Rinolan Moodley, of Phatisa, and Stephen Smithyman, of Kanu Equipment Limited, sharing a toast to success

TORRE INDUSTRIES LIMITED

Incorporated in the Republic of South Africa

(Registration number 2012/144604/06)

Share code: TOR     ISIN: ZAE000188629

(“Torre” or the “Company“)

Terms announcement regarding the investment by the African Agriculture Fund in Torre Equipment Africa Limited

1. Introduction

Torre is pleased to announce that it has concluded a subscription agreement (“Subscription Agreement”) with the African Agriculture Fund (“AAF”), a private equity fund managed by Phatisa Fund Managers Limited (“Phatisa”) in terms of which AAF will subscribe for 40% of the ordinary shares in Torre Equipment Africa Limited (“TEA”). A management consortium (“Manco”) will simultaneously subscribe for 5% of the shares in TEA (together, the “Transaction”). The shareholding in TEA after the Transaction will be 55% Torre, 40% AAF and 5% Manco. The Transaction will raise new capital of US$15 736 347 for TEA (“Subscription Proceeds”).

2. The Transaction

2.1          Nature of the business of TEA

TEA, a private company incorporated in Mauritius, is currently wholly owned by Torre’s international subsidiary, Torre International Holdings Limited (“Torre International”). TEA specialises in the supply of quality earthmoving, forestry, agricultural and construction equipment across southern, central and west Africa with operations in Zimbabwe, Botswana, Ghana, Republic of Congo, Sierra Leone, Ivory Coast, Cameroon, Liberia and Mauritius.

The South African operations of the TEA business (“South African Business”) are currently held under Torre’s South African subsidiary Torre Holdings Proprietary Limited (“Torre Holdings”).

2.2          Nature of the business of Phatisa and AAF

Phatisa is an African private equity fund manager, operating across sub-Saharan Africa, with offices in Mauritius, South Africa, Zambia, Kenya, London as well as Ivory Coast in the near future. Phatisa has two sector-specific funds under management, totalling more than US$ 285 million, focused on food and affordable housing.

Phatisa’s African Agriculture Fund – a US$ 246 million fund – commenced operations in January 2011 and has committed investments in excess of US$ 171 million, from Sierra Leone in West Africa to Mauritius in East Africa. This reflects a total of eight portfolio companies across a diverse range of agri and food related businesses.

2.3          Rationale for the Transaction

The Transaction introduces a strategic partner to TEA as Phatisa brings a track-record of managing private equity funds and businesses throughout the continent. The African Agriculture Fund focuses on agriculture and food production which is a target growth area for TEA. TEA was recently awarded the Case IH distribution agreement in Ivory Coast and is in discussions to expand this to Cameroon and other West African countries, thus increasing its agricultural footprint in the region.

The Subscription Proceeds will be used to fund expansion opportunities throughout the TEA group, increasing the rental fleet in response to demand for additional rental equipment and investing in working capital and spare parts inventories.

It is envisaged that Phatisa’s expertise in developmental agriculture funding and their extensive African presence will bring deal flow opportunities to TEA and allow TEA to reach its objective of becoming the leading distributor of equipment and related spares on the African continent.

2.4          Transaction Terms

Torre Holdings will sell the South African Business to a wholly owned subsidiary, Kanu Equipment Proprietary Limited (“Kanu Equipment”) in terms of a sale of business agreement (“Sale of Business Agreement”).

AAF will subscribe for an initial tranche of shares in TEA for a consideration of US$10 000 000 on the Effective Date – anticipated to be 30 June 2016. On the same date, Manco will subscribe for shares in TEA for US$925 000. Phatisa will subscribe for a second tranche of shares at any time prior to the 31 August 2016 for a consideration of US$4 811 347 (“Second Subscription”). Post the Second Subscription, Torre International will hold 55% of the issued share capital in TEA, AAF 40% and Management 5%. The total consideration of US$15 736 347 will be settled in cash.

AAF will also subscribe for 40% of the shares in Kanu Equipment for a nominal amount. Manco will subscribe for a further 5% such that the shareholding of Kanu Equipment will mirror that of TEA (“Kanu Subscription Agreement”).

On the Effective Date, AAF will also acquire its pro rata share of the remaining shareholder loans from Torre International for an amount of US$1 150 000.

On the conclusion of these transactions, TEA will have raised net new capital of c.$12.4m (R191m) for the growth of its operations and Torre will have received a total of c.$4.0m (R62m) from the repayment and sale of its loan accounts in TEA which will be utilised to reduce borrowings in Torre.

2.5          Warranties

The warranties contained in the Subscription Agreement are standard for a transaction of this nature.

2.6          Conditions precedent and suspensive conditions

The Transaction is subject to the fulfilment of the following outstanding conditions precedent by not later than 31 July 2016:

• The Sale of Business Agreement and the Kanu Subscription Agreement becoming unconditional in accordance with their terms;
• The shareholders of Manco entering into a shareholders agreement; and
• AAF being satisfied with the results of the due diligence investigation.

The Transaction is also subject to the suspensive condition that, where required, all material parties have provided consent to the Transaction within 90 days of the Effective Date.

2.7          Categorisation

The Transaction is a Category 2 transaction in terms of the JSE Limited Listings Requirements, accordingly no shareholder approval is required.

3. Net assets and profits of TEA

The value of the net assets of TEA at 30 June 2015 was R153m and the net profit after tax for the year ended 30 June 2015 was R18m.

Johannesburg

20 June 2016

Sponsor:   Rand Merchant Bank (A division of First Rand Bank)