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JSE
EIH
ERB - Erbacon - Abridged Prospectus
Erbacon Investment Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2007/014490/07)
Share code: ERB & ISIN: ZAE000111571
("Erbacon" or "the company")
ABRIDGED PROSPECTUS
This abridged prospectus is not an invitation to the public to subscribe for
shares in Erbacon. It is issued in compliance with the Listings Requirements of
the JSE Limited ("JSE") for the purpose of providing information to the public
and investors with regard to Erbacon.
1. INTRODUCTION
1.1 PSG Capital (Pty) Limited ("PSG Capital") is authorised to announce that,
subject to the necessary public shareholders spread being achieved in terms
of the private placing as set out in 4 below, the JSE has formally approved
the listing of 116 328 000 ordinary shares at a par value of R0.01 each in
the share capital of the company ("shares"), on the Alternative
Exchange ("Altx") from the commencement of trade on Friday, 7 December 2007
under the abbreviated name "Erbacon", share code "ERB" and ISIN
ZAE000111571.
1.2 Erbacon is raising approximately R53 million by way of an offer for
subscription in terms of a private placing of 19 383 000 shares at a
subscription price of R2.75 per share details of which are set out in 4 below
("the private placing").
2. BACKGROUND
2.1 Erbacon was incorporated as the newly interposed holding company in May
2007 of Erbacon Construction (Proprietary) Limited ("Erbacon Construction") and
Erbacon Small Plant (Proprietary) Limited ("Erbacon Plant Hire"), its two
wholly-owned subsidiaries (collectively "the Erbacon group")
2.2 The Erbacon group was borne out of the initial establishment of Erbacon
Construction CC in 1987 by its founder member, and CEO of Erbacon, Mr Dave
Erskine. Erbacon Construction initially started as a specialised concrete
repair contractor and later evolved into a full-service civil
engineering contracting operation, with the capability of taking on
major civil engineering contracts.
2.3 In 1996, a separate plant and scaffolding hire business, to be known as
Erbacon Plant Hire CC, was established by founding members Messrs Dave Erskine
and Frans Boraine. This business initially arose in servicing the increasing
plant hire needs of Erbacon Construction. However, in a fairly short period of
time it has developed into a stand alone operation and major national player in
small plant hire.
2.4 Erbacon Construction and Erbacon Plant Hire operate from premises situated
in Glen Anil, Durban. The company therefore has a considerable and long
standing presence in Kwazulu Natal, and an ever expanding national footprint.
2.5 Erbacon Construction and Erbacon Plant Hire have each endured the leaner
times experienced in the construction industry during the 1990`s, only to
emerge as competitive, experienced, well-heeled and, more importantly,
profitable players in their respective fields. They are now poised to take
advantage of the unprecedented growth projected for the construction industry.
2.6 The recent corporate restructuring undertaken by the company during the
course of August - October 2007, resulted in the interposition of Erbacon as
the holding company and the establishment of Erbacon Plant Hire and Erbacon
Construction as its two wholly-owned subsidiaries, and also saw Paladin Capital
Limited and 8 Mile Investments 41 (Proprietary) Limited acquire (initial)
interests of 35% and 15% respectively from Messrs Erskine and Boraine. All of
the aforementioned parties have each diluted their interests to allow for the
private placing, and the private placing does not involve any vendor sale, but
a fresh issue of shares.
3. OVERVIEW OF ERBACON
3.1 The Erbacon group makes for a medium to large sized player in the national
construction industry, with specific geographical focus in the Kwazulu Natal
province, at present. Such presence is however continually expanding, especially
with the surge in government`s infrastructure spend which has seen the group
secure more contracts further afield, such as, for example, Erbacon Plant Hire`s
ever increasing expansion into Gauteng, as a result of it supplying plant in
respect of the Gautrain project.
3.2 The entities within the group together provide a comprehensive suite of
civil engineering, construction and plant hire services, all of which find
extensive application in the major construction projects presently being
undertaken throughout South Africa, and which services include the following:
3.2.1 Erbacon Construction
* Concrete Structures and Buildings
* Concrete and Bridge Rehabilitation
* Pipeline Construction
* Township Services and Developments
* Bulk Earthworks and Roadworks
3.2.2 Erbacon Plant Hire
* General Small Plant Hire
* Compressed Air Division
* Formwork and Scaffolding Division
* Saw Cutting Division
Details of the activities and services undertaken by each of the above named
divisions is fully set out in the prospectus available as per 8 below.
3.3 The management of Erbacon regard it as one of the major players in the
civil engineering and construction sectors in Kwazulu Natal, and a dominant
player in small plant hire nationally.
3.4 Erbacon executes a variety of projects for private clients, parastatals,
government departments, municipalities and other provincial bodies, as well as
private property developers. Large projects are tendered for and undertaken by
Erbacon either as main contractor or in partnership with larger private or
listed multinational construction companies. Such projects span the development
of infrastructure, townships, retail and urban developments, and general
expansion of existing developments.
3.5 The Erbacon group prides itself in its stable and experienced work force,
the majority of which have been with each of the divisions for several years.
Management are all the founding members of the respective subsidiaries who are
fully committed to the group and who are hands on in all of the group`s
operations.
4. THE PRIVATE PLACING
4.1 The salient features of the private placing are set out below:
Offer price per share R2.75
Number of shares offered in terms
of the private placing 19 383 000
Issue consideration R53 303 250
Opening date of the private placing at 9:00 on Friday, 30 November 2007
Closing date of the private placing at 12:00 on Monday, 3 December 2007
Anticipate listing on date on the Altx
at commencement of trade on Friday, 7 December 2007
5. PROSPECTS
5.1 The Erbacon group has also felt the ripple effect of the buoyant civil
engineering and construction sectors, together with the looming capacity
constraint threat. However, although the latter may impact on roll-out
timelines in respect of the larger governmental projects and the like, it
does provide Erbacon with the unique opportunity of offering a highly
sought after set of civil engineering and construction services where
demand for such specialised services is fast out pacing supply.
5.2. A further consideration in Erbacon`s favour is the fact that while the
local competitive landscape is vibrant and thriving, international players find
it difficult to adjust to the South African operating environment due to the
highly specialised nature of the work and the intimate knowledge of local
operating conditions that is required.
5.3. While the supply of skills cannot keep abreast of demand, and while there
lacks the requisite skills quotient to manage and build all of the new
infrastructure, there exists enormous opportunities for Erbacon and the like.
Erbacon has the necessary trained employees, site supervision and qualified
senior management to deliver its projects timeously and within budget.
5.4. Erbacon is in the final stages of negotiation in respect of the
acquisition of a medium sized construction company also based in Kwazulu-Natal,
further details of which appear in the prospectus, available as per 8 below. It
is anticipated that this acquisition will make for meaningful vertical
integration in cementing Erbacon`s skills base and supply capacity.
5.5. Erbacon finds itself in the fortunate position of being large enough to
tender for (and secure) more substantial infrastructural projects, but also
small enough to tackle the spillover from the other multi-national construction
companies experiencing capacity constraints. This has resulted in Erbacon
being more selective in the projects undertaken, ensuring better margins.
5.6. As rampant infrastructural development drives the industry, and delivery
assurances by the government become politically imperative, Erbacon finds
itself well positioned to participate in the anticipated (and bankable)
growth.
5.7. Public sector related projects secured to date include plant hire in
respect of the Gautrain, and the 2010 Stadiums, as well as the widening of the
Durban harbour mouth. Construction projects involve upgrading of various
national roads and bridges throughout the country. Private sector contracts
relate to various shopping malls, office and retail developments primarily in
Kwazulu Natal. This results in a committed order book for Erbacon Construction
and steady rental income for Erbacon Plant Hire for the 2008 financial year.
6. DIRECTORS
6.1 The full names, ages, business address and occupations of the board of
directors of Erbacon are outlined below:
Name Age Capacity Business Address
Pierre Malan 40 Non-executive chairman 1st Floor, Ou Kollege,
35 Kerk Street,
Stellenbosch
David Boyd Erskine 53 Chief Executive Officer 2 Montreal Road,
Glen Anil, Durban
Frans Petrus Boraine 34 Executive director 2 Montreal Road,
Glen Anil, Durban
Gary Brockwell Flett 45 Financial director 2 Montreal Road,
Glen Anil, Durban
Sydney Mark Hedley 52 Non-executive director 3 Inkala Avenue,
Kloof, Durban
Petrus Johannes Mouton 30 Non-executive director 1st Floor, Ou Kollege,
35 Kerk Street,
Stellenbosch
7. FINANCIAL INFORMATION
The historical, pro forma and forecast financial information is fully set out
in the prospectus which will be made available to all participants in terms of
the private placing as set out in paragraph 8 below.
8. COPIES OF THE PROSPECTUS
8.1 This abridged prospectus is intended only as a summary of the full
prospectus which has been prepared and issued in relation to the private
placing and the listing of Erbacon on the Altx. It contains the salient
features of the prospectus dated 29 November 2007, which should be read in
its entirety for full appreciation thereof.
8.2 Copies of the full prospectus are available in English, during office
hours from Erbacon at 2 Montreal Road, Glean Anil, Durban or PSG Capital at
1st Floor, Ou Kollege, 35 Kerk Street, Stellenbosch or Building 8, Woodmead
Estate, 1 Woodmead Drive, Woodmead, from Thursday, 29 November 2007, and can be
viewed at www.erbacon.co.za. Alternatively, please contact your CSDP/broker or
professional adviser should
you require further information.
29 November 2007
Glen Anil
PSG Capital (Proprietary) Limited : Corporate Adviser
BDO Questco (Proprietary) Limited : Designated Adviser
Hofmeyr Herbstein & Gihwala Inc. : Attorneys
PricewaterhouseCoopers Inc. : Auditors and Reporting Accountants
Date: 29/11/2007 08:00:01 Produced by the JSE SENS Department.
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