CHEMICAL SPECIALITIES LIMITED : ChemSpec - Abridged Pre-listing statement

October 21, 2013 at 03:22 am EDT

MarketScreener.com By

CSP 201310180052A

Abridged Pre-listing statement

Chemical Specialities Limited

Incorporated in the Republic of South Africa

(Registration number: 2005/039947/06)

Share code: CSP

ISIN: ZAE000109427

("ChemSpec" or "the Company")

ABRIDGED PRE-LISTING STATEMENT

This abridged Pre-listing Statement relates to the proposed rights offer of

536,930,824 new ChemSpec compulsory convertible preference shares ("CCPs")

by the Company to ChemSpec shareholders and the listing of the CCPs on the

stock exchange operated by the JSE Limited ("JSE") with effect from the

commencement of business on Monday, 18 November 2013. The Issuer Regulation

Division of the JSE has approved the listing of the CCPs.

This Abridged Pre-Listing Statement is not an invitation to the general

public to subscribe for the CCPs but is issued in compliance with the JSE

Listings Requirements for the purpose of providing information about

ChemSpec.

The information in this Abridged Pre-Listing Statement has been extracted

from the Pre-Listing Statement, to be issued on 28 October 2013. For a full

appreciation of ChemSpec and the proposed rights offer, the Pre-Listing

Statement should be read in its entirety.

The rights offer circular will incorporate this Pre-listing Statement and

is issued in compliance with the Listings Requirements of the JSE, for the

purpose of providing information to the public with regard to the Company.

1. INTRODUCTION

As initially announced on 27 June 2013, and the revised terms announced on

2 August 2013 on SENS, ChemSpec would like to raise a total amount of

R214,772,330 (before expenses) from existing shareholders by way of a

renounceable rights offer.

In terms of the rights offer, 536,930,824 new ChemSpec CCPs, in the

authorised but unissued share capital of the Company, will be offered to

ChemSpec shareholders recorded in the register at the close of trade on

Friday, 1 November 2013 who will receive rights to subscribe for rights

offer shares on the basis of 50 CCPs for every 100 ChemSpec shares held, at

40 cents per rights offer share. Shareholders are permitted to apply for

shares in excess of their entitlement.

As a result of the rights offer, ChemSpec's spread of shareholders for the

CCPs will only be determinable after the rights offer has closed. The JSE

has granted ChemSpec dispensation from the spread requirements for the CCPs

as set out in paragraph 4.28(e) and (f) of the Listings Requirements on the

listing date on the condition that ChemSpec undertake to ensure that the

spread requirements are fulfilled within six months following the listing

date.

2. SHARE CAPITAL

ChemSpec has an authorised ordinary share capital of 2,250,000,000 no par

value shares, of which 1,073,861,648 ordinary shares are in issue,

representing R468,055,000 issued ordinary share capital. ChemSpec has

750,000,000 authorised CCPs of no par value, of which 536,930,824, will be

in issue, representing R212,772,330 issued CCP share capital. The Company

has no treasury shares.

3. ABOUT CHEMSPEC

The business was founded in 1957. This Company was incorporated on 10

November 2005 and obtained its certificate to commence business on the same

day. The Company purchased the business of ChemSpec on 1 January 2006.

On 14 September 2007, the Company was converted to a public company and on

6 November 2007, the Company listed on the AltX after raising R110 million

through a private placing of its shares.

ChemSpec is one of Africa's larger coatings companies, manufacturing and

distributing a comprehensive range of high technology industrial,

decorative and automotive paint systems. ChemSpec has a solid 56-year track

record proudly earned in both domestic and international markets. The

Company is headquartered at its world-class manufacturing facility in

Canelands, Durban, South Africa.

ChemSpec has built an excellent reputation amongst its customers,

suppliers, staff and the communities in which it operate. ChemSpec is a

responsible corporate citizen committed to operating at the highest levels

of integrity and ethics.

ChemSpec's passion for innovation, continuous improvement and imaginative

application of the latest technologies in its ranges enables it to compete

globally with the largest coatings companies in the world.

ChemSpec sees willingness among all its stakeholders for it to be

successful. The Company has a strong executive team and good corporate

governance, supported by a motivated team of coatings industry and support

professionals.

ChemSpec is entrepreneurial and has the advantage of being relatively small

and nimble, enabling it to take advantage of opportunities in the coatings

industry without any historic impediments. The Company is well established

locally in South Africa, has knowledge of doing business in Africa and has

a long-standing international footprint that is a significant part of its

business.

ChemSpec has "best of breed" international and local partners and is

developing relationships that it can build on for mutual success. These

partnerships also enable it to bolster its already high quality and diverse

product range.

4. PURPOSE OF THE RIGHTS OFFER AND LISTING OF THE CCPs

ChemSpec has reached the point in its growth path where it needs to be

financially independent while it generates sustainable profits.

The milestones achieved so far can be summarised as follows:

- A strong board

o Excellent non-executive directors; and

o Revised executive team comprising industry leaders

- Very good corporate governance;

- Industry specific workforce with good knowledge and experience;

- Great products with new routes to market;

- Good production and infrastructure with a focus on improved service

delivery;

- Good international and local partners; and

- Good sales growth in excess of 20% per annum for the last two years.

There is a clear strategic focus on ChemSpec's sales growth. Clearly

defined and specific sales channels and products as well as margin and cost

management with a rationalisation plan and supply chain improvements should

result in double digit sales growth and improved financial performance into

the future.

The levels of growth opportunities that ChemSpec will achieve both locally

and internationally will require capital to "stay ahead of the curve" as

well as to further accelerate its organic growth strategies and to

strengthen and improve the structure and efficiency of its balance sheet.

The Company intends to use the proceeds to:

- Fund organic growth initiatives;

- Increase the balance sheet flexibility and proactively manage the

capital structure, better aligning the funding of the Group's long

term investments with long term capital and diversifying and

improving funding sources and additional borrowing capacity; and

- Further improving working capital management, leveraging increased

liquidity to obtain better terms from suppliers and strategically

building inventory in an inflationary environment.

5. NEW LISTING OF CCPs

The Issuer Regulation Division of the JSE has approved the listing of the

CCPs as follow, with effect from the commencement of trade on the JSE on

Monday, 18 November 2013:

ISIN ZAE000184305

Share Code CSPP

Short name Chemspecpref

Sector Building Materials & Fixtures

6. PROSPECTS

ChemSpec is a good, sound business offering a host of opportunities.

The business has put together a strategic and methodical plan which will

allow sustainable growth through building brands and relationships earned

through consistency and credibility.

As a result, ChemSpec will continue to improve its position in the

decorative, automotive and industrial markets in its selected territories

through its international partnerships, its customer relationships and its

product mix improvement strategies. Opportunities in Africa are being

developed with all three brand portfolio platforms.

The US business is stable and self-sustaining, with significant growth

prospects in the short to medium term. The Australian business is poised

for growth, though this may take a little longer.

ChemSpec has adopted austerity measures on top of its growth plan and is

expected to continue to improve its results in the future.

7. DIRECTORS

The full names and business addresses of the directors are set out below:

Baron Christopher Schreuder

Chief Executive Officer