2017-11-20 09:30:58

Wearne Group of Companies

Home | Links | Contact | Investor Relations | Complaints


Warning: getimagesize(investor/images/investor_releases11.jpg) [function.getimagesize]: failed to open stream: No such file or directory in /home/wgw021/public_html/index.php on line 127


W G Wearne Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1994/005983/06)
(JSE code: WEA ISIN: ZAE000078002)
(“Wearne” or “the company”)

ACQUISITION OF THE PORTLAND GROUP AND FURTHER CAUTIONARY ANNOUNCEMENT

1. INTRODUCTION
Shareholders are referred to the renewal of the cautionary announcement dated 23 April 2008 and are advised that Wearne has entered into an agreement to acquire:
1.1. the entire issued share capital and cession of claims in Portland Holdings (Pty) Limited (“Portland Holdings”) and its subsidiaries, as well as the minority interests (“minority shareholders”) in certain subsidiaries, of Portland Holdings (collectively “the Portland Group”) in terms of the Portland agreement (“the Portland Agreement”) for a purchase consideration of R122 615 660 as detailed in paragraph 4 (“Portland acquisition”) from Portland Ready-mix Trust, Anco Besigheids Trust, Willchrest Besigheids Trust (“the vendors”); and
1.2. portion 8 of Farm 1098 Hooggekraal, as a going concern, in terms of the Visserhok agreement (“the Visserhok Agreement”) from Visserhok Investments (Pty) Limited (“Visserhok”) for a purchase consideration of R40 500 000 as detailed in paragraph 4 (“the Visserhok acquisition”).
1.3. An additional amount which shall not exceed R60 000 000 will be paid in terms of 4.1.3 to the vendors for Portland Hollowcare Slabs (Pty) Limited (“Portland Hollowcare Slabs”), a new company recently established, after the 31 August 2010 profit after tax has been finally agreed.
1.4. The Portland acquisition and the Visserhok acquisition are collectively defined as (“the transaction”).

2. BACKGROUND INFORMATION
2.1. The Portland Group was established 20 years ago, in the Durbanville area, in the Western Cape and is a supplier of ready mixed concrete and aggregate (sand and stone used in the making of concrete) as well as road building material to the construction industry.

2.2. The Portland Group offers the following products and services to the construction industry:
- high quality ready mixed concrete;
- aggregates and related products. The Portland Group utilises its own fleet and subcontractors to deliver aggregates to its clients;
- Precast hollowcore products to the concrete slab market with its latest state of the art plant and equipment; and
- concrete pump services.

2.3. The subsidiaries of Portland Holdings (including the percentage holding by Portland Holdings) are as follows:
- Portland Aggregates Sales (Pty) Limited (“Portland Aggregates Sales”) – 60%;
- Portland Ready-mix (Pty) Limited (“Portland Ready-mix”) – 100%;
- Portland Quarry (Pty) Limited (“Portland Quarry”) – 85%;
- Portland Sand Mines (Pty) Limited – 70%;
- Portland Concrete Pumps (Pty) Limited (“Portland Pumps”) – 75%; and
- Portland Hollowcore Slabs – 100%.

3. RATIONALE FOR THE TRANSACTION
Wearne is a ready mixed concrete and aggregate supplier operating mainly in Gauteng, the Free State, North West, Limpopo Provinces and KwaZulu-Natal. The Portland Group provides a strategic geographical expansion opportunity to Wearne into the lucrative Western Cape market. Furthermore:
- the transaction will expand Wearne’s product and services offering in market, diversify revenue streams and add critical mass to Wearne;
- the Portland Group is an established profitable operation with a presence and track record and can operate as a stand-alone and self-sufficient business unit;
- the Portland Group’s operating margins are significantly higher than Wearne’s margins; and
- the Portland Group has experienced management with a track record who will become Wearne shareholders and board members.

4. PURCHASE CONSIDERATION AND PAYMENT
4.1. Purchase price
Subject to the provisions set out below, the purchase price payable by Wearne for the Portland acquisition is the aggregate of:
4.1.1. R122 615 660 (in the event that the aggregate net profit after tax of the Portland Group for the year ended 29 February 2008 (“the February 2008 PAT”) is less than R20 218 000, then the purchase price shall be reduced by an amount equal to the aggregate of the sum of R8.06 for every R1.00 by which the February 2008 PAT is less than that amount) in terms of the Portland acquisition; and
4.1.2. R40 500 000 in terms of the Visserhok acquisition; and
4.1.3. an amount equal to five times the average annual audited profit after tax of Portland Hollowcore Slabs for the two 12 month periods ending 31 August 2009 and 31 August 2010 (“the Portland 2009/2010 PAT”), up to a maximum payment of R60 000 000. Portland Hollowcore Slabs is a new venture which is only expected to generate profit from May 2008.

4.2. Discharge of the purchase price
The purchase price will be discharged as follows:
4.2.1. R108 879 294 of the purchase price referred to in 4.1.1 will be discharged on the effective date by the issue and allotment by Wearne to the vendors of 31 108 370 Wearne ordinary shares at an issue price of R3.50 per share;
4.2.2. R4 736 364.50 of the purchase price referred to in 4.1.1 will be discharged on the effective date by the issue and allotment by Wearne to the minority shareholders of 1 353 247 Wearne ordinary shares at an issue price of R3.50 per share;
4.2.3. R9 000 001.50 of the purchase price referred to in 4.1.1 will be discharged in terms of 4.5 by the issue and allotment by Wearne to the minority shareholders of 2 571 429 Wearne ordinary shares at an issue price of R3.50 per share;
4.2.4. R40 500 000 of the purchase price referred to in 4.1.2 payable in cash to Visserhok against registration of transfer of Portion 8 of Farm 1098 Hooggekraal into the name of Wearne;
4.2.5. The portion of the purchase price referred to in 4.1.3 will be discharged on the third business day after the Portland 2009/2010 PAT has been finally agreed by the auditors by the issue and allotment of Wearne ordinary shares to the vendors at an issue price equal to the greater of:
a. R3.50 per Wearne ordinary share; or
b. the 30 day volume weighted average price per Wearne ordinary share at that date.
A maximum of 17 142 857 Wearne ordinary shares will be issued in this regard.

4.3. Restrictions
None of the vendors shall be entitled to sell:
- any of the Wearne ordinary shares issued to them prior to the first anniversary from the effective date;
- more than 50% of the Wearne ordinary shares issued to them prior to the second anniversary from the effective date.

4.4. Pre-emptive rights in favour of Wearne
Subject to the Restrictions in 4.3 and the JSE Limited (“JSE”) Listings Requirements, any of the vendors wishing to sell Wearne ordinary shares issued to them within five years from the effective date, are obliged to offer such shares to Wearne.

4.5. Call and put options
4.5.1. Phatutshelo has granted an irrevocable non-transferrable call option to Wearne to purchase its 15% interest of the issued share capital and all of the claims on loan account against Portland Quarry (so as to constitute Wearne as the sole shareholder of Portland Quarry) (“the Call Equity”). The call option may be exercised at any time from the effective date until 31 August 2010. The purchase consideration for the Call Equity is R9 000 001.50 and will be discharged by the issue of 2 571 429 Wearne ordinary shares at an issue price of R3.50 each, which are subject to the restrictions as per paragraph 4.3, if relevant.
4.5.2. Provided Wearne has not exercised the call option, Wearne has granted an irrevocable put option to Phatutshelo to sell to it the Call Equity on the same terms as per above except for the fact that the put option may be exercised only between 1 September 2010 and 15 September 2010.

5. EFFECTIVE DATE
The Portland acquisition will become effective on the first day of the month following the month in which all of the conditions precedent (as set out in 6) shall have become fulfilled or waived.

6. CONDITIONS PRECEDENT AND RESOLUTIVE CONDITION
6.1. Conditions precedent relating to the Portland Agreement:
The Portland Agreement is conditional, inter alia, upon:
6.1.1. the satisfactory outcome of a due diligence of the Portland Group by Wearne of the February 2008 Accounts (“February 2008 Accounts”);
6.1.2. service, confidentiality and restraint agreements for Mr N Heyns, Mr HWP Scholtz, Mr PJ Naudé and Mr C Ramukhubathi (“the key employees”) and confidentiality and restraint agreements for the vendors;
6.1.3. the auditors of the Portland Group expressing an unqualified audit opinion on the Portland Group February 2008 Accounts;
6.1.4. the execution of a shareholders’ agreement between Wearne and the Portland Sand Mines minority shareholders and Phatutshelo (a company in which the entire issued share capital is held by C Ramukhubathi) governing their relationship as shareholders of Portland Sand Mines and Portland Quarry;
6.1.5. the relevant unconditional written consent being obtained from the relevant authorities to the transfer of shares in terms of the Portland acquisition in relation to licences, permits, consents, mineral leases and mining rights; and
6.1.6. compliance with all regulatory obligations to the extent necessary to effect the Portland acquisition, including approval thereof in terms of the Competition Act 89 of 1998.

6.2. Resolutive condition relating to the Portland Agreement:
The Portland Agreement is subject to the resolutive condition that within a period of 90 days after the effective date, the registration of transfer of the property acquired in terms of the Visserhok Agreement into Wearne’s name is affected. If this resolutive condition is not fulfilled, the Portland Agreement shall become of no force and effect. The period for the fulfilment of this resolutive condition may be extended by mutual agreement in writing.

6.3. Conditions precedent relating to the Visserhok Agreement:
The Visserhok Agreement is conditional, inter alia, upon the written consent of the trustees for the time being of the Pluto Trust to the cession, assignment and delegation by Visserhok to Wearne of all of its rights and obligations in terms of the notarial mineral lease or agreement being reached between Visserhok and the trustees for the time being of the Pluto Trust regarding the termination of the notarial mineral lease.

6.4. Warranties and indemnities as are normal in transactions of this nature have been provided in both the Portland Agreement and the Visserhok Agreement.

7. APPOINTMENTS TO THE WEARNE BOARD
Once the transaction becomes unconditional, the Wearne Board of Directors will be strengthened with the appointment of Mr N Heyns (as an executive director) and Mr HWP Scholtz (as a non-executive director) to the Wearne Board.

8. FINANCIAL EFFECTS
The financial effects of the transaction will be released once the Portland Group February 2008 Accounts have been completed.

9. CLASSIFICATION OF THE TRANSACTION
The transaction is classified as a Category 2 transaction in terms of the Listings Requirements of the JSE.

10. FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue exercising caution in dealing in the Company’s securities on the JSE until such time as the financial effects of the transaction are published.

Johannesburg
19 May 2008

Corporate and Designated Adviser
Vunani Corporate Finance

Attorneys
Fluxmans Inc

Login | powered by Ideaworx