GRAND PARADE INVESTMENTS LIMITED (Incorporated in the Republic of South Africa) (Registration Number 1997/003548/06) Share code: GPL ISIN: ZAE000119814 ( GPI or the Company ) SMALL RELATED PARTY TRANSACTION: ACQUISITION BY GPI OF A FURTHER 42.79% OF THE ISSUED ORDINARY SHARE CAPITAL OF MAC BROTHERS CATERING EQUIPMENT (PROPRIETARY) LIMITED ( MAC BROTHERS ) 1. THE ACQUISITION Shareholders are hereby advised that GPI has entered into a sale of shares agreement dated 16 May 2014 ( the Agreement ) with, inter alia, Ranmac Management and Holdings (Proprietary) Limited, Nadesons Investments (Proprietary) Limited ( Nadesons Investments ), Razia Khan and Ivanhoe Nigel Burns (collectively referred to as the Sellers ), in terms of which the Sellers have agreed to sell 42.79% of the total issued ordinary share capital of Mac Brothers ( the Sale Shares ) to the Company ( the Acquisition ). Following the implementation of the Acquisition, GPI s total interest in Mac Brothers will be 65.00%. 2. DETAILS OF THE BUSINESS OF MAC BROTHERS Mac Brothers was established in 2002 and has grown to become one of the largest catering equipment manufacturers in South Africa and one of the leading suppliers of catering equipment and related services to the food service industry in Africa. Mac Brothers manufactures and supplies its own extensive range of stainless steel catering and refrigeration equipment and has well established agency agreements in place to import, supply and service some of the top international brands of food service equipment. In some cases, certain international brands are manufactured under licence in their factory taking advantage of an abundance of local stainless steel and well trained local artisans and engineers. They have a well-established and varied client base supplying from the local corner coffee shop, bakery or restaurant through to franchise groups, hotel groups, golf and wine estates, staff canteen feeding organisations, prisons, hospitals, mines and a large number of South Africa's finest world renowned restaurants. Mac Brothers is also a patron sponsor of the
South African Chefs Association and part of their program to inspire, train and promote up and coming chefs to the industry. The fabrication factory and head office is located in Cape Town, with branches in Johannesburg, Durban and Harare. It also has an extensive dealer network throughout Africa including Namibia, Mozambique, Tanzania, Kenya, Zambia, Botswana, Congo, Nigeria, Ghana, Uganda, Angola, Seychelles and Mauritius. 3. RATIONALE FOR THE ACQUISITION Mac Brothers is an established and professional business that has proved its operational capabilities over a number of years, some of which have been during difficult financial periods that have seen a number of industry players closing down. The technical capabilities of Mac Brothers ensure that it is uniquely placed to gain market share in a large and growing industry both locally and throughout the African continent. Mac Brothers has been approved by BURGER KING Corporation to manufacture and supply certain kitchen equipment for BURGER KING Restaurants through-out Africa. The kitchen equipment required in a BURGER KING Restaurant represents, on average, one third of a BURGER KING Restaurant set-up cost, therefore the Acquisition will allow GPI to reduce the BURGER KING set-up costs. As a result of the approval received from BURGER KING Corporation, Mac Brothers is able to supply kitchen and catering equipment to any BURGER KING Restaurant in Africa and GPI, through its relationship with BURGER KING Corporation will look for further opportunities to supply and export equipment to other BURGER KING franchises around the world. Roughly 18% of Mac Brothers sales are made outside of South Africa and accordingly, the Acquisition will give GPI exposure to African markets, which are expected to grow at a higher rate than South Africa and the rest of the developed world. This exposure will assist GPI in expanding the Burger King franchise into Africa. In addition, GPI has embarked on becoming the first local manufacturer of slot machines and other gaming equipment. A large portion of the components of a slot machine are stainless steel, which Mac Brothers can manufacturer. The Acquisition will further reduce GPI s overall cost of manufacturing the slot machines.
4. SMALL RELATED PARTY TRANSACTION 4.1 Due to the fact that one of the Sellers, being Nadesons Investments, is an associate of Mr Hassen Adams and Mr Alan Keet, both directors of GPI, the Acquisition is deemed to be a related party transaction in terms of section 10 of the Listings Requirements of the JSE Limited ( JSE ). 4.2 However, as the Acquisition amounts to less than 5% of the market capitalisation of GPI as at 30 April 2014, the Acquisition is classified as a small related party transaction in terms of paragraph 10.7 of the Listings Requirements of the JSE and written confirmation is required from an independent expert confirming the fairness of the terms of the Acquisition in relation to GPI shareholders. 4.3 Accordingly, GPI has appointed Mazars Corporate Finance (Proprietary) Limited ( Mazars ) as the independent expert and Mazars has provided written confirmation to the JSE that the terms of the Acquisition are fair in relation to GPI shareholders. The fairness opinion will lie open for inspection at the registered office of GPI for a period of 28 days from the date of publication of this announcement. 4.4 This announcement is made for information purposes only and no action is required by GPI shareholders with regards to the Acquisition. 5. PURCHASE CONSIDERATION The total consideration payable by the Company to the Sellers for the purchase of the Sale Shares is the sum of R 42 790 300 and shall be payable to the Sellers, in cash, in proportion to the number of Sale Shares being sold by each Seller, provided that the amount payable to each Seller shall be reduced by way of set-off against any amount which that Seller owes to Mac Brothers under any loan received from Mac Brothers. 6. CONDITIONS PRECEDENT 6.1. The Acquisition is subject to the fulfillment of the following outstanding conditions precedent, that: 6.1.1. by no later than 23 July 2014, the parties to the Agreement ( the Parties ) comply, to the extent necessary in law, with the Listings Requirements of the JSE Limited and the Competition Act, 1998; and
6.1.2. by no later than 30 May 2014, the unconditional approval, exemption and/or compliance certificate which might be required from the Takeover Regulation Panel for the purchase and sale of the Sale Shares shall have been obtained. 7. OTHER SIGNIFICANT TERMS OF THE AGREEMENT The Agreement provides for warranties and indemnities that are normal for a transaction of this nature. 8. PRO FORMA FINANCIAL EFFECTS The pro forma financial effects of the Acquisition are presented for illustrative purposes only and because of their nature may not give a fair reflection of the Company s financial position nor of the effect on future earnings after the Acquisition. Set out below are the unaudited pro forma financial effects of the Acquisition, based on the unaudited interim results for the period ended 31 December 2013. The directors of GPI are responsible for the preparation of the unaudited pro forma financial information. Basic earnings per share Basic headline earnings per share Net asset value per share Net tangible asset value per share Unaudited before the Acquisition (cents) Unaudited Pro Forma after the Acquisition (cents) Change (%) 26.21 26.74 2.0% 13.95 14.49 3.9% 369.00 376.00 2.0% 315.00 312.00 (0.7%) Notes and assumptions: 1. The basic earnings per share and basic headline earnings per share figures in the Pro Forma after the Acquisition column have been calculated on the basis that the Acquisition was effected on 1 July 2013. 2. The net asset value per share and net tangible asset value per share figures in the Pro forma after the
Acquisition column have been calculated on the basis that the Acquisition was effected on 31 December 2013. 3. The taxation rate applicable is assumed to be 28%. 4. The basic earnings per share and basic headline earnings per share figures are calculated based on weighted average number of shares in issue of 461.4 million at 31 December 2014. 5. The net asset value per share and net tangible asset value per share have been calculated based on 469.6 million shares in issue at 31 December 2014. 6. The results of Mac Brothers have been extracted from the statement of financial position and the statement of comprehensive income included in their management accounts for the 6 month period ended 31 December 2013, without adjustment. 7. GPI management has undertaken a preliminary purchase price allocation to determine the recognition and classification of the excess of the purchase price paid in the Acquisition over the identifiable net assets acquired. Accordingly based on the preliminary purchase price allocation an amount of R45.6 million is accounted for as goodwill. 8. The total purchase consideration for the Acquisition is assumed to be R42.8 million, being funded from GPI's cash reserves at an interest rate of 5.16% per annum, being the tax free rate of 57.38% of the prime interest rate applicable to preference share funding. 9. All adjustments, are expected to have a continuing effect. 9. EFFECTIVE DATE OF THE ACQUISITION In terms of the Agreement, the effective date of the Acquisition is 1 January 2014. 10. SUBSIDIARY COMPANY As a result of the Acquisition, Mac Brothers will become a subsidiary company of GPI and GPI shall ensure that the memorandum of incorporation of Mac Brothers ( MOI ) will not frustrate GPI in any way from compliance with its obligation in terms of the Listings Requirements of the JSE and nothing contained in the MOI shall relieve GPI from compliance with the Listings Requirements.
Cape Town 19 May 2014 Sponsor and corporate advisor: PSG Capital Lead corporate advisor: Leaf Capital Legal advisor: Bernadt Vukic Potash & Getz Independent expert: Mazars Corporate Finance (Proprietary) Limited Independent Reporting Accountants and Auditors: Ernst & Young Incorporated