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Release Date: 04/05/2020 16:57
Code(s): NVS     PDF:  
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Novus Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number: 2008/011165/06
JSE share code: NVS
ISIN: ZAE000202149
(“Novus Holdings”, “the Company” or “the Group”)


1. Background

Shareholders of Novus Holdings are advised that the Group has through its wholly owned subsidiary
Novus Packaging (Pty) Ltd ("Novus Packaging"), entered into (1) a sale of business agreement with
Novus Ventures (Pty) Ltd ("Novus Ventures"), in terms of which Novus Packaging will sell Correll Tissue
("Correll Tissue Business") as a going concern to Novus Ventures; and, thereafter, (2) a share sale
agreement between Mthembu Tissue Converting (Pty) Ltd ("Mthembu") and Novus Ventures, in terms
of which Novus Packaging will (1) sell 51% of the ordinary shares it holds in Novus Ventures ("Sale
Shares"), constituting 51% of all the issued ordinary shares in Novus Ventures to Mthembu; and (2)
grant Mthembu an option to purchase the remaining 49% of the ordinary shares it holds in Novus
Ventures (collectively, "Transaction").

2. Rationale

In September 2018, Novus Holdings announced the results of its strategic review. One of the outcomes
was management’s focus on minimising trading losses by exiting the Correll Tissue Business with an
optimum capital recovery. The Transaction has been entered into by the Group in furtherance of this
stated intention by (i) effectively disposing of 51% of the Group's interest in the Correll Tissue Business
and (ii) aligning with a joint venture partner, Mthembu, that boasts B-BBEE credentials that strengthen
the Group's empowerment strategy and represent an opportunity to unlock value in the Correll Tissue

3.   Description of the Correll Tissue Business

Novus Packaging, trading as Correll Tissue, is in the business of producing and distributing jumbo tissue
wadding which is used by the conversion industry to produce a complete range of household and
consumer products such as toilet paper, facial tissue, kitchen towels and serviettes.

4. Salient terms of the Transaction

As an initial step in the Transaction, Novus Packaging will sell the Correll Tissue Business to Novus
Ventures on and subject to, inter alia, the following salient terms:

    •   The purchase consideration is an amount of R60m (zero-rated for VAT), plus an additional
         amount not exceeding R5m for any stock or current assets acquired by Novus Ventures.
    •   In settlement of the purchase consideration, Novus Ventures will allot and issue to Novus
        Packaging, 100 fully paid up ordinary shares in Novus Ventures, which shares shall constitute
        100% of all of the issued shares of Novus Ventures.

Novus Packaging and Novus Ventures will enter into a lease agreement in respect of the premises
from which the Correll Tissue Business is operated ("Property"), and Novus Ventures will have an
option to acquire the Property, subject to certain terms and conditions.

As a further step in the Transaction, Novus Packaging will dispose of the Sale Shares to Mthembu on
and subject to, inter alia, the following salient terms and conditions:

    •   The purchase consideration for the Sale Shares will be R20m, due and payable in cash against
        delivery of the Sale Shares.
    •   Mthembu will be granted an option to purchase the remaining ordinary shares in Novus
        Ventures for an aggregate purchase consideration of R40m (escalating at 5% from 1 June
        2022), subject to certain terms and conditions including that the option lapses 5 years after
        the effective date of the Transaction.

Novus Packaging and Mthembu will enter into a shareholders' agreement to regulate their
relationship as shareholders of Novus Ventures.

5. The value of the net assets and the profits attributable to the net assets

As at the financial year ended 31 March 2019 (the last set of audited results), the book value of the
assets that are the subject of the Transaction was R135m, generated turnover of R233m and an
attributable loss of R15m. An impairment of R70m was accounted for in the 2020 financial year in
order to impair these assets to the expected fair value of the Transaction.

6. Application of the sale proceeds

In line with the immediate focus on preserving cash, the Group will reserve the cash proceeds until
more certainty exists regarding the long term impact of Covid-19.

7. Conditions Precedent

The Transaction is subject to conditions precedent normal for transactions of this nature.

8. Effective Date

The effective date of the Transaction is 1 June 2020, or such other date as may be agreed in writing
among the parties.

9. Categorisation

The Transaction is categorised as a category 2 transaction as contemplated in the JSE Listings
Requirements and, accordingly, no shareholder approval is required.

Cape Town
04 May 2020

Sponsor: Investec Bank Limited

Legal Advisors: Cliffe Dekker Hofmeyr

Date: 04-05-2020 04:57:00
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