ERM is a cash shell listed in the “Financial - Specialty and Other Finance” sector of the JSE Limited (“JSE”). The company has seen major changes to its shareholding and board of directors in the last eight months. By virtue of this the company is embarking on a new strategic direction in the area of property development. ERM is currently an investment holding company, with investments in the property industry and in the listed stock market.

The company is aggressively investigating a number of possible further transactions with a view to enhancing shareholders’ value through expanding its interests in property and introducing Black Economic Empowerment to the company, fulfilling the legislation in South Africa. After concluding the property transaction the strategy is to identify a number of small to medium sized private equity investments which will further enhance shareholder value.

The most important competitive forces include companies competing to achieve maximum returns in the property industry. The main objective of its investment in the property industry is to maximize returns and to grow and expand its property interests to a sustainable level, capable of competing in the industry.

The more competitors present in the industry, the more difficult it is to find suitable property acquisitions. The threat of a new competitor always exists and that is why it made sense to ERM to join forces with companies that have been dominant in the industry for a lengthy period and thus to become a significant operator in the industry rapidly. This will enhance the company’s ability to negotiate the best deals for ERM.

In November 2006 ERM and SABLE Holdings (a company listed in the real estate sector of the JSE in excess of 40 years including interests in commercial, retail, residential and industrial property developments in South Africa) formed a new entity, Amrich 58 Properties (Proprietary) Limited (“Amrich”), which will focus on income producing properties and property development. At this point ERM and SABLE each hold 50% of the issued capital of Amrich.

Further to this Amrich reached agreement with the vendors of Rotaflex Investments (Proprietary) Limited (ADAM International) in terms of which Amrich acquired 100% of the issued share capital of Rotaflex. Rotaflex is a company with a diversified portfolio of retail, commercial, residential and industrial properties.

Following the conclusion of the above, the resulting structure will be:

CONSOLIDATION OF INTERESTS

Simultaneously to the conclusion of the acquisition of Rotaflex, ERM has agreed to sell its 50% shareholding in Amrich to SABLE which consideration will be discharged by the issue of SABLE ordinary shares to ERM. SABLE will issue a further 392,500 ordinary shares to ERM for cash.

Following the conclusion of this transaction, the resulting structure will be:

ERM’s objective with this sale of shares to SABLE is to increase its shareholding in SABLE, thereby exposing itself to a much stronger and more diversified property holding.
ERM and SABLE have identified a synergistic association, through which both companies wish to grow, expand and diversify their property activities.

ERM’s strategy is unique in the sense that its business objective is the making of investments in sectors that utilize strong available existing resources. Through a well diversified investment portfolio, risks are spread and returns are maximized and shareholders enjoy the benefits of this strategy.
The company has carefully worked out its strategy and has already completed the first phase of reaching its goals towards diversifying and strengthening its investment portfolio.
The company only makes investments in companies where management is already in place and will remain in place and where costs are managed and kept at levels which are competitive in the market. Prior to any acquisition, proper due diligence investigations will give an indication of whether these investment criteria are in place.

All the above transactions were concluded subject to shareholder approval by ERM and SABLE shareholders.