Aug 2008 Financial News

Agostini’s Limited – Circular to Shareholders

Aug 14, 2008

The following shareholders’ circular was received from Agostini’s Limited:

In accordance with our Stock Exchange Listing Agreement, the Securities Industry Act 1997 and best practice, we write to inform you of the details of a material acquisition to be completed by Agostini’s Limited.

As at July 31, 2008 Agostini’s Limited has received acceptances for in excess of 5.5 million ordinary shares of Hand Arnold (Holdings) Limited (representing 91.7% of the outstanding shares of that company) at a price of $20.50 per share. It is our intention under the provisions of the Companies Act 1995 to acquire the remaining outstanding shares at the same price. In the event 100% of the shares are acquired, this will bring the total value of the acquisition to $123 million.

Hand Arnold Holdings Limited

The Hand Arnold Group has been in business successfully since 1920 and is principally engaged in the distribution of branded products through agency agreements with principals in Food, Pharmaceutical, Cosmetics, Household and Wines and Spirits. The Group has a wide range of products largely complementary to those of Agostini’s Limited and has shown consistent growth over the last three years. The major products distributed include KLIM, Pfizer, Anchor dairy products, Lucozade, Kellogs, Jergens, Heinz, Remy-Cointreau, Five Roses flour, Pedigree pet food, 3M sponges, Sterilite, Pine-Sol and other well known household brands. The Group has an experienced and well qualified staff of approximately 250, a wide range of customers and adequate warehousing, cold storage and distribution systems. Its operations are located at El Socorro Extension Road in San Juan.

Financial Impact on Agostini’s Limited

The final determination of the net assets acquired will only be made after all the underlying tangible and intangible assets have been marked to market and subjected to review by our external auditors and property valuators, as required by the latest accounting standards. Our initial estimation, however, is that the net tangible assets acquired, as at the acquisition date, have a market value of approximately $86 million, leaving approximately $37 million to be accounted for as goodwill and other intangible assets.

The purchase consideration was financed entirely by credit lines held by Agostini’s Limited. As soon as is practicable after the acquisition, the company intends to review its capital structure and, in view of the increased size of the combined entity, determine the optimal debt to equity ratio for the Group. This may involve a long-term Bond issue as well as offering existing shareholders the opportunity to increase their equity holding by way of a rights issue. We will communicate with you again on this subject in due course.

The acquisition is expected to provide a small increase in earnings per share for 2008 and be increasingly positive thereafter as the group seeks to take advantage of marketing and distribution synergies.

Future Operations

Hand Arnold is a well-run and successful group. Currently, there are no plans to change the management, staffing or operations in any significant way. Mr. John Hale will remain as the Managing Director of Hand Arnold Holdings Limited and be joined on the Board by appointees from the Agostini’s Group. Mr. John Hate has been invited to join the Board of Agostini’s Limited.

Conclusion

Your Directors are very pleased with this acquisition, which is complementary to our existing businesses. On an annualized basis, it is estimated to add over $290 million to our sales and $12 million to our net after tax profit before consideration of acquisition costs. This represents a significant step forward for the Agostini’s Group and augurs well for our combined future. We would like to take this opportunity to welcome the Hand Arnold Management and Staff to the Agostini’s Group. Together we will forge a dynamic future.


Source:
The Trinidad and Tobago Stock Exchange Limited
Thursday August 14, 2008