                  -         by no later than the third anniversary of the Signature Date, the unconditional written consent
                            by the Minister under the section 11 application of the MPRDA is obtained.

              The Purchaser hereby undertakes to do all such things as may be required to, by no later than the date that the
              mining right is registered in the Purchasers name to release the Seller from the rehabilitation obligation relating
              to the mining right. The current rehabilitation obligation is R3 249 853.79

4. Financial information

   4.1.       The value of the net assets that are the subject of the Transactions was R83.5 million as at 31 August 2019.

   4.2.       The loss attributable to the net assets that are the subject of the Transactions was R1.4 million for the 6 months
              ended 31 August 2019.

     The above financial information has been extracted from the Seller’s unpublished management accounts which
     were prepared in terms of the Sellers accounting policies and International Financial Reporting Standards. For
     the purposes of this announcement, the Company is satisfied with the quality of those management accounts.


5. Categorisation

   The Transactions collectively classified as a Category 2 transaction in terms of the JSE Listings Requirements and
   accordingly are not subject to the approval of CIG shareholders.

5 December 2019


Sponsor
Java Capital

Date: 05-12-2019 02:01:00
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