Announcement of the proposed sale by DAWN of it's 49% interest in Grohe Dawn
Watertech Holdings Proprietary Limited (GDW) and withdrawal of cautionary
Shareholders are referred to the cautionary announcements dated 11 July 2017 and 23 August 2017.
DAWN is pleased to announce the conclusion of a share purchase agreement ("Share Purchase
Agreement") and ancillary transaction agreements ("Transaction Agreements") on Thursday, 14
September 2017, with LIXIL Corporation ("LIXIL"), the 51% controlling shareholder of GDW. Under the
terms of the Share Purchase Agreement, LIXIL will acquire the remaining 49% of the issued ordinary
shares in GDW held by DAWN ("the GDW Shares") and GDW will repay DAWN's shareholder loan
claim against GDW (collectively "the Transaction"), pursuant to which DAWN will receive an aggregate
consideration of R324.5 million ("the Transaction Proceeds").
In accordance with the Transaction Agreements, DAWN is pleased to note that, in pursuit of its
turnaround strategic initiatives for its core operations, it will remain the master distributor for the GDW
product range in southern Africa through distribution and service agreements.
2. GDW overview
GDW is an investment holding company of the Watertech Companies engaged in the manufacture and
supply of taps, mixers, sanitary ware and related plumbing accessories.
The GDW group manages a portfolio of well-known brands, including Libra Bathrooms, Plexicor, Apex
Valves, Cobra Water Technology, Vaal Ceramics, Grohe and ISCA.
The GDW group includes the following subsidiaries which are collectively referred to as "the Watertech
. Grohe Dawn Fitting Division Proprietary Limited;
. Libra Bathrooms Proprietary Limited;
. Vaal Sanitaryware Proprietary Limited; and
. Apex Valves South Africa Proprietary Limited.
3. Rationale for the Transaction
In accordance with the turnaround strategic initiatives, management and the board of directors of
DAWN ("the Board") deemed DAWN's non-controlling interest in GDW as non-core as:
. GDW is independently managed by LIXIL; and
. GDW's capital investment program to modernise plant and equipment and product designs would
require shareholders to contribute additional cash resources.
In this context, DAWN management and the Board believe that DAWN's cash resources would be
better utilised through the allocation of the Transaction Proceeds to DAWN's core South African
operations. This view is augmented by GDW having entered into the Transaction Agreements, including
the master distributor arrangements, with DAWN and its two wholly owned subsidiaries, Wholesale
Housing Supplies Proprietary Limited ("WHS") and Distribution and Warehousing Network Africa
Proprietary Limited ("DAT") (further details set out in paragraph 4.2 below); regulating the relationship
with GDW and the Watertech Companies.
4. The Transaction
4.1. Share Purchase Agreement
LIXIL indirectly owns 51% of the GDW Shares through Grohe Luxembourg Four S.A. ("Grohe"),
an indirect wholly owned subsidiary of LIXIL. DAWN owns the remaining 49% of the GDW
In accordance with the Share Purchase Agreement, DAWN will dispose of the GDW Shares to
LIXIL, against payment by LIXIL of the purchase consideration for such shares, and the
repayment by GDW of amounts outstanding under the DAWN loan agreement, pursuant to
which DAWN will receive an aggregate consideration of R324.5 million.
The salient terms and conditions of the Share Purchase Agreement are set out below:
. the Share Purchase Agreement is subject to the fulfilment of the conditions precedent
contained in paragraph 4.2 below;
. the purchase consideration and the amount outstanding under the DAWN loan
agreement will be settled by an electronic funds transfer, free of any deductions, set-off
or withholding of any amount;
. DAWN is providing LIXIL normal and usual title warranties in relation to the GDW
Shares it owns;
. the Share Purchase Agreement contains the normal and usual remedies for a breach
of the agreement, including cancellation of the Transaction. However, the Share
Purchase Agreement may not be cancelled by any of DAWN, GDW or LIXIL ("the
Parties") after payment of the purchase consideration and the repayment by GDW of
amounts outstanding under the DAWN loan agreement; and
? LIXIL is entitled to assign its rights under the Share Purchase Agreement to another
company within its group.
4.2. Conditions precedent to the Share Purchase Agreement
The Share Purchase Agreement is subject to the fulfilment of the following suspensive
conditions on or before 31 December 2017:
. that any and all consents and approvals required from the JSE Limited to enter into and
implement the Transaction are obtained, including the approval of the circular (as referred
to in paragraph 5 below);
. that any and all consents and approvals required from the shareholders of DAWN in terms
of the Listings Requirements of the JSE Limited are obtained;
. that any and all consents and approvals required in terms of the Exchange Control
Regulations (promulgated in terms of section 9 of the Currency and Exchanges Act, No. 9
of 1933) in connection with the Grohe loan amendment agreement and the Transaction are
. that any and all consents and approvals required in terms of the Namibian Competition Act,
in connection with the Transaction are obtained; and
. that the Transaction Agreements are concluded and/or are obtained (as applicable) and if
subject to conditions, become unconditional, save in relation to any conditions requiring
that the Share Purchase Agreement be entered into and become unconditional.
None of the conditions precedent may be waived. The time for fulfilment of the conditions
precedent may be extended to a later date as agreed to in writing by both LIXIL and DAWN on
or before 31 December 2017.
4.3. Salient terms of the Transaction Agreements
Pursuant to the Share Purchase Agreement, the Parties and/or their underlying group
companies have entered into the Transaction Agreements. The material details of these
agreements are set out below.
The Transaction Agreements (other than the Share Purchase Agreement) are all inter-
conditional on the Share Purchase Agreement becoming unconditional. Therefore, if the Share
Purchase Agreement fails to become unconditional, the Transaction Agreements will not
The Transaction and the transactions contained in the Transaction Agreements constitute an
indivisible transaction. If any Transaction Agreement is not executed contemporaneously with
the others or if any fail to take effect in full or is terminated or cancelled for any reason on or
before the completion of the relevant closing obligations of each of the Parties in terms of the
Share Purchase Agreement ("Closing"), then each of DAWN and LIXIL will be entitled to
terminate the Share Purchase Agreement summarily, on written notice.
4.3.1. WHS master distributor agreement
The WHS master distributor agreement records the terms and conditions on which WHS
is appointed by each Watertech Company as its non-exclusive distributor of such
company's products within South Africa, Botswana, Swaziland, Namibia and Lesotho.
Pursuant to this agreement, the Watertech Companies will sell, and WHS will purchase
the relevant products.
4.3.2. DAT master distributor agreement
The DAT master distributor agreement records the terms and conditions on which DAT
is appointed by each Watertech Company as its non-exclusive distributor of that
company's products within certain jurisdictions which include, inter alia, Zambia,
Zimbabwe, Mozambique, Malawi, Seychelles, Rwanda, Ghana, Tanzania and the
Democratic Republic of Congo. Pursuant to this agreement, the Watertech Companies
will sell, and DAT will purchase, the relevant products.
4.3.3. Consignment agreement
Under the consignment agreement, the Watertech Companies will appoint WHS to hold
the inventory of the Watertech Companies recorded in their enterprise resource
planning ("ERP") systems which are held by WHS at its premises immediately before
the first business day of the calendar month following the calendar month in which
Closing occurs ("the Commencement Date") on consignment.
The consignment agreement is expressed to endure for not longer than one year from
the Commencement Date, at which point WHS will return all remaining consignment
inventory held by GDW.
4.3.4. Third party logistics agreement ("3PL Agreement")
The Watertech Companies require third party logistics services to, inter alia, deliver their
products to their customers. Consequently, it has entered into the 3PL Agreement
whereby each Watertech Company wishes to appoint WHS as a non-exclusive
independent contractor to perform services which include scheduling, delivery,
unloading and reverse logistics within South Africa, Botswana, Swaziland, Namibia and
4.3.5. Termination of services and amendment agreement
The current sales, operational and distribution services that WHS provides to the
Watertech Companies will terminate with effect from the Commencement Date, due to
the new Transaction Agreements (excluding the termination of services and amendment
agreement) being entered into, and are no longer required to be separately regulated in
such agreement. The previous agreement will remain in force to regulate the provision
by WHS of certain IT and payroll services (provided to date), which will be terminable
by the giving of written notice by any party thereto.
4.3.6. Irrevocable undertakings
DAWN has obtained irrevocable undertakings from certain of its shareholders to vote in
favour of the resolutions required to implement the Transaction. Details of such
irrevocable undertakings will be included in the circular to shareholders referred to
paragraph 5 below.
4.4. Restraint and bilateral non-solicitation
As part of the Share Purchase Agreement, DAWN has provided an undertaking to LIXIL, GDW
and each Watertech Company that:
. it will not at any time during the period commencing on Closing and expiring on the
second anniversary of Closing ("Restraint Period") become engaged in any competing
business (as defined in the Share Purchase Agreement) carried on anywhere in Sub-
Saharan Africa; and
. it will not at any time during the Restraint Period solicit or employ certain key employees
from LIXIL or any Watertech Company.
GDW has also provided substantially the same non-solicitation undertaking in favour of DAWN
and WHS not to solicit certain key employees of DAWN and WHS.
4.5. Utilisation of the Transaction Proceeds
DAWN intends to utilise the Transaction Proceeds for its ongoing operations after:
. settling the Company's existing indebtedness in full with ABSA Bank Limited under its
revolving credit and overdraft facilty in an aggregate of R200 million; and
. settling Transaction costs including any taxes that will arise from the Transaction.
4.6. Categorisation of the Transaction
The Transaction is a category 1 transaction in accordance with the Listings Requirements of the
JSE Limited. A general meeting of DAWN shareholders will be convened to be approve the
required resolutions by DAWN shareholders ("General Meeting"). In this context, DAWN seeks
to procure irrevocable undertakings from shareholders to vote in favour of such resolutions,
details of which will be included in the circular to shareholders referred to paragraph 5 below.
A circular containing the full details of the Transaction, recommendation by the Board, and
incorporating a notice convening the required General Meeting, will be posted to shareholders in due
course and the date of the General Meeting will be announced on SENS once the circular is posted.
6. Financial information relating to the Transaction
As per the 31 March 2017 DAWN audited consolidated financial statements, the investment in GDW
had a carrying amount of R290.6 million and contributed a loss, including impairments of R65.7 million
to the Group.
7. Responsibility statement
The Board accepts responsibility for the information contained in the announcement. To the best of
their knowledge and belief, the information contained in this announcement is true and nothing has
been omitted which is likely to affect the importance of the information included.
8. Withdrawal of Cautionary Announcement
Shareholders are referred to the cautionary announcement dated 11 July 2017 and renewed on 23
August 2017, respectively, and are advised that they are no longer required to exercise caution when
dealing in DAWN's securities.
14 September 2017
Financial advisor and transaction sponsor
Investec Bank Limited
Legal advisors to DAWN
Edward Nathan Sonnenbergs Incorporated
Legal Advisors to LIXIL
Bowman Gilfillan Incorporated
Deloitte & Touche Sponsor Services (Pty) Ltd
Date: 14/09/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.