| Thu 13 Sep 2007, 17:35 | | FSR/FST/DSY/RMH/REM- FirstRand/Discovery/RMBH/Remg |
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DSY FSR RMH REM
DSY FSR REM RMH
FSR/FST/DSY/RMH/REM- FirstRand/Discovery/RMBH/Remgro - Details terms
announcement
FirstRand Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1966/010753/06)
ISIN: ZAE000066304
Share Code (JSE): FSR
Share Code (NSX): FST
("FirstRand")
Discovery Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1999/007789/06)
ISIN: ZAE000022331
Share Code (JSE): DSY
("Discovery")
RMB Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1987/005115/06)
ISIN: ZAE000024501
Share Code (JSE): RMH
("RMBH")
Remgro Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1968/006415/06)
ISIN: ZAE000026480
Share Code (JSE): REM
("Remgro")
Detailed terms announcement regarding the:
proposed disposal by FirstRand of, in aggregate, 21.6 million Discovery shares
to certain members of Discovery`s senior management, the Discovery share trust
and RMBH for an aggregate consideration of R577.4 million;
proposed unbundling by FirstRand of its remaining Discovery shareholding (53.44%
of Discovery);
proposed acquisition by RMBH of, in aggregate, a further 49,7 million Discovery
shares from Remgro and the FirstRand staff share trusts for an aggregate
consideration of R1,330.5 million to be settled in cash and the issue of new
RMBH ordinary shares; and
withdrawal of the FirstRand cautionary announcement.
1. Introduction
Further to the joint announcement and the FirstRand cautionary announcement
released on SENS on 4 September 2007 and published in the press on 5 September
2007, the boards of FirstRand, Discovery, RMBH and Remgro are pleased to
announce the detailed terms of the proposed:
disposal by FirstRand of, in aggregate, 21,569,301 Discovery ordinary shares
("Discovery shares") to Adrian Gore (Chief executive officer of Discovery),
Barry Swartzberg (Executive director of Discovery) and certain members of
Discovery`s senior management ("Discovery senior management"), the Discovery
Holdings Limited Share Trust ("Discovery share trust") and RMBH ("the FirstRand
disposals") for an aggregate cash consideration of R577.4 million;
unbundling by FirstRand of its 316,357,337 Discovery shares, remaining after the
FirstRand disposals (53.44% of the entire issued share capital of Discovery), to
FirstRand ordinary shareholders ("FirstRand shareholders") ("the unbundling");
and
acquisition by RMBH, pursuant to the unbundling of, in aggregate, 49,700,040
Discovery shares from Remgro and the FirstRand Black Employee Trust, the
FirstRand Staff Assistance Trust, the FirstRand Black Non-executive Trust and
the FirstRand Limited Staff Trust ("the FirstRand staff trusts") for an
aggregate consideration of R1,330.5 million to be settled in cash and the issue
of new RMBH ordinary shares ("the RMBH transactions").
(collectively referred to as "the proposed transactions").
The proposed transactions will become effective on the fulfilment, or waiver as
the case may be, of the last suspensive condition.
2. Details of the proposed transactions
2.1 The FirstRand disposals
FirstRand raised a liability of approximately R553 million in order to follow
its rights and acquire additional Discovery shares at the time of the Discovery
claw-back offer in 2003 ("the liability"). FirstRand will, prior to the
unbundling, dispose of, in aggregate, 21,569,301 Discovery shares to Discovery
senior management, the Discovery share trust and RMBH resulting in net cash
proceeds of the FirstRand disposals matching the liability. The FirstRand
disposals are in terms of an existing pre-emptive right.
The acquisition of Discovery shares by Discovery senior management and the
Discovery share trust further enhances Discovery senior management`s and
Discovery staff`s ownership of Discovery and reinforces the existing "owner
managed" culture of Discovery.
The rationale for the acquisition of Discovery shares by RMBH is set out in
2.3.1 below.
2.1.2 Details of the FirstRand disposals
FirstRand will, subject to the fulfillment or waiver, as the case may be, of the
suspensive conditions set out in 0 below, dispose of 21,569,301 Discovery shares
for a total cash consideration of R577.4 million. This translates into a price
of R26.77 per Discovery share which is the 10 day volume weighted average price
("VWAP") of the Discovery share traded on the JSE Limited ("JSE") up to the
close of trading on 10 September 2007.
FirstRand, Discovery senior management, the Discovery share trust and RMBH have
reached agreement in terms of which:
Discovery senior management will acquire 15,062,820 Discovery shares from
FirstRand, equating to 2.54% of Discovery, for R403.2 million;
the Discovery share trust will acquire 3,297,180 Discovery shares from
FirstRand, equating to 0.56% of Discovery, for R88.3 million; and
RMBH will acquire 3,209,301 Discovery shares from FirstRand, equating to 0.54%
of Discovery, for R85.9 million.
Accordingly, following the FirstRand disposals, Adrian Gore and Barry Swartzberg
will together own 13.88% of Discovery, other members of Discovery senior
management will own 3.58% of Discovery and the Discovery share trust will own
2.94% of Discovery. RMBH will initially acquire 0.54% of Discovery in terms of
the FirstRand disposals, however, RMBH will, pursuant to the unbundling and
following the RMBH transactions (discussed further in 2.2 and 2.3 below),
increase its shareholding to 25.01% of the entire issued share capital of
Discovery.
2.2 The unbundling
2.2.1 Rationale for the unbundling
FirstRand`s strategy of owning two insurance companies has been consistently
monitored by the boards of FirstRand, Discovery and Momentum Group Limited
("Momentum"). This strategy has produced significant growth and created
shareholder value as both businesses were able to balance growth in market share
with increasing levels of competition.
However, with Discovery`s impending launch of its investment business and
Momentum`s ambitions in the health care sector, the FirstRand board has decided
that it is, at this time, appropriate to unbundle FirstRand`s shareholding in
Discovery.
The FirstRand board believes that the unbundling will unlock value for FirstRand
shareholders by, inter alia:
giving FirstRand shareholders a direct shareholding in Discovery;
increasing the liquidity and free float of Discovery shares on the JSE; and
increasing the strategic flexibility of both Discovery and Momentum, allowing
them to pursue their respective business objectives.
2.2.2 Details of the unbundling
FirstRand will, subject to the fulfillment or waiver, as the case may be, of the
suspensive conditions set out in paragraph 3.1 below, distribute, in compliance
with section 90 of the Companies Act, 1973 and in terms of section 46 of the
Income Tax Act, 1962, all of its remaining shareholding in Discovery (which,
following the FirstRand disposals, will be equal to 316,357,337 Discovery shares
or 53.44% of the entire issued share capital of Discovery) to FirstRand
shareholders in proportion to such FirstRand shareholders shareholding in
FirstRand.
In terms of the unbundling, FirstRand shareholders can expect to receive
approximately 5.63 Discovery shares for every 100 FirstRand shares held on the
record date of the unbundling.
2.3 Details of the RMBH transactions
2.3.1 Rationale for the RMBH transactions
RMBH, a 30.07% shareholder in FirstRand, believes in the strategic and value
proposition of Discovery and, accordingly, would like to increase its
shareholding in Discovery to 25.01%. The unbundling provides RMBH with the
opportunity to effectively increase its shareholding in Discovery to meet this
objective.
2.3.2 Details of the RMBH transactions
RMBH, in terms of the FirstRand disposals, will acquire 3,209,301 Discovery
shares equating to 0.54% of Discovery. In addition, RMBH will receive
95,138,974 Discovery shares pursuant to the unbundling. Immediately following
the unbundling, RMBH will hold a 16.61% shareholding in Discovery.
RMBH has reached agreement with the trustees of the FirstRand staff trusts to
acquire, subject to the fulfilment or waiver, as the case may be, of the
suspensive conditions set out in paragraph 3.2 below, the Discovery shares that
the FirstRand staff trusts receive pursuant to the unbundling. In terms of this
agreement, RMBH will acquire 22,691,417 Discovery shares for a total
consideration of R607.5 million, at the acquisition price of R26.77 per
Discovery share. RMBH will therefore own a 20.45% shareholding in Discovery
following the unbundling and the acquisition of the Discovery shares from the
FirstRand staff trusts.
RMBH has, in terms of a separate agreement with Remgro, agreed to acquire the
27,008,623 Discovery shares that Remgro (through a subsidiary) will receive
pursuant to the unbundling for an aggregate consideration of R723.0 million,
based on the acquisition price of R26.77 per Discovery share. RMBH will settle
the aggregate consideration by issuing 21,302,912 new RMBH ordinary shares
("RMBH shares") to Remgro (or a subsidiary nominated by Remgro) at a price of
R33.94 per RMBH share, which is the 10 day historic VWAP of the RMBH share
traded on the JSE up to the close of trading on 10 September 2007. Following
the FirstRand disposals, the unbundling and the RMBH transactions, RMBH will
hold 25.01% of the entire issued share capital of Discovery.
2.4 Small related party transactions
In terms of the JSE Listings Requirements ("listings requirements"):
the acquisition of Discovery shares by Adrian Gore and Barry Swartzberg from
FirstRand in terms of the FirstRand disposals will be categorised as a small
related party transaction for FirstRand;
the acquisition of Discovery shares by the Discovery share trust from FirstRand
in terms of the FirstRand disposals will be categorised as a small related party
transaction for Discovery;
the disposal of Discovery shares by the FirstRand staff trusts to RMBH in terms
of the RMBH transactions will be categorised as a small related party
transaction for FirstRand; and
the issue of RMBH shares to Remgro in settlement of the consideration payable
for the Discovery shares acquired from Remgro in terms of the RMBH transactions
will be categorised as a small related party transaction for RMBH.
(collectively, the "small related party transactions").
Accordingly, FirstRand, Discovery and RMBH are required to appoint an
independent professional expert to provide a fair and reasonable opinion to the
JSE confirming that the terms and conditions of the small related party
transactions are fair and reasonable to shareholders of FirstRand, Discovery and
RMBH respectively.
Details of the fair and reasonable opinions will be announced by FirstRand,
Discovery and RMBH as soon as practicable after the publication of this
announcement and the fair and reasonable opinion statement will lie for
inspection at the registered offices of FirstRand, Discovery and RMBH for a
period of 28 days from the date on which the announcement regarding the fair and
reasonable opinions are released on SENS.
3. Suspensive conditions of the proposed transaction
3.1 Suspensive conditions of the unbundling
The unbundling is conditional upon inter alia the following suspensive
conditions being fulfilled, or waived as the case may be:
approval by the FirstRand shareholders in general meeting of the implementation
of the unbundling by ordinary resolution;
implementation of the FirstRand disposals;
the independent professional expert, where required, confirming to the JSE that
the small related party transactions are fair and reasonable to shareholders of
FirstRand, Discovery and RMBH respectively; and
the approval of the Registrar of Long-Term Insurance, in accordance with section
26(2) of the Long Term Insurance Act, 1998, for RMBH to acquire more than 25.00%
of the Discovery shares.
3.2 Suspensive conditions of the FirstRand disposals and the RMBH transactions
The FirstRand disposals and the RMBH transactions are conditional upon the
following suspensive conditions being fulfiled or waived, as the case may be:
approval by the FirstRand shareholders in general meeting of the implementation
of the unbundling by ordinary resolution; and
the independent professional expert, where required, confirming to the JSE that
the small related party transactions are fair and reasonable to ordinary
shareholders of FirstRand, Discovery and RMBH respectively.
4. Pro forma financial effects
4.1 Pro forma financial effect of the proposed transactions on FirstRand
The table below summarises the unaudited pro forma financial effects of the
proposed transactions on FirstRand shareholders based on the unaudited results
of FirstRand for the six month period ended 31 December 2006.
The unaudited pro forma financial effects are the responsibility of the
FirstRand directors and have been prepared for illustrative purposes only to
provide information about how the proposed transactions may have affected the
financial position of the FirstRand shareholders on the relevant reporting date.
Due to their nature, the unaudited pro forma financial effects may not be a fair
reflection of FirstRand`s financial position after the implementation of the
proposed transactions or of FirstRand`s future earnings.
Unaudited Unaudited Change
unadjusted adjusted
FirstRand FirstRand pro
before the forma after
proposed the proposed
transactions transactions
(cents) (cents) (%)
Earnings per ordinary 103.8 106.2 2.3
share
Fully diluted earnings 100.8 103.1 2.3
per ordinary share
Headline earnings per 88.2 84.1 (4.6)
ordinary share
Fully diluted headline 85.6 81.7 (4.6)
earnings per ordinary
share
Normalised earnings per 98.3 94.7 (3.6)
ordinary share
Fully diluted 98.2 94.6 (3.6)
normalised earnings per
ordinary share
Net asset value per 743.7 693.3 (6.8)
ordinary share
Net tangible asset 661.1 612.1 (7.4)
value per ordinary
share
Notes:
The pro forma financial effects are based on unaudited interim financial results
of FirstRand for the six months ended 31 December 2006. The financial impact on
the earnings of FirstRand are illustrated as if the proposed transactions had
been completed at the beginning of the 2007 financial year, while the impact on
the net assets of FirstRand are shown as if the proposed transaction had been
implemented on 31 December 2006.
The unbundling will be implemented in compliance with section 90 of the
Companies Act, 1973 and in terms of section 46 of the Income Tax Act, 1962.
The following common assumptions have been used in the calculation of both
FirstRand and RMBH pro-forma financial effects:
an income tax rate of 29%;
a capital gains tax rate of 14.5%; and
an overnight JIBAR rate of 9.6% NACM.
In terms of the FirstRand disposals, 21.6 million Discovery shares will be sold
by FirstRand at a price per Discovery share of R26.77. An allowance of capital
gains tax has been included in the calculations.
The net proceed received from the FirstRand disposal is assumed to be invested
at JIBAR.
As a result of the unbundling, Discovery`s assets and liabilities, together with
their effective proportional share of post acquisition reserves will be
eliminated.
The financial effects set out above have been prepared based on IFRS and
interpretations of IFRS applicable at 30 June 2007. It should be noted that
IFRS is continuing to evolve through the issue and or endorsement of new
Standards and Interpretations and developments in the application of recently
issued Standards. For that reason, it is possible that the financial impact and
adjustments reflected above may change before the presentation of the results of
FirstRand Limited for the year ending 30 June 2008.
4.2 Pro forma financial effect of the RMBH acquisitions on RMBH
The table below summarises the unaudited pro forma financial effects of the RMBH
acquisitions on RMBH shareholders based on the unaudited results of RMBH for the
six month period ended 31 December 2006.
The unaudited pro forma financial effects are the responsibility of the RMBH
directors and have been prepared for illustrative purposes only to provide
information about how the RMBH acquisitions may have affected the financial
position of the RMBH shareholders on the relevant reporting date. Due to their
nature, the unaudited pro forma financial effects may not be a fair reflection
of RMBH`s financial position after the implementation of the RMBH acquisitions
or of RMBH`s future earnings.
Unaudited Unaudited Change
unadjusted adjusted RMBH
RMBH before pro forma
the RMBH after the RMBH
acquisitions acquisitions
(cents) (cents) (%)
Earnings per ordinary 157.7 163.5 3.7
share
Fully diluted earnings 153.5 159.3 3.7
per ordinary share
Headline earnings per 134.8 133.0 (1.4)
ordinary share
Fully diluted headline 131.3 129.5 (1.3)
earnings per ordinary
share
Normalised earnings per 155.1 153.1 (1.2)
ordinary share
Fully diluted normalised 155.0 153.1 (1.2)
earnings per ordinary
share
Net asset value per 1,235.7 1,283.4 3.9
ordinary share
Net tangible asset value 1,234.8 1,282.6 3.9
per ordinary share
Notes:
The pro forma financial effects are based on unaudited interim financial results
of RMBH for the six months ended 31 December 2006. The financial impact on the
earnings of RMBH are illustrated as if the RMBH acquisitions and the Discovery
shares acquired by RMBH in terms of FirstRand disposals had been completed at
the beginning of the 2007 financial year, while the impact on the net assets of
RMBH are shown as if the RMBH acquisitions and the Discovery shares acquired by
RMBH in terms of FirstRand disposals had been implemented on 31 December 2006.
It has been assumed that RMBH will acquire, in aggregate, 53.0 million Discovery
shares for a total consideration of R1.416 million with R693 million being
settled in cash and R723 million being settled through the issue of 21.3 million
new RMBH shares at a value of R33.94 per RMBH share.
The R693 million cash portion is assumed to funded through the issue of
preference shares with a coupon of 8.8% per annum. A related STC charge has
been included in the calculations.
The common assumption in note 3 under paragraph 4.1 above have been used to
calculate the pro-forma financial effects for RMBH.
The Financial effects set out above have been prepared based on IFRS and
interpretations of IFRS applicable at 30 June 2007. It should be noted that
IFRS is continuing to evolve through the issue and or endorsement of new
Standards and Interpretations and developments in the application of recently
issued Standards. For that reason, it is possible that the financial impact and
adjustments reflected above may change before the presentation of the results of
RMBH for the year ending 30 June 2008.
4.3 Pro forma financial effects of the unbundling on Discovery and the pro
forma financial effects of the acquisition by the Discovery share trust on
Discovery
The unbundling and the acquisition by the Discovery share trust in terms of the
FirstRand disposals will not have a material financial impact on Discovery or
the Discovery shareholders (other than FirstRand).
5. Effect on BEE
FirstRand has implemented a Black Economic Empowerment ("BEE") transaction
in terms of which the FirstRand Empowerment Trust ("FRET"), the FirstRand
Black Employee Trust, the FirstRand Staff Assistance Trust and the FirstRand
Black Non-executive Trust (collectively "the BEE Staff Trusts") were created
to hold c. 535 million FirstRand shares for the benefit of BEE parties and
black employees of FirstRand. Pursuant to the unbundling, FRET will continue
to hold the Discovery shares received pursuant to the unbundling. However,
the BEE Staff Trusts will dispose of the Discovery shares received pursuant to
the unbundling to RMBH.
Accordingly, Discovery, post the unbundling, will have direct BEE ownership of
approximately 9.53% which equates to approximately 10.36% of Discovery`s South
African businesses.
6. Shareholding structure of Discovery
The table below illustrates the shareholding structure before and immediately
after the proposed transactions.
Shareholder name Before the Immediately
proposed after the
transactions proposed
transactions
FirstRand 57.07% 0.00%
RMBH 0.00% 25.01%
Discovery senior management 14.92% 17.46%
BEE 6.34% 9.53%
Discovery share trust 2.38% 2.94%
Other shareholders 19.29% 45.06%
7. Salient dates and times for the unbundling
The salient dates and times for the unbundling are set out below.
2007
Post circular to FirstRand Monday, 08 October
shareholders on
Last day for receipt of proxy forms Monday, 22 October
for the general meeting by 10:00 on
General meeting to be held at 10:00 Wednesday, 24 October
on
Results of the general meeting Wednesday, 24 October
released on SENS on
Results of the general meeting Thursday, 25 October
published in the press on
Finalisation date announcement and Friday, 26 October
release of entitlement ratio on SENS
by no later than
Last day to trade in FirstRand shares Friday, 2 November
on the JSE to participate in the
unbundling on
FirstRand shares trade "ex" their Monday, 5 November
entitlement to Discovery shares in
terms of the unbundling on
Announcement of specified ratio in Wednesday, 7 November
respect of the apportionment of the
cost/base cost of Discovery for
taxation/CGT purposes on or about
Record date to participate in the Friday, 9 November
unbundling on
Unbundling date on Monday, 12 November
Dematerialised FirstRand shareholders Monday, 12 November
will have their accounts with their
CSDP or broker updated with the
Discovery shares received pursuant to
the unbundling on
Share certificates in respect of the Monday, 12 November
Discovery shares will be posted, by
registered post, at the risk of the
certificated FirstRand shareholder
concerned, to certificated FirstRand
shareholders on
Notes:
These dates and times are subject to change. Any such change will be released
on SENS and published in the press. Any reference to time is a reference to
South African time.
No dematerialisation or rematerialisation of FirstRand share certificates may
take place after the last day to trade in order to participate in the
unbundling.
8. Posting of the FirstRand circular and the general meeting
A circular to FirstRand shareholders providing information on the proposed
transactions and containing a notice of general meeting will be posted to
FirstRand shareholders on or about Monday, 8 October 2007.
A general meeting of FirstRand shareholders, convened in terms of the notice of
general meeting, will be held on Wednesday, 24 October 2007 at the registered
office of FirstRand, 4th Floor, 4 Merchant Place, Corner of Fredman and Rivonia
Roads, Sandton, 2196, for the purpose of considering and, if deemed fit, passing
the resolution required to give effect to the unbundling.
9. Withdrawal of FirstRand cautionary announcement
The FirstRand cautionary announcement released on SENS on 4 September 2007 and
published in the press on 5 September 2007 is hereby withdrawn. Accordingly,
FirstRand shareholders are no longer required to exercise caution when dealing
in their FirstRand shares.
22691
13 September 2007
Johannesburg
Merchant bank and sponsor to FirstRand, RMBH and Remgro
Rand Merchant Bank, a division of FirstRand Bank Limited
Financial advisor to Discovery and transaction sponsor to Discovery and
FirstRand
Deutsche Securities (SA) (Proprietary) Limited
Sponsor to Discovery
RMB
Legal advisor to FirstRand and RMBH
Webber Wentzel Bowens
Legal Advisor to Discovery
edward nathan sonnenbergs
Legal Advisor to Remgro
Hofmeyr, Herbstein and Gihwala
Date: 13/09/2007 17:15:02 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
