Basil Read Holdings : 23-10-2012 – Disposal of TWP Holdings

Basil Read Holdings Limited
(Incorporated in the Republic of South Africa)
Registration Number 1984/007758/06
Share Code: BSR ISIN: ZAE000029781
("Basil Read" or the "Company" or the "Group")
WORLEYPARSONS LIMITED TO ACQUIRE 100% OF TWP HOLDINGS (PTY) LIMITED FROM BASIL READ
Highlights:
- WorleyParsons Limited to acquire Basil Read's engineering, procurement and contract management (EPCM) business for a total cash consideration of ZAR900 million (c.A$100.5* million)
- Acquisition of TWP Holdings (Pty) Limited excludes Basil Read Matomo Projects (Pty) Limited and TWP Matomo Process Plant (Pty) Limited which conduct the Basil Read Matomo business as well as TWP
Investments (Pty) Limited and LYT Architecture (Pty) Limited
(previously TPSP Architects (Pty) Limited)
- Basil Read's strategy to focus on the growth of its engineering procurement and construction (EPC) business through Basil Read Matomo
and special projects unchanged
- Cash consideration will be applied towards, amongst others, a reduction of debt, organic growth and capital management initiatives
Marius Heyns, chief executive officer of Basil Read commented: "We are pleased to announce the acquisition of TWP by WorleyParsons. We believe the transaction creates value for our shareholders and fits perfectly into our evolving strategy of an increased focus on our EPC business."
Mr Heyns added, "We will be able to concentrate on our core business with increased emphasis on our special projects. In addition, we will focus on positioning Basil Read for organic growth, reduce our debt levels, and have sufficient cash reserves to start positioning for the planned local infrastructure role out which we believe will build momentum during 2013."
1. INTRODUCTION
Johannesburg - 23 October 2012. Basil Read (JSE:BSR) is pleased to announce that the Company has entered into a sale of shares agreement ("Sale Agreement") dated 23 October 2012 ("Signature Date") with WorleyParsons Limited ("WorleyParsons") whereby WorleyParsons RSA Group (Pty) Limited ("WorleyParsons SA"), a wholly-owned subsidiary of WorleyParsons, will acquire the entire issued share capital held by Basil Read in TWP Holdings (Pty) Limited ("TWP"), for a cash consideration of ZAR900 million (c.A$100.5* million) (the "Purchase Consideration"), hereinafter the "Proposed Transaction".
The Proposed Transaction excludes, amongst others, Basil Read Matomo Projects (Pty) Limited, TWP Matomo Process Plant (Pty) Limited (together "Basil Read Matomo"), TWP Investments (Pty) Limited and LYT Architecture (Pty) Limited (previously TPSP Architects (Pty) Limited), together the
"Excluded Companies". The Excluded Companies will continue to operate as wholly-owned subsidiaries of Basil Read, on a standalone basis within the Group.
2. RATIONALE FOR THE PROPOSED TRANSACTION AND USE OF PROCEEDS
Basil Read regularly reviews its portfolio of businesses with respect to their competitive position and growth prospects. The Company has been exploring ways to enable the further growth of TWP. Given the standing of WorleyParsons in global markets, and the Purchase Consideration, the board of directors of Basil Read (the "Board") considered it to be in the best interest of its shareholders to enter into the Sale Agreement.
In line with its strategy, Basil Read will maintain its growth into EPC services through its continued ownership of Basil Read Matomo. Basil Read therefore intends growing the Group's existing focus areas, namely construction and contract mining, into sectors that will include energy and renewables.
Basil Read intends applying the Purchase Consideration towards, amongst others:
- the reduction of Group debt;
- focussing on organic growth (acquisitive growth opportunities will also be evaluated where appropriate); and
- capital management initiates.
3. BACKGROUND TO THE PARTIES
3.1 Background to Basil Read
Basil Read is a JSE Limited ("JSE")-listed company and a leader in the South African construction sector. It has a proven track record in offering best-in-class design solutions and the most cost effective construction techniques. Its subsidiary companies are active in the areas of civil engineering, road construction, building, mixed integrated housing developments, property development, bitumen distribution, opencast mining, blasting operations and engineering design, procurement and construction management. The Group operates throughout Africa, Australia and South America.
3.2 Background to TWP
TWP, a wholly-owned subsidiary of Basil Read, is a highly capable resource- focused engineering project management entity providing a full range of engineering, and project management solutions to the mining and minerals industries, and the construction environment. TWP has offices in South Africa, Australia and Peru.
3.3 Background to WorleyParsons
Australian incorporated and ASX Limited ("ASX") listed WorleyParsons is a leading provider of professional services to the energy, resources and complex process industries. WorleyParsons's business has been built by working closely with customers through long-term relationships, anticipating their needs and delivering inventive solutions through
streamlined, proprietary project delivery systems. With 40,800 employees in
163 offices in 41 countries, including seven offices in South Africa, its
service capability covers the entire project lifecycle: from identifying the opportunity to the operating phase. WorleyParsons has a market capitalisation greater than A$6.5 billion, and makes up about 0.55% of the S&P/ASX 200 index.
4. CONSTITUTION OF SPECIAL COMMITTEE OF THE BOARD
A special committee of the Board comprising the independent directors of the Board, being Messrs S L L Peteni (Chairman) and C P Davies (the "Special Committee"), has been tasked with considering the terms and conditions of the Proposed Transaction.
Though not required under relevant regulations, the Special Committee appointed Mazars Corporate Finance (Pty) Limited as its independent expert ("Independent Expert") to provide it with its opinion whether the terms and conditions of the Proposed Transaction are fair and reasonable to Basil Read shareholders.
The Independent Expert has considered the terms and conditions of the Proposed Transaction, and has expressed an opinion to the Special Committee, based on the assumptions and other considerations set out in its opinion.
The Special Committee has reviewed the opinion received from the Independent Expert, and based on the positive view expressed in that opinion, has recommended to the Board that the Board call for a meeting of shareholders of the Company for the shareholders vote on the Proposed Transaction. The Board recommends that shareholders vote in favour of the Proposed Transaction in the absence of a superior offer.
5. THE PROPOSED TRANSACTION

implementation date, being the second business day after the fulfilment
(or, if permitted, waiver) of the last of the conditions precedent set out in paragraph 6 below ("Implementation Date"). Under the terms of the Sale Agreement the Excluded Companies will have been transferred out of TWP and back into Basil Read prior to the Implementation Date ("Restructure").
The warranties and indemnities included in the Sale Agreement are common for a transaction of this nature.
5.1.2 Key Employees and Employment Agreements
WorleyParsons has identified Nigel Townshend (TWP Chairman), Digby Glover (TWP Managing Director), Murray MacNab (TWP Executive Director) and Hector Padres (TWP SúdAmerica Managing Director) as key employees in the TWP business, each of whom will be required to conclude addenda to their
existing employment agreements ("Employment Agreement Addenda") to include, amongst others, a restraint of trade provision for a 12 month period in the event of a resignation within two years of the effective date of the relevant Employment Agreement Addenda.
5.1.3 Matomo service agreement and restraint of trade
The Sale Agreement makes provision for TWP executives currently seconded to Matomo to complete these projects on arms-length terms ("Matomo Service Agreement"). The agreement also specifically allows for Matomo to provide EPCM services within the scope of its existing activities, provided any such services, amongst others, does not exceed a fee threshold of ZAR100 million, for a period of 36 months from the Implementation Date.
5.1.4 Mutual non-solicitation
Under the terms of the Sale Agreement both parties agree not to solicit, entice or make any offers of employment to any employee of the other party for a period of 36 months.
5.2 Effective date of the Proposed Transaction
The effective date of the Proposed Transaction is 1 January 2013 (the
"Effective Date").
5.3 Purchase Consideration
The Purchase Consideration is payable in cash by WorleyParsons SA (guaranteed by WorleyParsons) on the Implementation Date, as follows:
- The Purchase Consideration will bear interest from (and including) the Effective Date to (but excluding) the date of payment thereof at the ZAR overnight call rate.
- If on the Implementation Date:
o the net debt of TWP (as defined in the Sale Agreement) is more or less than ZAR0 (zero), then the Purchase Consideration will be adjusted up or down (as the case may be) by an amount equal to
such net debt;
o the working capital of TWP (as defined in the Sale Agreement) is more or less than the working capital agreed amount of TWP (as
defined in the Sale Agreement) then the Purchase Consideration will be adjusted up or down (as the case may be) by an amount equal to such difference. The Sale Agreement further provides that if the aforesaid working capital agreed amount is less than ZAR175 million, the working capital agreed amount will be ZAR175 million, and in the event that the working capital agreed amount is greater than R187.5 million, the working capital agreed amount will be ZAR187.5 million.
6. CONDITIONS PRECEDENT RELATING TO THE PROPOSED TRANSACTION
The implementation of the Proposed Transaction is subject to the fulfilment of a number of conditions precedent common to a transaction of this nature including, amongst others: