Shareholders are referred to the cautionary announcement dated 25 July 2016, in terms of which shareholders were advised that Consolidated Infrastructure Group Ltd. is currently engaged in negotiations regarding a new acquisition. The board of directors of CIG (the “Board”) is pleased to announce it has concluded an agreement (“Purchase Agreement”) with the shareholders of Conlog (Pty) Ltd. (“Conlog”) to acquire the entire issued share capital of Conlog (the “Proposed Acquisition”), a manufacturer and distributor of prepaid electricity solutions.
Purchase consideration of the Proposed Acquisition
The purchase consideration for the Proposed Acquisition comprises an initial payment of R700 000 000 (“Initial Payment”) payable on closing, together with deferred consideration with an earn-out component of between R50 000 000 (“Guaranteed Deferred Payment”) and R150 000 000, depending on Conlog’s 2016 adjusted earnings before tax, depreciation and amortization (“EBITDA”), and a closing net cash and working capital adjustment. Conlog’s adjusted EBITDA is calculated on the basis of eliminating the impact of inter-company transactions, cost reallocations and one-off variations on the company’s reported EBITDA. The Initial Payment and the Guaranteed Deferred Payment will be funded by CIG using the proceeds of the claw-back rights offer, the details of which are set out in paragraph 3 below. To the extent it becomes payable, any purchase consideration in excess of the Initial Payment and the Guaranteed Deferred Payment will be funded using CIG’s internal cash and / or borrowing facilities.
Suspensive conditions to the Proposed Acquisition
The Purchase Agreement is subject to the following suspensive conditions:
– approval of the Proposed Acquisition by the Competition Authorities of South Africa and other jurisdictions where required by law;
– all exchange control approvals which are legally required for the implementation of the Proposed Acquisition from the South African Reserve Bank being duly obtained;
– on or before 30 November 2016, shareholders placing sufficient CIG shares under the control of the directors of CIG for the purposes of giving effect to a R750 000 000 claw-back rights offer (“Claw-back Rights Offer”) ; and
– on or before 30 November 2016, all conditions precedent to the underwriting agreement as set out in paragraph 3.2 being fulfilled.
The effective date (which will coincide with the closing date) of the Proposed Acquisition will be determined by reference to the date on which the last of the suspensive conditions to the Purchase Agreement is fulfilled:
– should the last of the suspensive conditions to the Purchase Agreement be fulfilled on or before the 23rd of a month, the effective date will be the last business day of that calendar month; or
– should the suspensive conditions to the Purchase Agreement take place after the 23rd of a month, the effective date will be the 7th business day of the calendar month following the month in which the last of the suspensive conditions to the Purchase Agreement was fulfilled; or
– such other date as the shareholders of Conlog and CIG may agree in writing.
Proposed claw-back rights offer
In order to raise the R750,000,000 purchase consideration payable in respect of the Initial Payment and the Guaranteed Deferred Payment, CIG intends to undertake the Claw-back Rights Offer which will only be implemented following the fulfillment of the last of the suspensive conditions to the Purchase Agreement. CIG has entered into underwriting agreements with Investec Bank Ltd. (“Investec”) and Pinecourt Advisors Ltd. (“Pinecourt”) to underwrite R500 000 000 and R250 000 000 respectively of the Claw-back Rights Offer.
Conditions precedent to the Claw-back Rights Offer
The implementation of the Claw-back Rights Offer is subject to the fulfillment of the following conditions precedent including, inter alia:
– on or before 30 November 2016, the Purchase Agreement becoming unconditional, save for any condition that the underwrite agreement becomes unconditional;
– Investec confirming that it is satisfied that all regulatory approvals, including but not Ltd. to the South African Reserve Bank and the JSE Ltd. have been obtained;
– the requisite majority of CIG shareholders placing a sufficient number of CIG shares under the control of the directors of CIG for the purpose of the Claw-back Rights Offer; and
– no material adverse effect or force majeure event occurring prior to the declaration announcement date of the Claw-back Rights Offer.
A notice of general meeting tabling the resolutions required to place sufficient shares under the control of the CIG directors will be posted to shareholders as soon as practicable following this announcement.