ALERT STEEL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2003/005144/06)
JSE code: AET
ISIN: ZAE000092847
(“Alert” or “the company”)
ACQUISITION OF SHARES IN AND CLAIMS AGAINST ALERT STEEL NORTHWEST AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the cautionary announcements, of which the last was dated 4 August 2011, and are advised that Alert has entered into an agreement (“the Alert Steel Northwest Acquisition”) with Alert Steel Northwest (Pty) Limited (“Alert Steel Northwest”), Capital Africa Steel (Pty) Limited (“Capital Africa Steel”) and the JC Family Trust, in terms of which Alert will acquire from Capital Africa Steel and the JC Family Trust all of the shares in Alert Steel Northwest (“Alert Steel Northwest Sale Shares”), and from Capital Africa Steel all of the claims on loan account held by Capital Africa Steel against Alert Steel Northwest (Alert Steel Northwest Sale Claim”).
References below to the:
“Alert NAV Per Share” as at any particular date means, subject to the proviso below, an amount calculated by dividing the net asset value of Alert (excluding inter alia the net asset value of Alert Steel North West, any shareholder loans and any loans outstanding, including interest thereon, to Capital Africa Steel, that arose through the implementation of the Alert Steel North West Acquisition) as at such date by the number of issued ordinary shares in Alert as at such date, provided that the Alert NAV Per Share shall never be less than 3,3 cents per share;
“Alert Steel Northwest Closing Date” means the first business day following the day on which all of the suspensive conditions as set out in paragraph 5 have been fulfilled or waived;
“Alert Steel Northwest Conversion Period” means the period commencing on the second anniversary of the Alert Steel North West Closing Date and ending on the third anniversary of the Alert Steel North West Closing Date; and
“Alert Steel Northwest Conversion Date” means any date falling within the Alert Steel North West Conversion Period selected in writing by Alert and notified by Alert to the Alert Steel North West Sellers prior to the end of the Alert Steel North West Conversion Period, provided that, in the event that no such notification is received by the Alert Steel North West Sellers prior to the end of the Alert Steel North West Conversion Period, the Alert Steel North West Conversion Date shall be deemed to be the third anniversary of the Alert Steel North West Closing Date; and
“Alert Steel Northwest Sellers” means Capital Africa Steel and the JC Family Trust.
2. BACKGROUND AND RATIONALE
Traditionally, Alert operated as a large retailer of prime steel, building materials, plumbing and hardware products. Alert is however in the process of returning to its core business which is the selling and supplying of steel and steel related products and services. Alert Steel Northwest is a retailer of steel. The location of the branches within Alert Steel Northwest enables Alert to expand to Rustenburg, Mafikeng and other rural areas, in the North West province, which have been identified by Alert as a strong growth area through branch networking and the container concept. The branches in the North West province will be utilised as a distribution network for Alert to expand further into the Northern Cape.
3. EFFECTIVE DATE
The effective date of the Alert Steel Northwest Acquisition will be the Alert Steel Northwest Closing Date.
4. CONSIDERATION
4.1 Alert will acquire the Alert Steel Northwest Sale Shares on the Alert Steel Northwest Closing Date for a purchase price equal to R100 plus a further amount equal to the net asset value of Alert Steel Northwest (excluding any shareholder loans or interest accrued thereon) as at the Alert Steel Northwest Conversion Date.
4.2 Alert will acquire the Alert Steel Northwest Sale Claims on the Alert Steel Northwest Closing Date for a purchase price equal to the face value of the Alert Steel Northwest Sale Claims.
4.3 On the Alert Steel Northwest Closing Date, Alert shall discharge the purchase consideration for the Alert Steel Northwest Sale Claims on loan account by creating a loan account in favour of Capital Africa Steel (“the Capital Africa Steel Loan Claim”) with a value equal to the face value of the Alert Steel Northwest Sale Claims as at the Alert Steel Northwest Closing Date. The Capital Africa Steel Loan Claim will accrue interest at prime plus 2% from the Alert Steel Northwest Closing Date to the Alert Steel Northwest Conversion Date.
4.4 On the Alert Steel Northwest Conversion Date, Alert will: convert the Capital Africa Steel Loan Claim to shares in Alert, by issuing to Capital Africa Steel such number of shares in Alert as have an aggregate subscription price (at the Alert NAV Per Share) equal to all amounts outstanding to Capital Africa Steel in respect of the Capital Africa Steel Loan Claim as at the Alert Steel Northwest Conversion Date (including accrued interest thereon); and discharge the further amounts owing to the Alert Steel North West Sellers in respect of the Alert Steel Northwest Sale Shares (as contemplated in paragraph 4.1 above) as at the Alert Steel Northwest Conversion Date owing by issuing to the Alert Steel Northwest Sellers such number of shares in Alert as have an aggregate subscription price (at the Alert NAV Per Share).
5. SUSPENSIVE CONDITIONS
The Alert Steel Northwest Acquisition is subject to all regulatory approvals having been obtained, including specifically any approvals required in terms of the Companies Act, the Competition Act and the JSE Listings Requirements.
6. CATEGORISATION OF THE ALERT STEEL NORTHWEST ACQUISITION AND CIRCULAR TO SHAREHOLDERS
The Alert Steel Northwest Acquisition is categorised, in terms of the JSE Listings Requirements, as a related party transaction. Accordingly, shareholders’ approval of the transaction and an independent opinion relating to the fairness thereof is required in terms of the JSE Listings Requirements.
7. CESSION OF SHARES
Alert has undertaken that, with effect from the Alert Steel Northwest Closing Date, it shall cede in securitatem debiti (and not as an “out-and-out” cession) to Capital Africa Steel, all of Alert’s rights, title and interests in and to the Alert Steel Northwest Sale Shares, and pledge the Alert Steel Northwest Sale Shares to Capital Africa Steel, as a continuing general covering security, for the due and punctual performance of all obligations and the due and punctual payment of all sums of money, which may at any time be or become owing by Alert to Capital Africa Steel in terms of the Alert Steel Northwest Acquisition.
8. PRO FORMA FINANCIAL EFFECTS OF THE ALERT STEEL NORTHWEST ACQUISITION
Shareholders are referred to the announcements dated 8 February 2011 and 31 March 2011 in which the disposal of the Klerksdorp, Lichtenburg and Randfontein branches (“the Subject Businesses”) to Alert Steel Northwest and the restructuring of Alert were detailed respectively. The Alert Steel Northwest Acquisition will not have any material financial effect on Alert as at 30 December 2010 (which is the date of the last published financial results), as: the Subject Businesses Disposal had no effect prior to or on 31 December 2010; and in terms of the Alert Steel North West Acquisition Alert will acquire the Alert Steel Northwest Sale Shares and the Alert Steel Northwest Sale Claims, and accordingly the Subject Businesses (now held by Alert Steel Northwest) will again form part of the Alert group of companies.
9. FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue exercising caution in dealing in the company`s securities as negotiations are still in progress, which if successfully concluded, may have a material effect on the price of the company’s securities.
Pretoria
18 August 2011
Designated Adviser
Vunani Corporate Finance
