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Acquisition of 60% of the ordinary shares in SPAR Holding AG and withdrawal of cautionary announcement
The SPAR Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1967/001572/06)
ISIN: ZAE000058517
Share Code: SPP
(“SPAR” or “the Company”)
DETAILED TERMS OF THE ACQUISITION OF 60% OF THE ORDINARY SHARES IN SPAR HOLDING AG
AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
The Company has concluded an agreement to acquire, subject to the conditions precedent set
out in paragraph 3 below, 60% of the ordinary shares of SPAR Holding AG (“SPAR Switzerland”),
for CHF44.5 million (R690.4 million, all CHF figures translated at an exchange rate of R15.5135 per
CHF at 17:00 on 8 March 2016) (the “Acquisition”) from the existing shareholders of SPAR
Switzerland (the “Sellers”).
2. THE ACQUISITION
2.1. The business of SPAR Switzerland
SPAR Switzerland is the operator and holder of the SPAR licence in Switzerland and has been
a member of SPAR International since 1989. The SPAR Switzerland group supplies a wide
range of food and beverage products to consumers through a combination of:
- 58 company owned SPAR, SPAR Express and convenience stores;
- 247 independent retailer stores trading under the SPAR, SPAR Express and Maxi
brands; and
- 11 company owned Cash & Carry outlets trading under the brand TopCC, the second
largest company in the Swiss cash and carry market, with a total selling area of
44,000m2.
In total, SPAR Switzerland supplies and supports 305 stores across the German-speaking part
of Switzerland. SPAR Switzerland operates a world-class logistics network based at a group-
owned 33,000 m2 centralised warehouse in St Gallen, and also owns two of the cash & carry
buildings.
2.2. Rationale
The Acquisition represents an opportunity for the Company to invest in an established
business in a stable market with growth potential. The Company believes that synergies will
result from the opportunity to share knowledge, technologies, products and best practice
across groups.
Furthermore, the Acquisition will complement the Company’s recently acquired operations
in Ireland and South West England while delivering a more geographically diversified business
portfolio and revenue stream. It will allow the Company to enhance its scale and provides
further foreign currency diversification benefits.
SPAR Switzerland will continue to operate under the current management team led by the
existing chief executive officer of SPAR Switzerland, Stefan Leuthold. Stefan has a long history
with SPAR Switzerland and SPAR International and is well-known to the Company’s
management team.
2.3. The purchase price
The Company and the Sellers have agreed to an aggregate purchase price of CHF100.8 million
(R1 563.8 million) for 100% of the ordinary share capital in SPAR Switzerland.
On the effective date of the Acquisition (which will be 1 April 2016) (the “Effective Date”),
the Company will acquire 60% of the issued ordinary share capital of SPAR Switzerland from
the Sellers for a price of CHF44.5 million (R690.4 million).
The Sellers will retain the remaining 40% of the issued ordinary share capital of SPAR
Switzerland for a period of five years post the Effective Date, following which the Company
will have the option to acquire from the Sellers, and the Sellers will have the option to put to
the Company, the remaining 40% of the issued ordinary share capital of SPAR Switzerland for
CHF56.3 million (R873.4 million).
2.4. Financial effects of the Acquisition
The table below sets out the audited net assets, sales, earnings before interest, tax,
depreciation and amortisation (“EBITDA”) and normalised profit after tax (“Normalised
PAT”) of SPAR Switzerland for the 12 months ended 31 December 2015 (being the date of
the most recent audited financial statements).
SPAR Switzerland selected audited financial results for
the 12 months ended 31 December 2015
CHF (million) ZAR (million)
Net Assets 144.9 2 247.9
Sales 824.3 12 787.8
EBITDA 27.7 429.7
Normalised PAT 7.4 114.8
Notes:
1. All figures are in Swiss GAAP.
2. CHF translated to ZAR at an exchange rate of R15.5135 per CHF, being the exchange rate
at 17:00 on 8 March 2016.
3. Normalised profit after tax is defined as the Swiss GAAP audited profit after tax for SPAR
Switzerland for the 12 months ended 31 December 2015 adjusted for certain agreed non-
recurring extra-ordinary items.
Immediately prior to the implementation of the Acquisition, SPAR Switzerland intends to
distribute a special dividend of CHF40 million (R620.5 million) to the Sellers (the “Special
Dividend”). The Special Dividend will result in a pro forma net asset value for SPAR Switzerland of
CHF104.9 million (R1 627.4 million), if applied to the net asset value at 31 December 2015. The
Company will provide a financial guarantee to secure the CHF40 million loan to SPAR Switzerland
to finance the Special Dividend.
3. CONDITIONS PRECEDENT TO THE ACQUISITION
The Acquisition is subject to the approval of a loan to SPAR Switzerland to finance the Special
Dividend and confirmation of the existing banking facilities available to SPAR Switzerland. In
management’s view, the conditions precedent to the Acquisition will be satisfied by the Effective
Date.
Shareholders are advised that the approval of the Exchange Control Department of the South
African Reserve Bank has been obtained for the Acquisition.
The Company will release a further announcement on SENS once all the conditions precedent to
the Acquisition are fulfilled.
4. NOTICE OF EXTRAORDINARY GENERAL MEETING
The Company continuously evaluates the optimal capital structure for the business as well as
value-enhancing opportunities.
In August 2014, SPAR utilised its balance sheet capacity to acquire 80% of TIL JV Ltd, the holding
company of the BWG group of companies, for EUR55 million (R799 million at an exchange rate of
R14.5 per Euro). In addition, the Company will utilise existing financial resources to fund the
Acquisition.
Shareholders are referred to the notice of extraordinary general meeting posted on 24 February
2016, which convenes an extraordinary general meeting on 24 March 2016 at 10:00 at the
Company’s offices. At the extraordinary general meeting, Shareholders will be requested to vote
on an ordinary resolution to give management the general authority to issue up to 14 000 000
new ordinary shares for cash (8.1% of issued shares, excluding treasury shares).
The passing of the proposed ordinary resolution will provide management with the tools to
optimally manage the business, its capital structure and create capacity for potential future
acquisitions.
5. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are advised that as a result of the publication of this announcement, the cautionary
announcement released on 24 February 2016 is hereby withdrawn and that caution is no longer
required to be exercised by Shareholders when dealing in their SPAR shares.
Pinetown
9 March 2016
Merchant bank
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Sponsor
One Capital
Date: 09/03/2016 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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