| Tue 2 Oct 2007, 15:00 | | PGR - Peregrine Holdings - Acquisition Of A Contro |
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PGR
PGR
PGR - Peregrine Holdings - Acquisition Of A Controlling Interest In The Stenham
Group And Withdrawal Of Cautionary Announcement
PEREGRINE HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number 1994/006026/06)
Share code: PGR ISIN: ZAE000078127
("Peregrine" or "the company")
ACQUISITION OF A CONTROLLING INTEREST IN THE STENHAM GROUP AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Peregrine has concluded a non binding heads of agreement ("the transaction") in
terms of which Peregrine will, subject to entering into formal acquisition and
shareholder agreements and the fulfilment of the conditions set out below ("the
conditions"), acquire at least 65% of Stenham Group Limited ("SGL"), with effect
from 1 October 2007 ("the effective date").
The Stenham group, being SGL and its subsidiaries, ("Stenham") was founded in
1901 and is an independent privately-owned wealth and asset management group
providing financial solutions and products to high net worth private clients and
institutions. Stenham currently has in excess of US$ 4 billion under management,
with over US$ 2 billion under management in its funds of hedge funds and a
further US$ 2 billion in its property investments. It has core operating offices
in the Channel Islands and the United Kingdom with marketing and client service
representation in South Africa, Israel and the Netherlands.
The acquisition of a controlling interest in Stenham will enhance Peregrine`s
position as a provider of wealth and asset management solutions to high net
worth individuals and selected institutional investors. It will meaningfully
augment the Peregrine group`s strategy of building capacity in selected aspects
of the hedge fund industry, with Stenham having a long-established reputation
and an excellent 20-year track record in running multi-manager hedge fund
portfolios and funds of funds.
The addition of a property investment and management business will further
diversify the nature of the revenue streams earned by the Peregrine group. The
type of operation and the key skills of the management team have enabled this
division to generate excellent returns from the asset class over time through
differing market conditions and across several international jurisdictions.
The transaction is seen as being highly complementary to the existing business
philosophy of the Peregrine group and together with immediate synergies, also
provides a foundation for members of the Peregrine group to internationalise
their businesses over time.
THE TRANSACTION
Peregrine will, directly or through a wholly owned subsidiary, acquire at least
65% of the shares in SGL (or another holding company of the Stenham group) from
Stenham Group Holdings Limited ("the seller") for a purchase consideration based
on an enterprise value of GBP150 million for SGL from which enterprise value
external debt (currently in the region of GBP11.3 million) is to be deducted.
Certain of the ultimate shareholders of SGL will be given an opportunity to sell
more than 65% of their indirect shareholding (in which event Peregrine will
acquire such additional shareholding) while other shareholders will be required
to retain a greater proportion of their shareholding. The exact percentage
holding to be acquired by Peregrine therefore cannot be determined precisely at
this stage but will be between 65% and 75%.
The purchase consideration is payable in cash within fifteen business days of
the fulfilment of the last of the conditions. Peregrine intends funding the
purchase consideration by a combination of internal resources and the raising of
debt.
CONDITIONS TO THE TRANSACTION
The transaction is conditional upon, inter alia, the following:
- Peregrine conducting and being satisfied with the results of a financial,
legal, taxation and commercial due diligence into SGL, its subsidiaries and
their respective businesses;
- formal approval of the transaction by the Peregrine board of directors;
- Peregrine receiving exchange control approval in respect of the transaction
and any obligations arising in terms thereof;
- to the extent required by the Listings Requirements of the JSE Limited, the
shareholders of Peregrine approving the transaction;
- the parties to the transaction receiving any material third party,
regulatory or tax consents or approvals on satisfactory terms (including, in
particular, the consent of the United Kingdom Financial Services Authority and
the Guernsey Financial Services Commission to the change in control of SGL) and
such consents and approvals remaining in full force and effect pending
completion.
The parties aim to sign definitive agreements as soon as reasonably possible but
in any event no later than 29 February 2008.
PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects for which the board of Peregrine is
responsible are presented for illustrative purposes only and may not fairly
present Peregrine`s financial position, changes in equity, results of operations
or cash flows following implementation of the transaction.
The table below sets out the unaudited pro forma financial effects of the
transaction based on the published financial results of Peregrine for the
financial year ended 31 March 2007.
Before the After the
transaction transaction
(cents) (cents) %
change
Basic earnings per share (EPS) 193,6 201,4 4
Diluted basic earnings per share 179,1 186,3 4
(DEPS)1
Net tangible asset value per share 419,4 (237,7) (156.7)
(NTAV)
Number of shares in issue (`000) 228,129 228,129 -
Weighted average number of ordinary 193,556 193,556 -
shares in issue (`000)
Diluted weighted average number of 209,243 209,243 -
shares in issue (`000)
1 - Disclosure in respect of effect on diluted EPS and diluted headline EPS is
relevant in light of the issue by Peregrine during August 2007 of 18 million
shares in terms of a staff deferred purchase scheme.
Notes / Assumptions
(i) The proforma results are based on the published financial results of
Peregrine for the financial year ended 31 March 2007 and on the unaudited
results of the Stenham group for its financial year ended 30 September 2007.
(ii) The EPS, DEPS and NTAV per share after the proposed transaction are based
on the assumptions that:
- Peregrine purchased 65% of the shares in Stenham;
the R: GBP exchange rate for balance sheet purposes was R14.03 : GBP1 (the rate
of exchange as at 30 September 2007) and R14.15 : GBP1 (the average rate of
exchange for the 12 months ended 30 September 2007) for purposes of translation
of the income statement;
- the purchase consideration was R1 266 million based on an enterprise value
of GBP150 million, less external debt and assuming an exchange rate at balance
sheet date of R14.03:GBP1;
- the purchase consideration was debt funded at an after tax cost of funding
of 9.5% per annum, assuming a 36 month repayment term and quarterly repayments.
For the sake of simplicity in preparation of these proforma effects the debt
repayment profile has been fixed. This assumption, however, does not take
account of the group`s ability to repay debt early should the directors elect to
do so; and
- on the effective date Peregrine paid transaction costs in the estimated
amount of R3,5 million, which costs have been capitalised in accordance with
IFRS 3.
(iii) The EPS after the proposed transaction are based on:
- attributable earnings for Peregrine as at 31 March 2007, adjusted for
funding costs and the unaudited financial results of Stenham for the 12 month
period ended 30 September 2007 converted at the average rate of exchange -
applicable to that period; and
- the weighted average number of ordinary shares of 193,1 million in issue
for the year ended 31 March 2007.
(iv) Diluted EPS after the transaction are based on the diluted weighted average
number of 209,2 million shares in issue for the year ended 31 March 2007.
(v) The NTAV per share after the proposed transaction is based on 195,7 million
net shares in issue as at 31 March 2007. Net shares in issue comprise 228,1
million ordinary shares in issue less 32,4 million treasury shares as at 31
March 2007.
(vi) The tax rate is 29% and STC on preference share funding is 10%.
(vii) The difference between the cost of the acquisition and the fair value
of the identifiable assets acquired has been classified as goodwill. Goodwill
is not amortised but is tested for impairment annually. Accordingly, there is no
income statement impact in respect of the recognition of goodwill for purposes
of preparation of the proforma effects. To the extent that, as part of the due
diligence process, an intangible asset separate from goodwill is identified, the
fair value of which can be reliably measured, the intangible asset will be
separately recognised on the face of the balance sheet. Intangible assets with a
finite useful life are depreciated on a straightline basis to write off the cost
of the asset to the current value of its expected residual value over its
expected useful life. The depreciation charge will have a negative effect on
both basic and headline earnings per share
(viii) The effects of the transaction on headline EPS, diluted headline EPS
and net asset value per share are not material and are therefore not shown.
FURTHER ANNOUNCEMENTS AND DOCUMENTATION
Further announcements regarding the transaction and progress as regards the
signing of definitive agreements will be made as appropriate.
As the transaction constitutes a category 1 transaction in terms of the JSE`s
Listings Requirements a circular containing more detail in relation to the
transaction and incorporating a notice of general meeting will be sent to
Peregrine shareholders in due course.
WITHDRAWAL OF CAUTIONARY
In light of this announcement, shareholders are no longer required to exercise
caution in their dealing in shares.
Rosebank
2 October 2007
Sponsor
Java Capital (Proprietary) Limited
Date: 02/10/2007 15:00:02 Produced by the JSE SENS Department.
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