AVENG LIMITED - Category 2 transaction announcement: Disposal of Aveng Water


AEG 201901180001A<br/>
Category 2 transaction announcement: Disposal of Aveng Water<br/>
(Incorporated in the Republic of South Africa)<br/>
(Registration number: 1944/018119/06)<br/>
ISIN: ZAE000111829<br/>
("Aveng" or "the Group")<br/>
Background and rationale<br/>
In February 2018, Aveng Limited ("Aveng" or the "Group") announced the results of its strategic<br/>
review ("Strategic Review"). The outcome of the review was the adoption by Aveng of a new and<br/>
focused strategy to be an international infrastructure and resources group operating in selected<br/>
markets and capitalising on its considerable knowledge and experience. As part of this Strategic<br/>
Review, the Group announced that it intends to dispose of certain non-core assets and properties.<br/>
Aveng Water Proprietary Limited and the Aveng Namibia Water business (together "Aveng Water")<br/>
was identified as one of these non-core assets.<br/>
Aveng has entered into a sale and purchase agreement ("SPA") with Cambrose 735 Proprietary<br/>
Limited, a special purpose vehicle incorporated as a private company ("Infinity Partners"), for the<br/>
sale of the shares in Aveng Water Proprietary Limited and the Aveng Namibia Water business<br/>
("Proposed Transaction").<br/>
Infinity Partners is a 100% Black-owned company jointly held by E-Squared Investments Proprietary<br/>
Limited ("E-Squared") and Suzie Nkambule, the current managing director of Aveng Water who has<br/>
led the successful turnaround of the business for the past 3 years. Suzie Nkambule is a Fellow of the<br/>
Allan Gray Orbis Foundation and will lead the business as it builds on its strategy and capabilities to<br/>
become a leading water infrastructure development and technology company operating across sub-<br/>
Saharan Africa.<br/>
E-Squared is a large impact investor whose vision is of an economically sustainable and inclusive<br/>
South Africa. E-Squared invests in high-impact businesses driven by the Allan Gray Orbis Foundation<br/>
Fellows who have entrepreneurial ambition and who seek to make meaningful<br/>
transformation possible in the South African economy. Investing in Infinity Partners is aligned to E-<br/>
Squared's mission to empower responsible entrepreneurs to become the catalysts for economic<br/>
development, transformation and social upliftment in South Africa.<br/>
This sale is another important step in the delivery of Aveng's Strategic Action Plan and in the<br/>
refocussing of Aveng to become an international infrastructure and resources group. The Proposed<br/>
Transaction addresses the retention of all existing jobs, surety for the continuation of existing<br/>
clients' contracts, and sustainability to ensure the business remains successful well into the future.<br/>
Particulars of the Proposed Transaction<br/>
Aveng will sell the shares in Aveng Water and the transaction will be structured as follows:<br/>
(i) Sale of 100% of the issued shares of Aveng Water Proprietary Limited; and<br/>
(ii) Sale of the assets and liabilities and the business of the Aveng Namibia Water from Aveng<br/>
The fully-funded net transaction consideration is R95 million and will be settled in cash on a debt<br/>
free basis.<br/>
The proceeds from the sale will be used to strengthen the financial position of the Group and will be<br/>
applied as working capital to the remainder of the Grinaker-LTA business as previously agreed with<br/>
the Group's South African Lenders in the Common Terms Agreement.<br/>
The transaction is expected to close by the end of the first calendar quarter of 2019.<br/>
Conditions precedent<br/>
The Proposed Transaction is subject to a number of conditions precedent, including:<br/>
(i) Satisfactory completion of due diligence;<br/>
(ii) Entering into a license agreement in terms of which Aveng Water retains the right to use the<br/>
‘Aveng Water' brand and all other related brands for a period of six calendar months after the<br/>
Effective Date;<br/>
(iii) To the extent legally required, the Proposed Transaction is approved by the Competition<br/>
Authorities in all applicable jurisdictions;<br/>
(iv) To the extent required, approval of the Proposed Transaction by financiers who are party to the<br/>
Common Terms Agreement concluded with Aveng Limited on 25 February 2018 and most recently<br/>
amended on 13 September 2018;<br/>
(v) any other required regulatory approvals in respect of the final agreements and the Proposed<br/>
Transaction; and<br/>
(vi) any third-party consents that may be required for the implementation of the Proposed<br/>
Transaction to the satisfaction of the Aveng.<br/>
The SPA incudes representations and warranties that are normally associated with a transaction of<br/>
this nature.<br/>
About Aveng Water<br/>
Aveng Water is a leading water treatment process engineering and project delivery business with a<br/>
broad service offering from project development to long term operations and maintenance. The<br/>
business has a core capability well ahead of its South African peers in mine-impacted water<br/>
treatment technology and sea water desalination in Southern Africa. It is well positioned in the<br/>
water sector for both public and private water and wastewater reuse developments with strong<br/>
international and local partners to meaningfully participate in the delivery of the South African water<br/>
and sanitation infrastructure backlog.<br/>
Aveng Water was reclassified and reported as Held for Sale in the annual financial statements for the<br/>
year ended 30 June 2018. As part of this reclassification, the basis of valuation was changed to fair<br/>
value less cost to sell. The net asset value of the business unit amounted to negative R29 million.<br/>
The Group reported a profit after taxation of R63 million for the year end 30 June 2018 relating to<br/>
Aveng Water.<br/>
The historical financial information for Aveng Water was prepared in accordance with International<br/>
Financial Reporting Standards.<br/>
This information has not been reviewed or reported on by the Group's external auditors.<br/>
The Proposed Transaction is categorised as a Category 2 transaction in terms of the JSE Listings<br/>
Requirements and accordingly no shareholder approval is required.<br/>
Jet Park<br/>
18 January 2019<br/>
JSE Sponsor<br/>
UBS South Africa Proprietary Limited<br/>
Legal advisors<br/>
Baker & McKenzie<br/>
Michael Canterbury<br/>
Group Executive: Strategy & Investor Relations<br/>
Tel: 011 779 2979<br/>
Email: michael.canterbury@avenggroup.com<br/>
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