| Thu 20 Mar 2008, 17:35 | | PGR - Peregrine Holdings - Further Update In Regard To The Proposed |
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PGR
PGR
PGR - Peregrine Holdings - Further Update In Regard To The Proposed
Acquisition 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")
FURTHER UPDATE IN REGARD TO THE PROPOSED ACQUISITION OF A CONTROLLING INTEREST
IN THE STENHAM GROUP AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Shareholders are referred to the announcements of 2 October 2007 and 18
February 2008 regarding the proposed acquisition by Peregrine of the Stenham
group of companies through its wholly-owned subsidiary, Peregrine Financial
Services Holdings Limited (the "transaction").
Shareholders are advised that the parties have now signed the formal
acquisition agreement on the terms contemplated in the announcement of
18 February 2008, which are as follows:
- Peregrine Financial Services Holdings Limited ("PFS") will initially
purchase (the "initial acquisition") 51% of the shares in Stenham Limited
(the "Stenham shares"), a newly constituted holding company of the
Stenham group of companies (the "Stenham group") (following a corporate
reorganisation of the group) from the current shareholders (the "Stenham
vendors"). In addition, in terms of an option, PFS will be entitled to
purchase an additional 14% of the Stenham shares in the Stenham group
from the Stenham vendors.
- The purchase price for the Stenham shares acquired in terms of the
initial acquisition is GBP75,705 million based on an enterprise value of
GBP150 million in respect of the Stenham group to which valuation certain
adjustments have been made (the "initial Stenham value").
- This purchase price will be paid by Peregrine to the Stenham vendors on 4
April 2008 (the "completion date"), will be settled partly in cash and
partly in terms of loan notes issued by PFS and will be funded by way of
an onshore bank loan and internal cash resources of the company.
- In addition to this purchase price, an additional consideration of up to
but not exceeding GBP5 million will be payable to certain members of
management, in the event that specified performance criteria for each of
the businesses within the Stenham group are met within the 3 year period
immediately following the completion date or, in the event that within
such 3 year period, a material part of the business of the Stenham group
is sold to a third party (specifically excluding a sale pursuant to a
listing and an initial public offering).
- In terms of the option referred to above, PFS will be entitled to
purchase an additional 14% of the shares in the Stenham group (the
"option shares") from the Stenham vendors. The option may be exercised
from 1 April 2010 to 30 April 2010, in whole and not in part only.
- If PFS exercises the option, the purchase price for the option shares
will be GBP25,237 million plus 14% of all retained income accumulated
during the period from 1 October 2007 to date of payment of the purchase
price of the option shares. This purchase price will be settled in cash.
CONDITIONS TO THE TRANSACTION
The transaction remains conditional on fulfilment of the following conditions:
- approval of the transaction by the Peregrine shareholders as required in
terms of the Companies Act and by the rules of the JSE;
- completion of the internal reorganisation of the Stenham group as
referred to in the announcement of 18 February 2008; and
- conclusion of a shareholders agreement between the parties.
PRO FORMA FINANCIAL EFFECTS
The pro forma financial information set out below has been prepared for
illustrative purposes only, to provide information on how the transaction may
have impacted on the historical results and financial position of the company.
Because of its nature, the pro forma financial information may not give a fair
reflection of the company`s financial position after the transaction, or the
effect of the transaction on the company`s future earnings. The calculation of
the pro forma financial information is the responsibility of the directors.
The pro forma financial effects are presented for two scenarios:
- scenario 1: the acquisition of 51% of the Stenham shares (in terms of the
initial acquisition); and
- scenario 2: the acquisition of 65% of the Stenham shares (in terms of the
initial acquisition and the exercise of the option).
PRO FORMA FINANCIAL EFFECTS
Before After the transaction
the
transacti
on
Scenario 1: % Scenario 2: % change
Acquisition change Acquisition
of 51% of 65%
(cents) (cents) (cents)
Basic 129.7 134.3 3.6% 131.0 1.0%
earnings per
share (EPS)
Headline 127.0 130.5 2.8% 126.9 0.0%
earnings per
share (HEPS)
Diluted 129.7 134.3 3.6% 131.0 1.0%
basic
earnings per
share (DEPS)
Diluted 127.0 130.5 2.8% 126.9 0.0%
headline
earnings per
share
(DHEPS)
Net asset 585.0 585.0 0.0% 585.0 0.0%
value per
share (NAV)
Net tangible 460.1 (2.9) -100.6% (187.7) -140.8%
asset value
per share
(NTAV)
Number of 228,129 228,129 228,129
ordinary
shares in
issue (`000)
Treasury 12,869 12,869 12,869
shares held
(`000)
Weighted 199,819 199,819 199,819
average
number of
ordinary
shares in
issue (`000)
Diluted 199,819 199,819 199,819
weighted
average
number of
ordinary
shares in
issue (`000)
Notes:
1. The pro forma financial information is based on the unaudited published
results of Peregrine for the six months ended 30 September 2007 and on
pro forma results of Stenham Limited for the six months ended
30 September 2007 as will be fully detailed in the circular to be sent to
shareholders in respect of the transaction. Per the requirements of the
JSE, the latest published financial results of the company are required
to be utilised as the basis for the pro forma information. As a result,
the pro forma income statement is for a six month, rather than a full
year, period.
2. The EPS, HEPS, DEPS, DHEPS, NAV and NTAV per share after the proposed
transaction are based on the following assumptions:
2.1. in the case of EPS, HEPS, DEPS and DHEPS, that the transaction was
completed on 1 April 2007 and, in the case of NAV and NTAV per share
that the transaction was completed on 30 September 2007.
2.2. a R : GBP exchange rate for balance sheet purposes of R14.03 : GBP1
(the rate of exchange as at 30 September 2007) and R14.15 : GBP1
(the average rate of exchange for the six months ended 30 September
2007) for purposes of translation of the income statement.
2.3. in respect of scenario 1:
2.3.1. a purchase consideration for the Stenham shares acquired
under the initial acquisition of GBP73,211 million (the
scenario 1 value) based on an enterprise value of GBP150
million, less external debt and adjusted for the net
current assets of the Stenham group as at the effective
date (This differs from the purchase price of GBP75,705
million referred to above as it does not take into account
the further adjustment for the period between 1 October
2007 and the completion date as, for the purposes of the
pro forma results, no account has been taken of earnings
of the Stenham group for the period between 30 September
2007 and the completion date, which earnings are expected
to compensate for such adjustment);
2.3.2. Peregrine entering into an asset swap in respect of
GBP54,151 million of the purchase price at a rate of
R13.85 : GBP1.The balance of the purchase price translated
at the exchange rate at balance sheet date of R14.03 :
GBP1. The total purchase price accordingly amounts to
R1,017 million for scenario 1;
2.3.3. Peregrine funding the transaction through a loan in the
amount of R150 million and from the repayment of existing
loans to PFS, by subsidiaries of the group. The
subsidiaries will raise funding via replacement loans in
the amount of R600 million. For purposes of the pro forma
financial information the loans bear interest at an after
tax cost of funding of 10.37% per annum, assuming a 36
month repayment term with quarterly repayments. For the
sake of simplicity in preparation of these pro forma
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. The maximum term of the funding facility in place
allows for a seven year repayment profile;
2.3.4. the balance of the purchase price, being R267,405 million,
funded out of internal cash resources at an opportunity
cost of 8.9% before tax (6.3% after tax) being the call
rate for the six month period to September 2007;
2.4. in respect of scenario 2:
2.4.1. a purchase consideration for the acquisition of an
additional 14% of the Stenham shares on exercise of the
option of GBP25,237 million. The consideration has been
translated at the forward exchange rate of R16.10:GBP1.
Whilst the purchase consideration for the option has been
translated at a forward exchange rate of R16,10 : GBP1,
the additional earnings acquired as a result of the
exercise of the option have been translated at a
historical rate of R14,15 : GBP1 as per 2.2. Accordingly,
no recognition has been given to the increase in Rand
earnings as a result of the higher forward Rand exchange
rate;
2.4.2. the purchase consideration to be funded out of external
preference share funding at a cost of funding of 11.20%
per annum, assuming a 36 month repayment term and
quarterly repayments. For the sake of simplicity in
preparation of these pro forma 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.
3. On the implementation of the transaction, Peregrine paid estimated
transaction costs in the amount of R10,130 million, which costs have been
capitalised in accordance with IFRS 3.
4. The EPS and HEPS after the proposed transaction are based on:
4.1. attributable and headline earnings for Peregrine for the six month
period ended 30 September 2007, adjusted for funding costs and the
pro forma financial results of Stenham Limited for the six month
period ended 30 September 2007 converted at the average rate of
exchange applicable to that period, and
4.2. the weighted average number of ordinary Peregrine shares of 199,819
million in issue for the six months ended 30 September 2007.
5. Diluted EPS and HEPS after the transaction are based on the diluted
weighted average number of 199,819 million shares in issue for the six
months ended 30 September 2007.
6. The NAV and NTAV per share after the proposed transaction are based on
215,260 million net shares in issue as at 30 September 2007. Net shares
in issue comprise 228,129 million ordinary shares in issue less 12,869
million treasury shares as at 30 September 2007.
7. An income tax rate of 29%.
8. The difference between the purchase price of the Stenham shares acquired
under the transaction and the fair value of the identifiable assets
acquired has been classified as goodwill. Goodwill is not amortised but
is tested for impairment annually. There is thus no income statement
impact in respect of the recognition of goodwill for purposes of
preparation of the pro forma effects. To the extent that, as part of the
valuation process (to be completed following the transaction), 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 straight line 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.
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
In light of this announcement shareholders are no longer required to exercise
caution when dealing in the company`s shares.
SALIENT DATES AND FURTHER DOCUMENTATION
The following are the applicable salient dates in respect of obtaining
shareholder approval for the transaction:
2008
Circular posted on Thursday, 20 March
Receipt of forms of proxy in Thursday, 3 April
respect of the general meeting by
09h00 on
General meeting at 09h00 on Friday, 4 April
Results of the general meeting Friday, 4 April
published on SENS on
Results of the general meeting Monday, 7 April
published in the press on
Notes:
1. The circular will incorporate a notice of general meeting, which meeting
is convened for the purposes of obtaining shareholder approval for the
transaction.
2. The above dates and times are South African and are subject to change.
Any changes will be released on SENS and published in the press.
Rosebank
20 March 2008
Corporate advisor and sponsor
Java Capital (Proprietary) Limited
Date: 20/03/2008 17:35:27 Produced by the JSE SENS Department.
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