AVENG LIMITED - Category 2 Transaction Announcemen5 Jul 2019
AEG 201907050039A
Category 2 Transaction Announcement: Disposal Of Aveng DFC Business

(Incorporated in the Republic of South Africa)
(Registration number: 1944/018119/06)
ISIN: ZAE000111829
("Aveng" or "the Group")


1. Background and rationale

Following the strategic review concluded in 2018 and as part of the non-core disposal process,
Aveng has entered into a binding sale of business agreement and a subordinated loan agreement
with Copaflo Fluid Control Proprietary Limited ("Copaflo") for the sale of the Aveng Dynamic Fluid
Control business unit ("DFC") as a going concern ("Proposed Transaction"), subject to certain
conditions precedent.

DFC was identified as non-core as part of the strategic review and consists of its South African
business, together with related foreign subsidiaries in Australia, Brazil, Finland and the United

Copaflo is a 100% black owned investment company which invests in engineering and manufacturing
businesses. Copaflo directly and indirectly owns 55% of the Fabchem Group. Fabchem Group owns
Fabchem Mining which is the second largest supplier of cable anchors in Southern Africa.

2. Particulars of the Proposed Transaction

Aveng will sell the operations of DFC in South Africa, Australia, Brazil, Finland, and the United States
("Target Business") as a going concern.

The Proposed Transaction consideration is R165 million, comprising the sale of business for R129m
payable to Aveng and the sale of property for R36m payable to Dimopoint, an associate company in
which Aveng holds 30%. The business purchase consideration (excluding the aforementioned
property consideration) will be subject to adjustment to reflect any changes in the net working
capital position of DFC which may occur between 31 December 2018 and the effective date.
Accordingly, approximately R129 million will be settled in cash directly to Aveng on the effective
date, R36 million to Dimopoint on registration of transfer of the property and an R11 million
subordinated loan will be advanced by Aveng to Copaflo pursuant to the Proposed Transaction.
Copaflo has a funding agreement with the Industrial Development Corporation ("IDC"), which
funding agreement terms are subject to the same conditions precedent as the Proposed Transaction.

The proceeds from the sale will be used to strengthen the financial position of Aveng and to reduce
overall debt.

3. Consents and conditions precedent

The Proposed Transaction is subject to the following consents and conditions precedent:
    -   Copaflo providing Aveng with a guarantee from the IDC;
    -   Approval being granted by, or notification given to, the various financiers who are a party to
        the Common Terms Agreement concluded with Aveng;
    -   Approvals required from the Financial Surveillance Department of the South African Reserve
        Bank, if required;
    -   Obtaining the consent of third parties to cancel or transfer financial guarantees; and
    -   Finalisation of the transitional services agreement providing for the orderly carve out of the
        Target Business from the Group.

The transaction agreements include warranties normal for a transaction of this nature.

4. About DFC

DFC was established in 1958 and is a South African based international manufacturer and supplier of
valves and pumps. DFC has some of the best known and established brands in the local and
international valve industry, and penetrates global markets through its presence in Australia, Brazil,
Finland and the United States. DFC supplies mainly into the water, effluent and mineral processing

5. Effective date

The transaction is expected to close no later than 31 October 2019 after all conditions have been

6. Net asset value and profit attributable to DFC as at 31 December 2018

DFC was reported as held for sale in the interim financial statements for the period ended 31
December 2018. As part of this classification, the basis of valuation is fair value less cost to sell. The
net asset value of the business unit amounted to R268 million at the interim period ended 31
December 2018.

DFC reported a profit after taxation of R10 million for the interim period ended 31 December 2018.
The historical interim financial information for DFC was prepared in accordance with International
Financial Reporting Standards.

This financial 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
5 July 2019

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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