| Tue 4 Sep 2007, 8:20 | | GDF - Gold Reef - Firm intention by BidCo and with |
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GDF
GDF
GDF - Gold Reef - Firm intention by BidCo and withdrawal of cautionary
Gold Reef Resorts Limited
(Incorporated in the Republic of South Africa)
(Registration number 1989/002108/06)
JSE share code: GDF
ISIN: ZAE000028338
("Gold Reef" or "the Company")
Fluxrab Investments No 159 (Proprietary) Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/043727/07)
("BidCo")
Firm intention by BidCo to make an offer to acquire all the issued shares and to
be issued shares in Gold Reef Resorts Limited (other than treasury shares) and
withdrawal of cautionary announcement
1. INTRODUCTION
Further to the cautionary announcements published by Gold Reef on 9 March 2007,
18 May 2007, 25 June 2007, 13 August 2007 and 23 August 2007, shareholders are
advised that after conducting a comprehensive formal process of soliciting
offers for the Company as a result of and subsequent to having received an
initial approach from an interested party, the board of directors of Gold Reef
("the Board") has decided to recommend an offer ("the offer") submitted by
BidCo, the shares of which are held indirectly by a consortium ("the
Consortium") led by Ethos Private Equity ("Ethos"), comprising Ethos, investment
subsidiaries of Goldman Sachs and real estate investment funds sponsored and
managed by Goldman Sachs, certain broad-based Black Economic Empowerment groups
which currently own an interest in Gold Reef (the "BEE Shareholders") and
members of the Gold Reef management team ("Management"). In terms of the offer,
Bidco will acquire the entire issued and to be issued ordinary share capital of
Gold Reef (other than treasury shares) for a cash consideration of R34,00 per
Gold Reef share ("the purchase consideration"). The purchase consideration
equates to an enterprise value of approximately R11.4 billion. The offer is
backed by a fully committed financing package provided by a group of banks,
including Goldman Sachs and Nedbank Corporate, a division of Nedbank Limited.
The offer is to be implemented, subject to the conditions set out in paragraph 4
below, by way of a scheme of arrangement ("the scheme")in terms of section 311
of the Companies Act 61 of 1973, as amended ("the Act"), to be proposed by BidCo
between Gold Reef and all of its shareholders, excluding Aldiss Investments
(Proprietary) Limited ("Aldiss") (a wholly-owned subsidiary of the Company and
the holder of treasury shares), ("scheme members").
The rationale for the scheme is to provide Gold Reef shareholders with the
opportunity to realise significant value for their investment.
If the scheme does not become operative because the Court has not sanctioned the
scheme (other than due to a failure to obtain necessary regulatory approvals or
because the requisite majority of scheme members did not approve the scheme)
then BidCo may extend the offer by way of an alternative mechanism to the
scheme, namely a general offer to acquire the entire issued share capital of
Gold Reef (other than treasury shares), ("the general offer"). The general
offer will be conditional on Bidco receiving acceptances of the general offer in
respect of at least 90% of Gold Reef`s shares which are the subject of the
general offer on or before 31 January 2008 or such later date as may be mutually
agreed upon. If the general offer becomes unconditional, BidCo shall in terms
of section 440K of the Act acquire the Gold Reef shares in respect of which the
general offer was not accepted. Save as aforesaid, the general offer shall be
for the same consideration as that to be paid in terms of the scheme and shall
be on the same terms and conditions as the scheme.
2. TERMS OF THE OFFER
If the scheme becomes operative, or if the general offer is extended, Gold Reef
shareholders who are entitled to participate in the scheme or general offer, as
the case may be, will be entitled to receive the purchase consideration, which
represents a:
- 44.5% premium to the 30 day volume weighted average price ("VWAP") per
Gold Reef share on the JSE Limited ("the JSE") for the 30 trading days
up to and including 8 March 2007 of R23,53, being the day before the
first cautionary announcement was published; and
- 48.5% premium to the closing price per Gold Reef share on the JSE on 8
March 2007 of R22,90.
The purchase consideration will be increased by one South African cent per Gold
Reef share per business day from 1 January 2008 until the date upon which the
scheme becomes operative, or the general offer becomes unconditional.
Following the implementation of the scheme, or the general offer, as the case
may be, and save for the 14 427 602 treasury shares held by Aldiss, all of the
issued and to be issued shares in Gold Reef will be held by BidCo and Gold
Reef`s listing on the JSE will be terminated.
3. FUNDING AND CASH CONFIRMATION
The aggregate purchase consideration will be funded by a combination of equity
funding provided by funds owned and/or managed by Ethos and by investment
subsidiaries of Goldman Sachs and real estate investment funds sponsored and
managed by Goldman Sachs and by the BEE Shareholders and Management and debt
funding provided by a group of banks, including Goldman Sachs and Nedbank
Corporate, a division of Nedbank Limited.
The BEE Shareholders and Management have undertaken to reinvest a portion of the
purchase consideration which they will receive pursuant to the scheme or general
offer.
In terms of Rule 2.3.2(b) and Rule 21.7 of the Securities Regulation Code on
Takeovers and Mergers ("Code"), the Securities Regulation Panel ("SRP") has been
provided with the necessary cash confirmation letters.
4. CONDITIONS PRECEDENT
The implementation of the scheme, or the general offer, as the case may be, is
subject, inter alia, to the fulfilment of the following conditions precedent on
or before 31 January 2008 or such later date as may be mutually agreed upon:
4.1 all approvals to the extent necessary in respect of the offer being
received, including but not limited to approvals from the Competition
Authorities, the JSE, the SRP and the South African Reserve Bank;
4.2 the approval of the relevant Gambling Boards to the implementation of the
offer;
4.3 the approval of the scheme by 75% or more of the votes exercisable by the
scheme members present and voting, in person or by proxy, at the scheme meeting
or the acceptance of the general offer in respect of at least 90% of the Gold
Reef shares which are the subject of the general offer on or before 31 January
2008 or such later date as may be mutually agreed upon; and
4.4 in the case of the sanctioning of the scheme by the Court, a certified copy
of the Order of Court sanctioning the scheme being registered by the Registrar
in terms of the Companies Act.
5. OFFER IMPLEMENTATION AGREEMENT, NON-SOLICITATION AND BREAK FEE
Gold Reef and BidCo have entered into an offer implementation agreement ("OIA")
which provides, inter alia, for implementation of the offer, a non-solicitation
arrangement and payment of a break fee described below, and which contains
certain assurances and confirmations between the parties.
Gold Reef has agreed that, until the earlier of the scheme becoming operative or
the general offer becoming unconditional, as the case may be, or the OIA being
terminated, it will not, nor will it permit any member of its group (nor any of
their respective directors, officers, senior employees or professional advisers)
to solicit a proposal from a third party to acquire all or a major portion of
the shares in the Company or all or a major portion of the Company`s
undertaking, assets or business ("competing offer") or, save where required by
the Code or the fiduciary duties of the Gold Reef directors, to enter into any
talks with any third party in response to an unsolicited competing offer. Gold
Reef has undertaken that it has terminated all talks, in relation to competing
offers, with third parties in which it was engaged prior to the date of
signature of the OIA. Gold Reef will immediately inform BidCo if it receives an
approach in respect of a competing offer, and will keep BidCo advised as to the
progress of such approach.
If Gold Reef receives an unsolicited competing offer, Gold Reef will, within two
days of receipt thereof, inform BidCo of the details of the competing offer and,
unless the competing offer is sufficiently superior to BidCo`s offer, Gold Reef
will use all reasonable endeavours to procure that its directors do not withdraw
or modify its recommendation of BidCo`s offer. Where the unsolicited competing
offer is a sufficiently higher offer, BidCo will be given two business days to
confirm in writing that it intends to increase or revise its offer or submit
another offer which in either case would, in the opinion of the Board, provide
superior risk adjusted financial value to the Gold Reef shareholders than the
unsolicited competing offer and is otherwise on terms which are, in the
reasonable opinion of the Board, substantially equal to or not materially worse
than those contained in the unsolicited competing offer. If BidCo fails to so
advise within two business days and/or subsequently fails to announce its
revised or increased offer within 10 business days, Gold Reef shall be entitled
to terminate the OIA and to withdraw or modify its recommendation of Bidco`s
offer.
The Board has agreed that if (a) a competing offer is announced while the offer
is still open and such competing offer is thereafter recommended by the Board
and successfully implemented; or (b) if the Board withdraws its recommendation
in the absence of a competing offer or a negative final fair and reasonable
opinion as referred to in 9 below; or (c) Gold Reef breaches any of its
obligations under the OIA (and fails to remedy such breach within 10 business
days of receipt of notice thereof, or such other period as may be reasonable
having regard to the nature of the breach), then Gold Reef will pay BidCo a
break fee of 1% of the purchase consideration (plus VAT).
6. SPECIAL ARRANGEMENTS
On implementation of the scheme or the general offer, as the case may be, the
BEE Shareholders will, directly or indirectly, beneficially own and hold 30% of
Fluxrab Investments No 160 (Proprietary) Limited ("Holdco") which in turn will
hold 100% of the issued share capital of BidCo.
BidCo is fully supportive of the existing management team and has invited
management to participate in the equity of Holdco. Certain directors of Gold
Reef, namely SB Joffe, JS Friedman, C Neuberger, BJ Biyela and RT Moloko have
reached an arrangement with BidCo in terms of which they have undertaken,
directly or indirectly, to subscribe for and hold shares in the issued share
capital of Holdco.
7. HOLDINGS OF SECURITIES IN GOLD REEF
The SRP requires that the BEE Shareholders may not exercise their votes at the
scheme meeting in respect of 37 438 905 Gold Reef shares, being the number of
shares in regard to which the BEE Shareholders will utilise the purchase
consideration in order to acquire new shares in Holdco.
Messrs SB Joffe, JS Friedman, C Neuberger, BJ Biyela and RT Moloko and other
members of management forming part of the Consortium own or control, in
aggregate, 9 257 233 Gold Reef shares (excluding share options). The SRP
requires that Management may not exercise their votes at the scheme meeting in
respect of 5 535 118 Gold Reef shares, being the number of shares in regard to
which Management will utilise the purchase consideration in order to acquire new
shares in Holdco.
8. SHAREHOLDER SUPPORT
Existing shareholders holding approximately 80,5% of Gold Reef`s issued and to
be issued shares (excluding treasury shares) have irrevocably undertaken to
BidCo to accept the offer in respect of their entire shareholdings, subject to
no competing offer being received which is at least 10% higher than R34,00 a
share. As noted in paragraph 7 above, certain existing shareholders are not
eligible to vote a portion of their respective shareholdings at the scheme. BEE
Shareholders and Management have undertaken to reinvest a portion of the
consideration payable to them. The SRP requires that BEE Shareholders and
Management will be entitled to vote to the extent of those shares and associated
proceeds that are not reinvested. As a result, shareholders holding
approximately 65,0% of Gold Reef`s issued and to be issued shares and
approximately 76,9% of Gold Reef`s issued and to be issued shares eligible to
vote on the scheme can be regarded as having irrevocably undertaken to accept
the offer.
The following sets out the details of those shareholders who have given such an
undertaking:
Shareholder Number of fully Percentage of
diluted shares fully diluted
held issued share
capital
Krok Family entities 71 910 971 25.90%
BEE Shareholders* 69 206 412 24.93%
Casinos Austria 60 226 988 21.69%
International Holding GmbH
Schutte Family Trusts 12 064 267 4.35%
S B Joffe (director)* 6 283 333 2.26%
J S Friedman (director)* 1 967 093 0.71%
C Neuberger (director)* 1 370 000 0.49%
B J Biyela (director)* 201 333 0.07%
Eglin Investments No.30
(Pty) Ltd* 170 000 0.06%
R T Moloko (director)* 33 334 0.01%
A J Aaron (director) 10 000 0.004%
* Members of the Consortium
9. OPINIONS, RECOMMENDATIONS AND UNDERTAKINGS
The Board of Gold Reef has run a comprehensive formal process of procuring an
offer for Gold Reef that it believes allows shareholders to realise significant
value for their investment. Furthermore it has obtained independent advice on
the offer. Messrs SB Joffe, JS Friedman, C Neuberger, BJ Biyela, RT Moloko, P
September and RJ Khoza recused themselves from all deliberations and decisions
by the Board regarding the offer.
The Board appointed Ernst & Young Advisory Services Limited ("E&Y") to advise it
whether the offer is fair and reasonable to Gold Reef shareholders. E&Y has
completed a preliminary valuation of Gold Reef and has advised the Board that
the offer is fair and reasonable to Gold Reef shareholders as at the date of
their advice to the Board. E&Y`s opinion will be finalised at the last
practicable date prior to the publication of the circular to Gold Reef
shareholders and will be based on financial, regulatory, securities market and
other conditions prevailing at that time.
Based on E&Y`s preliminary advice, but subject to receipt of a final fair and
reasonable opinion from E&Y, the Board excluding Messrs SB Joffe, JS Friedman, C
Neuberger, BJ Biyela, RT Moloko, P September and RJ Khoza evaluated the offer
and the preliminary advice of E&Y and are of the unanimous opinion that the
offer is fair and reasonable to Gold Reef shareholders. Accordingly, the Board
recommends, subject to receipt of a final fair and reasonable opinion, that Gold
Reef shareholders vote in favour of the scheme, or accept the general offer, as
the case may be and the directors of Gold Reef, where applicable, undertake to
vote their own Gold Reef shares in favour of the scheme, or to accept the
general offer, as the case may be. E&Y`s written opinion will be contained in
the circular referred to in paragraph 11 below.
10. MARKET AND FINANCIAL INFORMATION
The table below sets out information regarding the price at which Gold Reef
shares traded immediately prior to the release of Gold Reef`s first cautionary
announcement and this announcement of BidCo`s firm intention to make an offer,
as well as a comparison of the purchase consideration to the net asset value and
tangible net asset value per Gold Reef share at 30 June 2007.
Before the The purchase Premium
scheme consideration (%)
(Rand) (Rand)
Gold Reef Shares
Market price on 8 March 2007 22,90 (1) 34,00 48,5
30-day VWAP to 8 March 2007 23,53 (2) 34,00 44,5
Market price on 31 August 2007 31,40 (3) 34,00 8,28
30-day VWAP to 31 August 2007 30,02 (4) 34,00 13,28
Net asset value per Gold Reef 5,92 (5) 34,00 474,3
share
Tangible net asset value per 3,61 (5) 34,00 841,8
per Gold Reef share
Notes:
1. Closing price of Gold Reef shares on the JSE on 8 March 2007, being the last
trading day prior to release of the first cautionary announcement.
2. VWAP at which Gold Reef shares traded on the JSE for the 30 trading days up
to and including 8 March 2007, being the last trading day prior to release
of the first cautionary announcement.
3. Closing price of Gold Reef shares on the JSE on 31 August 2007, being the
last trading day prior to this announcement of BidCo`s firm intention to
make an offer.
4. VWAP at which Gold Reef shares traded on the JSE for the 30 trading days up
to and including 31 August 2007, being the last trading day prior to this
announcement of BidCo`s firm intention to make an offer.
5. Unaudited net asset value and tangible net asset value per Gold Reef
share attributable to Gold Reef shareholders at 30 June 2007.
11. DOCUMENTATION
A circular providing further information on the offer and containing, inter
alia, a notice of scheme meeting, an order of Court, a form of proxy and a form
of acceptance, surrender and transfer will be posted to Gold Reef shareholders
in due course.
12. IMPORTANT DATES AND TIMES
Gold Reef shareholders will be advised of important dates and times of the
scheme in due course.
13. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS
Gold Reef shareholders are advised that the cautionary announcements concerning
the offer, referred to in paragraph 1 above, are hereby withdrawn.
Johannesburg
4 September 2007
Enquiries
Ethos Corporate Affairs
Chelsea Wilkinson
Tel +27 (0) 11 328 7463
Cell +27 (0) 82 898 5192
Email: cwilkinson@ethos.co.za
Financial advisor to Gold Reef
Merrill Lynch South Africa (Proprietary) Limited
Legal advisors to Gold Reef
Edward Nathan Sonnenbergs and Werksmans Inc.
Transactional sponsor to Gold Reef
Merrill Lynch South Africa (Proprietary) Limited
Sponsor to Gold Reef
Nedbank Capital
Independent advisor to the Gold Reef Board
Ernst & Young Advisory Services Limited
Reporting Accountants to Gold Reef
PriceWaterhouseCoopers Inc
Private equity sponsor and transaction arranger for BidCo
Ethos Private Equity and Goldman Sachs
Financial advisor to BidCo
Goldman Sachs International
Legal advisors to BidCo
Fluxmans Attorneys Inc, Deneys Reitz, Inc, Webber Wentzel Bowens and Sullivan &
Cromwell LLP
Legal advisors to the BEE Shareholders
Webber Wentzel Bowens
Lenders
Goldman Sachs and Nedbank Corporate, a division of Nedbank Limited
Legal advisors to BidCo Lenders
Cleary Gottlieb Steen & Hamilton LLP and Deneys Reitz, Inc
Date: 04/09/2007 08:20:33 Produced by the JSE SENS Department.
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