| Wed 22 Aug 2007, 14:00 | | GMB - Glenrand M I B - Acquisition of the business |
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GMB - Glenrand M I B - Acquisition of the business of Finrite and withdrawal of
cautionary
GLENRAND M I B LIMITED
(Incorporated in the Republic of South Africa)
Licensed Financial Services Provider
(Registration number 1997/008001/06)
Share code: GMB & ISIN: ZAE000078010
("the company" or "Glenrand M I B" or "the group")
ACQUISITION OF THE BUSINESS OF FINRITE INSURANCE ADMINISTRATORS (PROPRIETARY)
LIMITED AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Shareholders are advised that Glenrand M I B, through a wholly owned
subsidiary, has entered into a Memorandum of Understanding with Finrite
Insurance Administrators (Proprietary) Limited ("Finrite") dated 23 April
2007, to purchase its business as a going concern ("the Acquisition"). The
purchase will be effective on the fulfilment of the suspensive conditions,
as referred to in paragraph 6 below.
2. Nature of business
Finrite was founded in 1993 and focuses on `end to end` administration and
claims fulfilment of high volume insurance products for underwriters. A key
component of such administration is cellphone handset insurance and related
claims that are managed through an integrated multilingual contact centre
with direct point of sale link to retailers.
3. Rationale for the purchase
In keeping with the group`s core strategy of providing innovative and cost
effective risk advisory services, the Acquisition adds to the current suite
of insurance solutions offered to clients, as well as providing an
opportunity to:
- Diversify revenue streams to address insurance market trends;
- Enhance annuity based revenue; and
- Support the retail segment (both from our existing client base and non
clients) in administering volume products to both emerging markets and
affinity groups.
4. Consideration
The initial consideration for the acquisition is R50 million, of which R30
million is payable on the effective date and the balance over two years.
The initial consideration will be adjusted upwards upon the achievement of
certain profit thresholds over a period of two years from the effective
date of the Acquisition. The cumulative final purchase consideration will,
however, not exceed R70 million. The consideration will be settled in cash,
financed through own cash and debt resources.
5. Financial effects of the acquisition
Based on the reviewed results of Glenrand M I B for the six months ended 31
December 2006, the unaudited pro forma financial effects of the Acquisition
on earnings per share ("EPS"), fully diluted earnings per share ("FDEPS"),
headline earnings per share ("HEPS"), fully diluted headline earnings per
share ("FDHEPS"), net asset value per share ("NAV") and net tangible asset
per share ("NTAV") are set out below. This unaudited pro forma financial
information has been prepared for illustrative purposes only and because of
its nature may not give a fair reflection of Glenrand M I B`s financial
position and results of operations, nor of the effect and impact of the
Acquisition on Glenrand M I B. The preparation of the pro forma financial
information is the responsibility of Glenrand M I B`s directors.
Before the After the % Change
Acquisition Acquisition
(1) (2)
EPS (cents) 24,9 25,4(3 ) 2
HEPS (cents) 1,6 2,1(3 ) 31
FDEPS (cents) 24,9 25,4(3 ) 2
FDHEPS (cents) 1,6 2,1 (3) 31
NAV (cents) 73,2 73,2(4 ) -
NTAV (cents) 32,3 12,3(4 ) (62)
Weighted average shares in issue
for calculating EPS and HEPS 226 526 226 526
(`000)
Weighted average fully diluted
shares in issue for calculating 226 526 226 526
FDEPS and FDHEPS (`000)
Shares in issue for calculating 226 526 226 526
NAV and NTAV (`000)
Notes
1. Based on the published reviewed interim condensed results of Glenrand
M I B for the six months ended 31 December 2006.
2. Based on the assumption that the Acquisition took place on 1 July 2006
for income statement purposes and on 31 December 2006 for balance
sheet purposes.
3. EPS, HEPS, FDEPS and FDHEPS have been adjusted to include the
following for the six months ended 31 December 2006:
- income after taxation from the business acquired as extracted
from Finrite`s management accounts. The accounting policies
adopted by Finrite in preparing the management accounts are not
materially different from those currently adopted by Glenrand
M I B;
- interest charged on the R10 million external funding to be
utilised;
- unwinding of the discount on the deferred payments;
- reversing the interest earned on the R20 million own funds used;
and
- the amortisation of the intangible assets as per note 4 over the
estimated useful lives thereof.
4. The R45 million excess of purchase price over the fair value of
tangible assets acquired has been provisionally allocated to
identified intangible assets and goodwill and, in the case of the
intangible assets, amortised over the estimated useful lives. A final
purchase price allocation as required by IFRS3: Business Combinations
will be completed in due course.
6. Suspensive conditions
The suspensive conditions of the Memorandum of Understanding include the
obtaining of Competition Commission approval and final signed agreements.
7. Categorisation
The Acquisition is a Category 3 transaction in terms of the JSE Limited
Listings Requirements.
8. Withdrawal of Cautionary
Shareholders are referred to the cautionary announcement dated 10 August
2007 and are now advised that further to this announcement, caution no
longer needs to be exercised when dealing in Glenrand M I B`s securities.
Randburg
22 August 2007
Investment bank and sponsor
Nedbank Capital
Attorneys to Glenrand M I B
Deneys Reitz
Date: 22/08/2007 14:00:01 Produced by the JSE SENS Department.
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