| Thu 7 Aug 2008, 16:52 | | BFS - Blue - Proposed Acquisition Of Credit U Holdings Limited And Withdrawal Of |
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BFS
BFS
BFS - Blue - Proposed Acquisition Of Credit U Holdings Limited And Withdrawal Of
Cautionary Announcement
BLUE FINANCIAL SERVICES LIMITED
(Registration number 1996/006595/06)
(Incorporated in the Republic of South Africa)
JSE Code: BFS
ISIN: ZAE000083655
("Blue" or "the company")
PROPOSED ACQUISITION OF CREDIT U HOLDINGS LIMITED AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. Introduction
1.1 Blue is pleased to announce that the company has made a firm offer ("the
offer") to the board of Credit U Holdings Limited ("Credit U") on 7 August
2008 to acquire the entire issued ordinary share capital of Credit U,
excluding the 2 250 000 treasury shares held by the Employee Share
Incentive Scheme ("the Credit U acquisition"). The offer entails that
Credit U ordinary shareholders will be offered 44.5 Blue ordinary shares
for every 100 Credit U ordinary shares held. The offer amounts to a total
purchase consideration of R278 147 250 (based on 115 750 000 Credit U
ordinary shares in issue excluding 2 250 000 treasury shares held by the
Credit U Employee Share Incentive Scheme), which effectively translates
into a price of 240 cents per Credit U ordinary share.
1.2 Blue will issue 51 508 750 ordinary shares at an issue price of 540 cents
per share. In terms of the offer, 22.25 (50%) of the Blue ordinary shares
receivable by every Credit U ordinary shareholder will be pre-placed with
Mr Dave van Niekerk (a shareholder and executive director of Blue) ("the
underwriter") for a cash consideration of 540 cents per Blue ordinary
share, amounting to R139.07 million as partial settlement in cash.
1.3 Shareholders are referred to paragraphs 3.1 and 3.2 below and the
accompanying joint announcement by Credit U and Blue released on SENS on 7
August 2008 setting out salient details of the proposed Credit U
acquisition.
2. Rationale for the Credit U ACQUISITION
2.1 Credit U is a financial services enterprise that targets the financial
needs of clients in the Living Standards Measurement ("LSM") 4 to 7 bands
with a broad range of financial services products to its customers, which
include credit products, cellular products, insurance products and other
financial solutions.
2.2 The Credit U acquisition will result in Blue increasing its branches from
80 to above 172 branches in South Africa. Credit U specialises in the
provision of term loans which also form part of the Blue product range. The
transaction will give Blue access to a more extensive distribution
footprint through which it will market its own products in addition to the
existing term loan and other product offering of Credit U.
3. Terms of the Credit U acquisition
3.1 The Credit U acquisition will be effected by way of a scheme of arrangement
("the scheme") in terms of section 311 of the Companies Act, 1973 (Act 61
of 1973), as amended ("the Companies Act"), to be proposed by Blue between
Credit U and all its ordinary shareholders.
3.2 In the event of the scheme not being approved and implemented and subject
to obtaining the relevant regulatory approval, Blue will make a conditional
offer to Credit U ordinary shareholders in terms of section 440 of the
Companies Act to acquire all their ordinary shares in Credit U (excluding
the 2 250 000 treasury shares held by the Employee Share Incentive Scheme)
by offering 44.5 Blue ordinary shares for every 100 Credit U ordinary
shares held ("the substitute offer"). The substitute offer is conditional
on acceptance by ordinary shareholders of Credit U holding no less than 90%
of the total issued ordinary shares of Credit U.
3.3 If the substitute offer is accepted by Credit U ordinary shareholders
holding no less than 90% of the total issued ordinary shares of Credit U,
Blue will invoke the provisions of section 440K of the Companies Act to
acquire the remaining shares held by Credit U ordinary shareholders.
3.4 In the event of the scheme being approved and implemented, the substitute
offer will not be implemented.
4. FUNDING OF THE CREDIT U ACQUISITION
4.1 The underwriter has agreed to acquire 25 754 375 of the Blue ordinary
shares to be issued in terms of the offer at 540 cents per Blue ordinary
share. The underwriter has provided confirmation to the Securities
Regulation Panel ("SRP") that he has sufficient cash resources to satisfy
the cash consideration amounting to R139.07 million.
4.2 Regarding the remaining 25 754 375 Blue ordinary shares to be issued to
Credit U ordinary shareholders in terms of the offer, Blue will use its
best endeavours, before 15 September 2008, to obtain irrevocable
undertakings from another select party or parties who are prepared to
acquire all of the remaining 22.25 Blue ordinary shares out of the 44.5
Blue ordinary shares to be issued in terms of the offer at 540 cents per
Blue ordinary share. If and when such parties are secured, and they have
provided confirmation to the SRP that they have sufficient cash resources
to meet their obligations in respect of the balance of R139.07 million, an
announcement will be made that the offer will be amended.
5. Financial effects of the Credit U acquisition
5.1 The table below sets out the unaudited pro forma financial effects ("pro
forma financial effects") of the Credit U acquisition on the earnings,
headline earnings, net asset value and tangible net asset value per Blue
share.
5.2 The pro forma financial effects have been calculated, assuming:
5.2.1 for purposes of the earnings and headline earnings per share
calculations, that the Credit U acquisition was effective throughout
the financial year ended 29 February 2008 (using the Credit U audited
results for the period ended 31 August 2007); and
5.2.2 for purposes of net asset value and tangible net asset value per share
calculations, that the Credit U acquisition was effected on
29 February 2008 (using the Credit U audited results for the period
ended 31 August 2007);
Audited(1) Pro forma(2)
Before After the Percentage
Credit U change
acquisition
(cents) (cents) (%)
Earnings per share 14.58 19.70 35.1
Headline earnings 12.28 17.68 44.0
per share
Diluted earnings 13.93 17.93 28.7
per share
Diluted headline 11.86 16.09 35.7
earnings per share
Net asset value 133.70 174.16 30.3
per share
Tangible net asset 55.69 69.09 24.1
value per share
Notes
(1) Extracted from the audited financial results of Blue for the
financial year ended 29 February 2008 with 465.7 million ordinary
shares in issue, 423.5 million weighted average number of
ordinary shares in issue and 470.5 million fully diluted number
of ordinary shares in issue.
(2) Based on the issue of 51.5 million Blue ordinary shares at a
price of 540 cents per Blue share in terms of the Credit U
acquisition resulting in 517.2 million ordinary shares in issue,
475.0 million weighted average number of shares in issue and
522.1 million fully diluted ordinary number of shares in issue.
(3) Goodwill is allocated in individual cash-generating units based
on business activity. Impairment testing is done on a regular
basis by comparing the net carrying value of the cash-generating
units to the estimated value in use. As a result of the Credit U
acquisition R169.9 million will be classified as goodwill as
stated above.
5.3 The pro forma financial effects contained in paragraph y5.2 above are
presented for illustrative purposes only to provide information on the
Credit U acquisition. The pro forma financial effects are the
responsibility of the directors of Blue. Due to the nature of the pro
forma financial effects, such effects may not necessarily present a true
reflection of Blue`s future earnings and net asset value after the Credit U
acquisition.
6. categorisation
The Credit U acquisition is a "Category 2" transaction for Blue in terms of
paragraph 21.10 of the Listings Requirements of the JSE Limited. Credit U
is not a related party to Blue.
7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement released on SENS by Blue on 19 June
2008, shareholders are advised that caution is no longer required to be
exercised when dealing in their Blue ordinary shares.
Johannesburg
7 August 2008
Designated and Corporate Adviser
PSG Capital (Pty) Limited
Date: 07/08/2008 16:52:06 Produced by the JSE SENS Department.
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