| Wed 30 Jul 2008, 17:33 | | CLI- Clientele Limited - Investment in Nigeria and related party transaction |
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CLI
CLI
CLI- Clientele Limited - Investment in Nigeria and related party transaction
CLIENTELE LIMITED
Incorporated in the Republic of South Africa
Registration Number: 2007/023806/06
Share code: CLI
ISIN: ZAE000117438
("Clientele")
INVESTMENT IN NIGERIA AND RELATED PARTY TRANSACTION
1. Introduction
Shareholders are informed that KC 2008 Limited ("KC 2008"), a company
incorporated and registered in Nigeria, will, in terms of an agreement to
be formally executed on or about 1 August 2008 but which is nonetheless
binding on the parties thereto, inter alia:-
1.1 subscribe for 25% of the issued share capital of Independent Field
Advertisers Limited ("IFA Nigeria") which is effectively whollyowned by
Clientele ("Transaction");
1.2 contribute share and loan capital to IFA Nigeria.
2. Background Information
2.1 The board of Clientele ("board") recently undertook a thorough
investigation into the establishment of a business in Nigeria. The board
resolved to pursue the opportunity subject to:-
2.1.1 the completion by Clientele`s management of a comprehensive due
diligence investigation into the establishment of such a
business and the viability taking into account all relevant
factors, and the board being satisfied with the results
thereof;
2.1.2 the conclusion of satisfactory arrangements, necessary for the
conduct of the business, with an insurance company registered
and operating in Nigeria.
All of the criteria necessary for the pursuit of the business have been
met.
2.2 In anticipation of a final decision as whether or not to proceed with
the venture, Clientele caused IFA Nigeria to be incorporated.
Clientele, through a whollyowned subsidiary, namely Clientele Life
(Netherlands) Cooperatieve U.A. ("ClienteleSub"), owned the entire
issued share capital of IFA Nigeria immediately prior to the
subscription referred to in paragraph 5.2.
2.3 IFA Nigeria will utilise the expertise of Clientele`s IFA distribution
channel to market and distribute life insurance policies specifically
tailored for the Nigerian market. Clientele`s IFA distribution channel
has been used as a very effective and appropriate means to distribute
life insurance policies to the predominantly black middle to lower
income sectors of the South African population over the last ten years.
Clientele believes that this distribution model is an African solution
that could be used very effectively in selected countries in Africa and
specifically in Nigeria. Clientele will, through ClienteleSub, receive
annual royalties from IFA Nigeria for the know-how imparted in relation
to the IFA distribution channel.
2.4 The policies will be underwritten by ADIC Life Assurance Limited
("ADIC"), the insurance company selected by Clientele to underwrite
life insurance business generated by IFA Nigeria. IFA Nigeria is a
licensed brokerage company that will develop and market products on
behalf of ADIC. In addition, IFA Nigeria will perform certain
administration functions for ADIC relating to the sale of such
products.
3.Rationale
The Transaction:-
3.1 facilitates an investment in IFA Nigeria by Nigerian shareholders,
which is both necessary and desirable;
3.2 secures for IFA Nigeria substantial capital and the bulk of the funding
necessary for the capitalisation of the company and the conduct of its
business.
4.KC 2008 Shareholding
4.1 The shares in the capital of KC 2008 are owned as to 50,1% thereof by
Kunoch Limited ("Kunoch") and as to 49,9% thereof by IVM Intersurer BV
or its nominee ("IVM Co").
4.2 Kunoch is in turn a company incorporated and registered in Nigeria and
is controlled by a private equity company which is effectively owned
and controlled by a prominent Nigerian family.
4.3 IVM Co is in turn a Netherlands registered company that has a
significant interest in the Hollard insurance group. It was the
influence of IVM Co that secured Kunoch`s agreement to invest in IFA
Nigeria. Kunoch stipulated as a condition however that IVM Co coinvest
jointly with it through the vehicle of a corporate entity, KC 2008.
5. Salient Terms of the Transaction
5.1 The aggregate subscription price for 25% of the issued share capital of
IFA Nigeria is effectively US$16,5 million (subject to adjustment if
any portion of the Designated Loan referred to in paragraph 5.5 has
been repaid) and will be settled in accordance with the provisions
referred to in paragraphs 5.2 to 5.5.
5.2 KC 2008 will initially subscribe for 25% of the issued share capital of
IFA Nigeria for a subscription price of US$6 million.
5.3 KC 2008 is obliged, on or before 31 December 2008, to subscribe for one
additional share in the capital of IFA Nigeria for a subscription price
of US$2 million. So as to maintain its shareholding ratio,
ClienteleSub will simultaneously subscribe for three additional
ordinary shares in the capital of IFA Nigeria at its par value.
5.4 ClienteleSub is obliged, on or prior to 31 December 2008, to subscribe
for three additional ordinary shares in the capital of IFA Nigeria for
a subscription price of US$1 million. Simultaneously therewith, one
additional share will be allotted and issued to KC 2008 at its par
value so as to maintain the 75 : 25 shareholding ratio as between
ClienteleSub and KC 2008.
5.5 KC 2008 is obliged, on 31 December 2008, to lend US$2 million to IFA
Nigeria ("Designated Loan"). The Designated Loan, which is subject to
various permutations, must be repaid by not later than 31 December
2013. If the call option referred to in paragraph 5.6 is exercised by
KC 2008, the balance of the Designated Loan will effectively be
capitalised on the basis that the shareholding ratio as between
ClienteleSub and KC 2008 of 75 : 25 will be maintained.
5.6 KC 2008 is entitled, at any time on or after 1 January 2009 until 31
December 2010, to call upon IFA Nigeria to allot and issue to it one
additional ordinary share in the capital of IFA Nigeria for a
subscription price of US$7,5 million less an amount equal to 50% of the
then outstanding capital balance of the Designated Loan ("call
option"). If the call option is exercised, IFA Nigeria will
simultaneously allot and issue to ClienteleSub three new ordinary
shares in the capital of IFA Nigeria at its par value so as to maintain
the shareholding ratio of 75 : 25. If KC 2008 does not exercise the
call option in its favour, it is obliged to offer to sell to
ClienteleSub, for a nominal consideration, so many shares in the
capital of IFA Nigeria as constitutes 10% of its entire issued share
capital.
5.7 The relationship between ClienteleSub and KC 2008 inter se as
shareholders of IFA Nigeria is regulated on terms and conditions usual
for transactions of such a nature. The salient features of their
relationship are that:-
5.7.1 resolutions in relation to certain minority protected matters
require unanimity;
5.7.2 KC 2008 will, for so long as it holds 15% or more of the issued
share capital of IFA Nigeria, be entitled to appoint two
directors of the company provided that if its shareholding
falls below 15% but is more than 5% it will be entitled to
appoint only one director;
5.7.3 there are standard preemptive rights as between ClienteleSub and
KC 2008.
5.8 The Transaction will be effective from 1 July 2008.
6. Financial Effects
6.1 The pro forma financial effects of the Transaction are presented for
illustrative purposes only. Due to the nature of the Transaction, they
may not give a fair reflection of the effects of the Transaction on
Clientele`s financial position. No effects on earnings are given as
the Transaction essentially involves an issue of shares for cash in the
capital of IFA Nigeria, the operations of which only commence on 31
July 2008. The subscription proceeds will be applied in developing the
business of IFA Nigeria but the return that will flow from that
investment is uncertain at this early stage.
6.2 Set out below are the unaudited pro forma financial effects of the
Transaction on the net assets and net tangible assets per share of
Clientele, based on the unaudited interim results for the six month
period ended 31 December 2007. The directors of Clientele are
responsible for the preparation of the unaudited pro forma financial
information.
Before the After the %
Transaction Transaction change
Net asset value per share 43,08 55,67 29,2
(cents)
Net tangible asset value 43,08 55,67 29,2
per share (cents)
Notes:
The net asset value per share and net tangible asset value per share figures in
the "After the Transaction" column have been calculated on the basis that the
Transaction was effected on 31 December 2007 and that the subscription proceeds
referred to in paragraphs 5.2.and 5.3 had been received.
The conversion rate at 31 December 2007 was ZAR6,78 : US$1.
7. Small Related Party Transaction
7.1 This announcement is published in accordance with the provisions of
paragraph 10.7(c) of the Listings Requirements of JSE Limited ("the
JSE").
7.2 By virtue of IVM Co`s shareholding in KC 2008, the Transaction is
categorised as a small related party transaction. IVM Co has a
significant interest in the Hollard insurance group, which also
controls Clientele. However, being a small related party transaction,
no action is required by Clientele shareholders.
7.3 Clientele is obliged to provide the JSE with written confirmation from
an independent professional expert acceptable to the JSE that the terms
of the transaction with the related party are fair as far as the
shareholders of Clientele are concerned ("Confirmation"). Details of
the Confirmation will be announced by Clientele as soon as practicable
after the publication of this announcement. The Confirmation will lie
for inspection at Clientele`s registered office for a period of 28 days
from the date of such announcement.
Johannesburg
30 July 2008
Attorneys Sponsor
Edward Nathan PricewaterhouseCoopers
Sonnenbergs Inc Corporate Finance
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Date: 30/07/2008 17:33:07 Produced by the JSE SENS Department.
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