| Mon 14 Jul 2008, 18:56 | | DRC - DNR Capital Limited - Restructure of transactions |
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DRC
DRC
DRC - DNR Capital Limited - Restructure of transactions
DNR Capital Limited
(Previously Independent Financial Services Limited)
(Registration No. 1950/037061/06)
Share Code: DRC ISIN Code: ZAE000110375
("DNR Capital" or "the company")
RESTRUCTURE OF TRANSACTIONS
INTRODUCTION
Shareholders are referred to the acquisitions and reverse take-over
announcement dated 25 March 2008 advising that, on 19 March 2008, the
company had concluded an agreement with Jonah Mining (Proprietary)
Limited ("Jonah Mining"), Abalengani Equities (Proprietary) Limited
("Abalengani Equities") and Xeedan Holdings (Proprietary) Limited
("Xeedan Holdings") ("the original transactions agreement").
Shareholders are advised that the parties have restructured their
arrangements as recorded in the original transactions agreement on the
basis that-
- DNR Capital`s economic position is to be substantially the same as it
is under the terms of the original transactions agreement;
- Abalengani Equities and Xeedan Holdings will have no investment in or
relationship with DNR Capital save as might arise pursuant to the
put/call option arrangements in respect of Abalengani Equities`
remaining 50% equity in Abalengani Mining Investment (Proprietary)
Limited ("AMI") and Xeedan Holdings` remaining 50% equity in JB
Platinum Holdings (Proprietary) Limited ("JPH"), the details of which
are contained below;
- Abalengani Equities and Xeedan Holdings will restructure their
interest in Kilken Platinum (Proprietary) Limited ("Kilken"), by
transfering Abalengani Equities` and Xeedan Holdings` respective
interests in each of AMI and JPH to Samada Diamond Holdings
(Proprietary) Limited (to be renamed Abalengani Platinum Holdings
(Proprietary) Limited) ("Abalengani Platinum");
- Jonah Mining`s sole interest in Kilken will be via Jonah Mining`s
shareholding in DNR Capital.
A new agreement has been entered into on 11 July 2008 between the
company, Jonah Mining, Abalengani Equities, Xeedan Holdings and
Abalengani Platinum ("the new transactions agreement"), in terms of
which-
- the original transactions agreement is cancelled;
- Jonah Mining sells to the company 50% of the entire issued share
capital in and all of its claims on loan account against each of -
- AMI ("the AMI sold equity")("the AMI sale transaction"); and
- JPH ("the JPH sold equity")("the JPH sale transaction"),
which collectively hold 8,000 shares in Kilken, representing
approximately 41.8% of the issued share capital in Kilken;
- Abalengani Platinum is granted a put option to dispose of and the
company a call option to acquire the remaining 50% of the entire issued
share capital in and all of its claims on loan account against each of -
* AMI (collectively, "the AMI option equity")("the AMI option
transaction"); and
* JPH (collectively, "the JPH option equity")("the JPH option
transaction"),
which collectively hold 8,000 shares in Kilken, representing
approximately 41.8% of the issued share capital in Kilken;
- Jonah Mining is granted the right to subscribe for up to 200,000,000
new ordinary shares in the issued share capital of DNR Capital at an
issue price of 100 cents per share (the "shares for cash transaction").
This right will expire on the first anniversary of the fulfilment of the
last of the conditions precedent to the transactions;
- if prior to the exercise of the put/call arrangements in respect of
the AMI option equity and the JPH option equity, AMI and JPH unbundle or
otherwise distribute to Abalengani Platinum 50% of the shares in Kilken
held by each of AMI and JPH being in aggregate 8,000 Kilken shares ("the
Kilken option shares") then Abalengani Platinum`s put/call arrangements
with DNR Capital pursuant to the AMI option transaction and the JPH
option transaction shall automatically apply in respect of the Kilken
option shares in the place of the AMI option equity and the JPH option
equity (the "Kilken option transaction"),
(collectively, "the transactions").
RATIONALE FOR THE TRANSACTIONS
The parties have restructured the arrangements as set out in the original
transactions agreement on the basis that DNR Capital`s economic position
is to be substantially the same as it would have been under the terms of
the original transactions agreement. The rationale for the transactions
as set out in the new transactions agreement remains unchanged from that
of the original transactions agreement and is as stated below.
The intention of DNR Capital and Jonah Mining is that the company be
constituted as the JSE listed entity housing the future South African
mining investment opportunities (excluding any coal related investments)
of the Jonah group, comprising Jonah Capital (Proprietary) Limited, Jonah
Mining and their respective subsidiaries, headed by Sir Sam Jonah KBE.
The transactions comprise the first of such investment opportunities for
the company. The transactions and the consequent alliance created with
the Jonah group will constitute Jonah Mining as the controlling
shareholder of the company. The company, as a listed equity investment
company, therefore proposes adopting a new investment strategy whereby
the company will hold strategic investments in companies involved in
mining and/or mining related activities primarily in South Africa.
The Kilken Joint Venture
Kilken is a party to a joint venture agreement with Imbani Minerals
(Proprietary) Limited ("Imbani"), a black economic empowered entity, in
terms whereof Kilken participates in the ratio of 70% to Kilken and 30%
to Imbani ("joint venture"). Kilken is the primary operating partner of
the joint venture.
The joint venture is engaged in the business of metallurgy, the
processing of tailings concentrate and the production of platinum group
metals being platinum, palladium, rhodium and gold.
The joint venture has concluded a `life of mine` sale of tailings and
concentrate agreement with Rustenberg Platinum Mine ("Rustplat"), an
Anglo Platinum Limited subsidiary, and operates from leased premises
owned by Rustplat at the platinum mine known as Amandelbult, near
Rustenburg in the North West Province of South Africa. The joint venture
purchases tailings from Rustplat, processes the tailings and sells the
resultant concentrate and platinum group metals back to Rustplat. The
joint venture`s agreement with Rustplat will continue for so long as
Rustplat produces tailings from the Amandelbult site estimated to be at
least 50 years.
AMI owns 49,63% and JPH owns 33,96% (collectively, 83,59%) of the entire
issued share capital of Kilken.
The implementation of the AMI sale transaction and the JPH sale
transaction will result in DNR Capital effectively owning approximately
41.78% of Kilken, and provides DNR Capital with an entry into and
exposure to the mining industry.
The implementation of the AMI option transaction and the JPH option
transaction (or the Kilken option transaction should that become
applicable) will result in DNR Capital effectively owning approximately
83.6% of Kilken.
TERMS OF THE TRANSACTIONS PURSUANT TO THE RESTRUCTURE
The AMI sale transaction and the JPH sale transaction
- Subject to the fulfilment and/or waiver of the conditions precedent
to the transactions (as detailed below) (the "conditions precedent") and
with effect from the first business day after the fulfilment (or, where
appropriate, waiver) of the last of the conditions precedent (the
"effective date") Jonah Mining will sell the AMI sold equity and the JPH
sold equity to DNR Capital (ex a dividend to be declared and paid by AMI
in an aggregate amount of R7,623,990 and JPH in an aggregate amount of
RR5,216,415 to Jonah Mining and Abalengani Platinum).
- The purchase price of the AMI sold equity is the sum of R267,187,500
payable on the effective date as follows:
* R53,437,500 in cash;
* R44,531,250 by way of the issue to Jonah Mining of cumulative,
compulsory redeemable preference shares at an issue price of 100
cents with a coupon equal to 65% of the prime rate of Investec
Bank Limited, which coupon will be serviced quarterly in arrears.
These preference shares shall not be tradeable on the JSE
("preference shares"); and
* R169,218,750 by way of the issue to Jonah Mining of 169,218,750
ordinary par value shares in the company at 100 cents per share,
which shares will be listed on the JSE.
- The purchase price of the JPH sold equity is the sum of R182,812,500
payable on the effective date as follows:
* R36,562,500 in cash;
* R30,468,750 by way of the issue to Jonah Mining of 30,468,750
preference shares; and
* R115,781,250 by way of the issue to Jonah Mining of 115,781,250
ordinary par value shares in the company at 100 cents per share,
which shares will be listed on the JSE.
The AMI option transaction and the JPH option transaction
- Each of the AMI option equity and the JPH option equity comprises
the remaining 50% of the shares in and all of Abalengani Platinum`s
claims on loan account against each of AMI and JPH, respectively.
- During the period commencing on 1 April 2009 and ending on 31
October 2009, subject to the fulfilment of the condition detailed below:
* Abalengani Platinum will be entitled to put the AMI option equity
and/or the JPH option equity to the company;
* the company shall be entitled to call on Abalengani Platinum to
sell the AMI option equity and/or the JPH option equity to the
company,
at a price equal to -
* for the AMI option equity, the higher of R267,187,500 or the
fair market price of 4 750 shares in Kilken;
* for the JPH option equity, the higher of R182,812,500 or the
fair market price of 3 250 shares in Kilken.
In both instances the fair market price shall be agreed to between
Abalengani Platinum and the company or failing agreement to be
determined by an independent third party (ignoring any minority
discount or marketability discount).
- The exercise of each of the AMI option and the JPH option shall be
conditional on Rustplat having furnished its written consent to the
implementation of the sale of the AMI option equity or the JPH option
equity, as the case may be, pursuant to the exercise of the put/call
option by no later than midnight on 31 January 2009.
- At the election of DNR Capital the purchase price of each of the AMI
option equity and the JPH option equity shall be discharged either:
* in cash or partly in cash (to the extent that the company has
cash resources available to it or the company is able to raise
cash to discharge all or a portion of the purchase consideration
in cash); and/or
* by way of the allotment and issue of ordinary shares in the
company to be issued at a price equal to the volume weighted
average traded price at which the company`s ordinary shares
traded on the JSE over the 30 trading days immediately prior to
the date on which the put/call option is exercised.
Shares for cash transaction
At any time prior to the first anniversary of the effective date, Jonah
Mining is granted a right to subscribe for up to 200 million ordinary par
value shares in the company at an issue price of 100 cents per share.
The Kilken option transaction
At any time prior to the exercise of the AMI option and the JPH option,
should Abalengani Platinum unbundle (or otherwise distribute) its
holdings in each of AMI and JPH so that, pursuant to such an unbundling,
Abalengani Platinum holds its attributable interest in the 8,000 Kilken
shares (currently held through its 50% shareholding in each of AMI and
JPH) directly, both the AMI option transaction and the JPH option
transaction shall ipso facto cease to be of force and effect and be
substituted by the Kilken option transaction on the same terms and
conditions as apply to the AMI option transaction and the JPH option
transaction, details of which are set out above, save that -.
- the Kilken option equity comprises 41,78% of the entire issued share
capital in Kilken;
- the price payable for the Kilken shares shall be an amount equal to
the higher of R450,000,000 or the fair market price of 8,000 ordinary
shares in Kilken (ignoring any minority discount or marketability
discount) as agreed between Abalengani Platinum or failing agreement
to be determined by an independent third party.
Conditions precedent to the transactions
The transactions will be conditional on the fulfilment of the following
conditions precedent namely:
- the receipt by the company of irrevocable undertakings from
shareholders of the company representing at least 75% of all DNR
shareholders entitled to vote in favour and otherwise support the
transactions;
- the passing and registration, where appropriate, of the requisite
special and ordinary resolutions by the company`s shareholders for the
purpose of approving and implementing the transactions;
- Investec Bank Limited ("Investec") confirming that contemporaneously
with the implementation of the AMI sale transaction and the JPH sale
transaction, AMI and JPH will be released from any suretyship granted to
Investec for the obligations of any third party;
- the Securities Regulation Panel ("SRP")agreeing to dispense with any
obligation on the part of Jonah Mining and/or Abalengani Platinum to make
a mandatory offer in terms of the Securities Regulation Code on Takeovers
and Mergers ("the Code"), which mandatory offer would otherwise be
occasioned by the issue of DNR Capital shares issued to discharge the
purchase consideration for the AMI sold equity and/or the JPH sold equity
and/or the implementation of all or any of the AMI option transaction,
the JPH option transaction, the Kilken option transaction and/or the
shares for cash transaction, subject only to a majority of the
independent votes at a general meeting of shareholders of the company
waiving any requirement for such mandatory offer;
- a majority of the independent votes at a meeting of shareholders of
the company agreeing to waive the requirement for Jonah Mining and/or
Abalengani Platinum to make a mandatory offer under the Code occasioned
by the issue of any shares in the company pursuant to the implementation
of the transactions;
- confirmation from the JSE Limited ("JSE") that post implementation
of the AMI sale transaction and the JPH sale transaction, the company
will be suitable for listing as if it were a new applicant and that the
company will continue to satisfy the conditions for listing as set out in
section 4 of the JSE Listings Requirements.
REVERSE TAKEOVER
The implementation of the transactions will result in a reverse takeover
of the company. The JSE will only permit the company to retain its
listing, following the reverse takeover, if the JSE is satisfied that the
company still qualifies for listing. The directors are confident that the
company will continue to qualify for listing after implementation of the
transactions and the reverse takeover.
NEW CORPORATE IDENTITY AND BOARD
Subject to shareholder approval it is proposed that the name of the
company will be changed to Andulela Investment Holdings Limited to
reflect the future investment activities of the listed company.
In addition, as a result of the transactions, the company will tailor its
investment strategy to focus on investment in mining and mining related
companies.
On implementation of the AMI sale transaction and the JPH sale
transaction, the board of directors of the company will be reconstituted
to reflect the new business focus and strategy of the company. Sir Sam
Jonah will be appointed as a non-executive director of the company.
FINANCIAL EFFECTS
The unaudited pro forma financial effects for which the board of DNR
Capital is responsible are presented for illustrative purposes only and
may not fairly present DNR Capital`s financial position, changes in
equity, results of operations or cash flows following the implementation
of the transactions.
The table below sets out the unaudited pro forma financial effects of the
transactions based on the reviewed published interim financial results of
DNR Capital for the six months ended 31 December 2007 ("DNR Capital`s
interim results") and on the unpublished management accounts of AMI, JPH
and the joint venture for the six months ended 31 December 2007.
The pro forma financial effects are presented for four scenarios:
- scenario 1: after the completion of the AMI sale transaction and the
JPH sale transaction;
- scenario 2: after the completion of the AMI sale transaction, the
JPH sale transaction, the AMI option transaction and the JPH option
transaction (or the Kilken option transaction should the Kilken option
transaction substitute the AMI option transaction and the JPH option
transaction as detailed above), where 100% of the purchase consideration
is settled in cash;
- scenario 3: after the completion of the AMI sale transaction, the
JPH sale transaction, the AMI option transaction and the JPH option
transaction (or the Kilken option transaction should the Kilken option
transaction substitute the AMI option transaction and the JPH option
transaction as detailed above), where the purchase consideration is
settled by the allotment and issue of shares in the company; and
- scenario 4: after the completion of the AMI sale transaction, the
JPH sale transaction, the AMI option transaction and the JPH option
transaction (or the Kilken option transaction should the Kilken option
transaction substitute the AMI option transaction and the JPH option
transaction as detailed above) and after the shares for cash transaction
in terms of which the company will issue 200 million shares to Jonah
Mining.
Interim Before the
results transactions
(cents)
Earnings per share (EPS) (5.48)
(1.39)
Headline earnings per (5.48)
share (HEPS) (1.39)
Net asset value per share (9.3)
(NAV) 71.06
Net tangible asset value (9.3)
per share (NTAV)
71.06
Number of ordinary shares 34 000
in issue (`000)
134 000
After the transactions
Scenar % Scenar % Scenar % Scenari %
io 1 chang io 2 change io 3 chang o 4 chang
e e e
(cents (cents (cents (cents)
) ) )
Earnings per 0.28 105% (5.59) (2)% 0.54 90% 1.03 119%
share (EPS)
Headline 0.28 105% (5.59) (2)% 0.54 90% 1.03 119%
earnings per
share (HEPS)
Net asset 89.55 1 91.33 1 082% 95.82 1 96.60 1
value per 063% 130% 139%
share (NAV)
Net tangible 89.55 1 (116.9 (1 (4.61) 50% 14.96 261%
asset value 063% 6) 158)%
per share
(NTAV)
Number of 419 419 869 1 069
ordinary 000 000 000 000
shares in
issue (`000)
Notes / Assumptions
- The "Interim results" column reflects the EPS, HEPS, NAV and NTAV as
disclosed in DNR Capital`s interim results.
- The "Before the transactions" column reflects the EPS, HEPS, NAV and
NTAV after allotment and issue of 100 000 000 ordinary shares in terms of
the specific issue at R1,00 per ordinary share as detailed in the
circular to shareholders dated 15 November 2007.
* The company has issued 100 000 000 ordinary shares in terms of the
specific issue at R1,00 per ordinary share.
* Assuming the proceeds of the specific issue, net of costs, were
received on 1 July 2007 and that the aforementioned costs were set off
against the company`s share premium.
* No adjustments have been passed to the income statement in
respect of the specific issue since DNR Capital did not incur an interest
expense against which any interest income could have been set off, and
any share issue expenses incurred were set off against the company`s
share premium.
- The "After the transactions" column reflects what the NAV and NTAV
would have been at 31 December 2007 had the transactions taken place on
31 December 2007 and what the EPS and HEPS would have been had the
transactions taken place on 1 July 2007.
- In respect of scenario 1:
* The purchase consideration of R267,187,500 in respect of the AMI
sale transaction is settled as follows:
- R53,437,500 in cash;
- R44,531,250 by way of issue to Jonah Mining of
cumulative, compulsory redeemable preference shares,
bearing a coupon rate of 10.08%, being 65% of the prime
lending rate;
- R169,218,750 by way of issue to Jonah Mining of
ordinary par value shares in the company at R1,00 per
share.
* The purchase consideration of R182,812,500 in respect of the JPH
sale transaction is settled as follows:
- R36,562,500 in cash;
- R30,468,750 by way of issue to Jonah Mining of cumulative,
compulsory redeemable preference shares, bearing a coupon
rate of 10.08%, being 65% of the prime lending rate;
- R115,781,250 by way of issue to Jonah Mining of ordinary par
value shares in the company at R1,00 per share.
* AMI and JPH have been accounted for as associate companies.
* The calculation in the "After the transactions" column is based on
419 million DNR Capital shares in issue.
- In respect of scenario 2:
- The purchase consideration of R267,187,500 in respect of the
AMI sale transaction is settled in cash.
- The purchase consideration of R182,812,500 in respect of the
JPH sale transaction is settled in cash.
* AMI and JPH are consolidated as subsidiary companies of DNR Capital.
* The exercising of the AMI and JPH option acquisitions results in DNR
Capital effectively owning 85% of Kilken, thus constituting Kilken a
subsidiary company.
* Interest on the cash consideration has been calculated at 12% for
the period.
* Interest payable on the cash consideration and shareholders loans in
AMI and JPH is not deductible for tax purposes.
* The calculation in the "After the transactions" column is based on
419 million DNR Capital shares in issue.
- In respect of scenario 3:
* The purchase consideration of R267,187,500 in respect of the AMI
option transaction is settled by way of the issue of ordinary par
value shares in the company at R1,00 per share.
* The purchase consideration of R182,812,500 in respect of the JPH
option transaction is settled by way of the issue of ordinary par
value shares in the company at R1,00 per share.
* Share issue expenses have been written off against the company`s
share premium.
* The calculation in the "After the transactions" column is based
on 869 million DNR Capital shares in issue.
* Interest payable on the shareholders loans in AMI and JPH is not
deductible for tax purposes.
* The intangible assets being the difference between the purchase
consideration and the attributable net asset value has been
accounted for as goodwill.
- In respect of scenario 4:
* Jonah Mining will fully exercise their right to subscribe for 200
million ordinary shares at R1,00 per share in terms of the shares
for cash transaction.
* It has been assumed that in respect of the AMI option transaction
and the JPH option transaction (or the Kilken option transaction,
if that is applicable) the purchase consideration is settled by
the allotment and issue of shares in the company.
* Interest on cash balances has been calculated at an interest
rate of 9%, for 6 months.
- Taxation has been provided for at 29% and interest payable on the
shareholders loans in AMI and JPH is not deductible for tax
purposes.
IRREVOCABLE UNDERTAKINGS
Irrevocable undertakings in favour of and otherwise in support of the
transactions have been received from shareholders of the company
representing in excess of 75% of all shareholders of the company.
FURTHER DOCUMENTATION
An application will be made to the SRP under Rule 8.7 of the Code to
dispense with the obligation on the part of Jonah Mining and/or
Abalengani Platinum to make any mandatory offer under Rule 8 of the Code
which would otherwise be occasioned by any of the transactions. A further
announcement to shareholders in this regard will be published in due
course.
A circular and revised listing particulars (which will be subject to the
prior approval of the SRP and the JSE) containing further details of the
transactions will be sent to the company`s shareholders in due course.
14 July 2008
Corporate advisor, legal advisors and transaction sponsor
Java Capital (Proprietary) Limited
Attorneys to the company
Fluxmans Attorneys
Company sponsor
PSG Capital (Proprietary) Limited
Date: 14/07/2008 18:55:59 Produced by the JSE SENS Department.
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