| Wed 5 Sep 2007, 7:05 | | ABL / ABIL /ELH - ABIL / Ellerines - Announcement |
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ABL ELH ABLP
ABL ELH
ABL / ABIL /ELH - ABIL / Ellerines - Announcement Of A Firm Intention To Make
An Offer And Withdrawal Of Cautionary Announcement
AFRICAN BANK INVESTMENTS LIMITED ELLERINE HOLDINGS LIMITED
(Incorporated in the Republic of (Incorporated in the
South Africa) Republic of South Africa)
(Registration number: (Registration number:
1946/021193/06) 1968/013402/06)
(Registered bank controlling Share code: ELH & ISIN:
company) ZAE000022752
Ordinary share code: ABL & ISIN: ("Ellerines")
ZAE000030060
Preference share code : ABLP
ISIN: ZAE000065215
("ABIL")
ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER FOR THE ENTIRE ISSUED
ORDINARY SHARE CAPITAL OF ELLERINES AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Further to the detailed joint cautionary announcement released on SENS
on Monday, 20 August 2007, ABIL and Ellerines shareholders are advised
that ABIL and Ellerines have now completed satisfactory reciprocal due
diligence investigations on each others businesses. Accordingly ABIL has
submitted to the board of directors of Ellerines a notice of its firm
intention to make an offer ("the offer") to acquire the entire issued
ordinary share capital of Ellerines (other than approximately 9 392 653
treasury shares owned within the Ellerines group ("the excluded treasury
shares")).
2. Terms and mechanism of the offer
ABIL is proposing to acquire, by way of a scheme of arrangement ("the
Scheme") in terms of section 311 of the Companies Act, No. 61 of 1973,
as amended (the "Companies Act"), and subject to the conditions detailed
in paragraph 6 below, the entire issued ordinary share capital of
Ellerines, other than the excluded treasury shares. The offer has been
based on a valuation of R85.00 per Ellerines ordinary share which ABIL
intends to settle by way of an issue of new ABIL ordinary shares.
Based on the valuation of R85.00 per Ellerines ordinary share and the 30-
day volume weighted average price ("VWAP") of ABIL, as at close of
business on Friday, 17 August 2007 (being the date on which the price
for the initial proposal was determined by ABIL) of R32.10, the purchase
consideration translates into an exchange ratio of 265 ABIL ordinary
shares per 100 Ellerines ordinary shares.
In order to maintain the current level of BEE ownership in ABIL, ABIL
will reserve 3.75% of the purchase consideration ("BEE reserved
shares"). These shares are to be used to facilitate a BEE programme
(similar to ABIL`s Eyomhlaba programme) targeted at the current
Ellerines business and its stakeholders, which will be implemented
shortly after the operative date of the Scheme.
Accordingly, after deducting the BEE reserved shares, Ellerines
shareholders would receive a net purchase consideration of 255 ABIL
ordinary shares per 100 Ellerines ordinary shares.
Based on the latest information available, Ellerines has approximately
124 975 732 ordinary shares in issue, which after deducting the excluded
treasury shares, leaves approximately 115 583 079 Ellerines ordinary
shares to be acquired in terms of the offer. Accordingly, based on the
gross exchange ratio of 265 ABIL ordinary shares per 100 Ellerines
shares, ABIL will issue approximately 306 295 159 new ordinary shares
pursuant to the offer.
The purchase consideration results in the following premiums to
Ellerines` shareholders:
Premium Premium
based on net of
gross BEE
considerat reserved
ion shares
Based on closing price of R58.00 47% 41%
on 17 August 2007
Based on 30 day VWAP to 17 August 32% 27%
2007 of R64.28
The boards of both ABIL and Ellerines have agreed that since the
operative date of the proposed Scheme is expected to be after each
company reports its year end results, the parties would be entitled to
pay a final dividend out of the second half results, provided such
dividend record date is prior to the operative date for the Scheme.
Furthermore, it has been agreed that such dividends should be based on
the respective dividend cover ratios (using headline earnings
attributable to ordinary shareholders for the second half of the
financial year) of each company for its most recent interim results,
being 1.20 times for ABIL and 2.85 times for Ellerines. If either party
declares a final dividend which results in the respective dividend cover
ratio being less than the limits set out above, an equitable adjustment
to the switch ratio will be made prior to the operative date of the
Scheme to compensate the other party, provided that an adjustment will
only be made if it results in a change to the exchange ratio of at least
1 ABIL share per 100 Ellerines shares.
Other than as contemplated above, the offer has been based on the
assumption that no other dividend, distribution or similar payment is
declared or made to ordinary shareholders, including the buyback of
ordinary shares, by either party between the date of the offer and the
operative date of the Scheme. For purpose of clarity, the above
restrictions do not apply to the issued preference shares of ABIL.
3. Financial effects on ABIL shareholders
The unaudited pro forma financial effects of the offer on ABIL ordinary
shareholders set out below are based on the 12 month period to 30
September 2006 and the Ellerines results on the 12 month period to 31
August 2006. The unaudited pro forma financial effects are the
responsibility of the board of directors of ABIL and have been prepared
for illustrative purposes in order to assist shareholders of ABIL in
assessing the effects of the offer on earnings, headline earnings, net
asset value and net tangible asset value (adjusted for the elimination
of goodwill) per share.
The unaudited pro forma financial effects of the offer on ABIL ordinary
shareholders are set out below:
Before the Change due After the % Change
to the
acquisition acquisition acquisition
Earnings per 229.5 23.8 253.3 10.4
ordinary share
(cents)
Headline 223.3 26.0 249.3 11.7
earnings per
ordinary share
(cents)
Net asset value 444.1 1,053.9 1,498.0 >100
per ordinary
share (cents)
Net tangible 444.1 311.1 755.2 70.0
asset value per
ordinary share
(cents)
Number of shares 496.9 306.3 803.2 61.6
in issue
(millions)
Weighted average 496.7 306.3 803.0 61.7
number of shares
in issue
(millions)
The assumptions underlying the unaudited pro forma financial effects of the
offer on ABIL shareholders are set out below:
1) The financial information in the "Before the acquisition" column has
been based on:
- For income statement purposes, ABIL`s published and audited income
statement for the 12 month period ended 30 September 2006; and
- For balance sheet purposes, on ABIL`s published and audited balance
sheet as at 30 September 2006.
2) The unaudited pro forma income statement of ABIL has been prepared
assuming that ABIL acquired Ellerines with effect from 30 September 2005
for income statement purposes.
3) The unaudited pro forma balance sheet of ABIL has been prepared assuming
that the acquisition was effected on 30 September 2006 for balance sheet
purposes.
4) The number of shares in issue (including the BEE reserved shares)
increases by approximately 306.3 million as a result of the acquisition.
5) No adjustment has been made for the one month difference between ABIL
and Ellerines financial year-ends as the effect of this is considered to
be immaterial.
6) The financial effects are based on historic 12 month audited results to
30 September 2006 due to the cyclical nature of the two businesses,
which would have presented a distorted view if the financial effects
were based on the 6 months results to 31 March 2007.
4. Financial effects on Ellerines shareholders
The financial effects on Ellerines shareholders will be announced upon
the receipt by the board of Ellerines of the opinion by KPMG (referred
to in paragraph 7 below) that the terms of the offer are fair and
reasonable. The announcement will be published during the course of the
week beginning 10 September 2007.
5. Shareholder support
Following the detailed cautionary announcements on Monday, 20 August
2007, ABIL and Ellerines have held discussions with a number of their
respective major shareholders, who have indicated strong support for the
offer.
6. Conditions precedent
The offer is, inter alia, subject to the fulfilment or waiver (where
appropriate) of the following conditions precedent:
- the independent professional expert to Ellerines expressing an
opinion that the terms of the offer are fair and reasonable to
Ellerines shareholders;
- the requisite majority of votes being cast in favour of the offer
(including the placing of the BEE reserved shares under the
authority and control of the ABIL board) at an ABIL shareholders`
meeting;
- the High Court of South Africa authorising the convening of a
Scheme meeting of Ellerines shareholders;
- the Scheme being approved by a majority representing not less than
three-fourths of the votes exercisable by the scheme members
present and voting, either in person or by proxy, at the scheme
meeting;
- the sanctioning of the Scheme by the High Court;
- a certified copy of the Order of Court sanctioning the Scheme being
registered by the Registrar of Companies in terms of the Companies
Act; and
- all applicable regulatory and statutory approvals being obtained
including the approval of :
- the Registrar of Banks;
- the Financial Services Board;
- the JSE Limited and the Securities Regulation Panel;
- the South African Reserve Bank; and
- the Competition Authorities.
7. Independent professional expert
KPMG Services (Pty) Ltd ("KPMG") has been appointed by the board of
directors of Ellerines to advise on whether the terms of the offer are
fair and reasonable to the Ellerines shareholders. KPMG`s opinion will
be finalised in due course and a copy of that opinion will be contained
in the circular to Ellerines shareholders referred to in paragraph 10
below.
8. Board of directors of ABIL
The board of directors of ABIL has considered the terms and conditions
of the offer and unanimously recommend that ABIL shareholders vote in
favour of the offer at the ABIL general meeting to be convened for the
purposes of considering, and, if deemed fit, approving the proposed
acquisition. All of the directors of ABIL who own shares in ABIL intend
to vote in favour of the resolutions to be proposed at the ABIL general
meeting.
9. Board of directors of Ellerines
The board of directors of Ellerines has considered the offer submitted
by ABIL and the results of the due diligence carried out on ABIL, and,
subject to the receipt of the opinion by KPMG (referred to in paragraph
7 above) that the terms of the offer are fair and reasonable, intends to
recommend the offer to Ellerines shareholders.
10 Salient dates and documentation
Circulars containing details of the offer and the Scheme will be posted
to shareholders of the respective companies in due course. A further
announcement setting out the salient dates of the offer and the Scheme
will be made in due course.
11. Withdrawal of joint cautionary announcement
ABIL and Ellerines shareholders are advised that, as a result of the
publication of this announcement, the relevant joint cautionary
announcement is now withdrawn.
Midrand Bedfordview
5 September 2007
Merchant bank and transaction sponsor to ABIL
FirstRand Bank Limited, acting through Rand Merchant Bank Corporate Finance
Attorneys to ABIL
Prinsloo, Tindle & Andropoulos Inc.
Investment bank and sponsor to Ellerines
Nedbank Capital Corporate Finance
Attorneys to Ellerines
Cliffe Dekker
Date: 05/09/2007 07:05:10 Produced by the JSE SENS Department.
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