AVENG LIMITED - Category 2 transaction announcemen3 Oct 2018
AEG 201810030016A
Category 2 transaction announcement: Disposal of Aveng Rail business

(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
Share code: AEG
Share ISIN: ZAE000194940
("Aveng", "the Company")
CATEGORY 2 TRANSACTION ANNOUNCEMENT: Disposal of Aveng Rail business

1. Background and Rationale
In February 2018, Aveng Limited (“Aveng” or the “Group”) announced the results of its strategic review (“Strategic
Review") following a thorough and robust interrogation of all parts of the organisation. The outcome of the review
was the adoption by the Board of a new and focused strategy to be an international infrastructure and resources
group operating in selected fast-growing markets capitalising on its considerable knowledge and experience. This
resulted in identifying the businesses and assets that support its overall long-term strategy and therefore will be core
to the Group. As part of this Strategic Review, the Group announced that it intends to dispose of certain non-core
assets and properties.

Negotiations with an interested party have successfully concluded a binding agreement and the Board of Aveng has
approved the entering into of a sale and purchase agreement (“Proposed Transaction”) with Mathupha Capital
Proprietary Limited (“Mathupha Capital”) for the sale of the Aveng Rail business, on the conditions set out in this

Mathupha Capital is a 100% black owned investment company which invests in strategic companies that
manufacture products supplied to the rail sector; and design, engineer and construct transport infrastructure.
As part of Mathupha’s growth strategy, it has been actively exploring opportunities in the rail sector to enable
Mathupha Capital to become a fully-fledged railway solution provider. Accordingly, the Proposed Transaction forms
an integral part of giving effect to this strategy.

Mathupha Capital is a level 1 Broad-Based Black Economic Empowerment ("B-BBEE") entity, with 100% black

2. Particulars of the proposed transaction.
Aveng acting through its wholly owned subsidiary, Aveng (Africa) Proprietary Limited (“Seller”), will sell the business
of Aveng Rail (“Target Business”). The salient features of the transaction are:
    •   The Seller agreeing to implement the Proposed Transaction in terms of which (i) a limited liability private
        company will be incorporated or acquired by the Seller, the entire share capital of which shall be owned by
        the Seller ("Aveng Rail NewCo") and (ii) the agreed tangible and intangible assets which comprise the Target
        Business (including the employees employed in respect of the Target Business and short and long-term
        borrowings relating to the Target Business), being transferred as a going concern by the Seller to Aveng Rail
    •   Mathupha Capital will acquire 100% of Aveng Rail Newco from the Seller; and
    •   A fully funded net transaction consideration of R133 million to be settled in cash
As outlined in the Strategic Review, the proceeds from the sale will be used to strengthen the financial position of
the Group and to reduce overall debt

3. Consents and Conditions Precedent
The following represent the consents and conditions precedent associated with the Proposed Transaction
    •   The conclusion of the final and binding agreements which are required and/or normal in transactions similar
        to the Proposed Transaction;
    •      The conclusion of a separate purchase agreement for the Aveng Rail factory property between Mathupha
           Capital and the current landlord; or
    •      The cession and assignment of the existing lease agreement to Mathupha Capital;
    •      The completion of a confirmatory due diligence by Mathupha Capital;
    •      The Seller obtaining the required approvals to enable the cession and assignment by the Seller to Aveng Rail
           NewCo of its rights and obligations arising from previously agreed joint venture agreements; and
    •      The parties obtaining all statutory and regulatory approvals, including Competition Commission approval.

4. About Aveng Rail
Aveng Rail is the pre-eminent track work contractor in Southern Africa, and is focused on the development,
construction, rehabilitation and maintenance of regional track work systems. The business unit owns and operates
an extensive fleet of mechanised track maintenance equipment geared to undertake all aspects of track
construction, rehabilitation and maintenance.

5. Closing Date
The transaction is expected to close no later than 31 December 2018 after all conditions have been met.

6. Net Asset Value and Loss attributable to the Aveng Rail Business as at 30 June 2018
Aveng Rail was re-classified and reported as Held for Sale in the annual financial statements for the year ended 30
June 2018. As part of this re-classification, the basis of valuation was changed to fair value less cost to sell. The net
asset value of the business unit amounted to R215 million prior to the re-classification. The Group recorded an
impairment provision of R104 million on re-classification and reported a net asset value of R111 million at 30 June
2018. This excludes the value of various trademarks, names and other intangibles associated with the business unit
but held by other Group companies.
The Group reported a loss after taxation of R80 million for the year end 30 June 2018 relating to the Aveng Rail
business unit.
The historical financial information for Aveng Rail was prepared in accordance with International Financial Reporting
Standards. This information has not been reviewed or reported on by the Group’s external auditors.

7. Categorisation
The Proposed Transaction is categorised as a Category 2 transaction in terms of the JSE Listings Requirements and
accordingly no shareholder approval is required.

Jet Park
3 October 2018

JSE Sponsor
UBS South Africa Proprietary Limited

Legal advisors
Baker & McKenzie

Michael Canterbury
Group Executive: Strategy & Investor Relations
Tel: 011 779 2979
Email: michael.canterbury@avenggroup.com

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