Speaking in Johannesburg, on Monday, CEO Lance Cooper said that the deal was a “life changing opportunity” for both companies, which would see improved efficiencies, job creation and enhanced profitability, as the firm moves to an increased level of self-sufficient log supplies.
He explained that the acquisition would result in York being able to meet more than 70% of the group’s forecast sawmill input, which was previously bought at market spot prices, internally, which would “materially” benefit the company’s earnings.
“The merged entity provides better stability to the highly efficient York mills, as well as improved efficiencies of the GFP mills by way of a cross-pollination of processing techniques.”
GFP owns and operates three large sawmills and a plywood plant, yielding between 600 000 m3 and 700 000 m3 of pine logs a year.
CFO John Lehman, who explained the deal structure at a press conference, said that York had made a R1,186-billion bid for GEF’s 70% stake in GFP and that the Industrial Development Corporation's (IDC’s) 30% stake in GFP, worth R508-million, would be flipped up into York through a share exchange.
He said that the IDC had formally waived its pre-emptive and tag-along rights.
The purchase price would be funded through the issue of additional York shares amounting to R350-million and the remainder of the purchase price would be paid through approved loan facilities of up to R1,23-billion from Rand Merchant Bank, which would provide senior and mezzanine loan facilities.
Upon completion of the deal, York’s controlling shareholder, Blackstar, would hold a 43,9% stake in the company, while the IDC would hold a 34,5% stake and new BEE would a 15% interest. Staff and public shareholders would hold a 4% and 2,6% stake, respectively.
Lehman stated, however, that York intends to increase its public shareholder’s interest to a level ranging between 20% and 30% in the foreseeable future.
The IDC has set aside R150-million to enhance BEE and staff participation.
“We see the IDC as a valuable partner, as they have been shareholders in the asset for a number of years,” Lehman added.
Cooper said that the combined entity would operate seven sawmills, which creates an “ideal training ground” to build future black management.
“There is a great scope for affirmative action in the new merged entity with its eight processing plants. Black sawmill managers will learn the ropes of management at our smaller operations and move up to more complex operations as their skills and experience increase,” he said.
Lehman said that the acquisition of GFP takes largely care of the firm’s growth intentions in South Africa, but that York still remained upbeat about expanding north of the country’s borders.
York expects the effective date of the transaction to be no later than June 30, with Reserve Bank approval expected by May 31 and formal JSE approval by June 15. South Africa’s competition authorities were also still to approve the transaction and Lehman said that this was likely to happen by July 9.
The company’s shares remained unchanged during the day, trading at R20 a share at 15:15. Shares closed at R20 a share on Friday afternoon.