| Fri 8 Aug 2008, 7:30 | | RCH - Richemont To Restructure And Distribute 90% Of BAT Interest |
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RCH
RCH
RCH - Richemont To Restructure And Distribute 90% Of BAT Interest
Richemont Securities AG
(Incorporated in Switzerland)
Share code: RCH
ISIN: CH0013157380
("Richemont")
RICHEMONT TO RESTRUCTURE AND DISTRIBUTE 90% OF BAT INTEREST
Compagnie Financiere Richemont S.A. ("CFR") announces that it is proceeding
with a restructuring of its businesses to create a focused luxury goods
business and a separately-listed investment vehicle. The restructuring will
result in the distribution of 90 per cent of Richemont`s interest in British
American Tobacco p.l.c. ("BAT") to its shareholders.
The restructuring proposals are subject, inter alia, to the approval of the
shareholders of CFR and the holders of participation certificates ("PCs") of
Richemont S.A., Luxembourg. They are also subject to the approval of
shareholders of Remgro Limited ("Remgro"), Richemont`s co-shareholder in R&R
Holdings S.A. ("R&R"), which holds the combined interest of Richemont and
Remgro in BAT. Today, Remgro has also announced proposals for the
distribution of 90 per cent of its interest in BAT.
The restructuring addresses the changes to tax legislation in Luxembourg,
which would make the current group structure significantly less attractive to
Unitholders from 31 December 2010 onwards.
Key elements of the proposed restructuring
- Richemont units, comprising shares issued by CFR and PCs issued by
Richemont S.A., will be de-twinned on 20 October 2008 to create two
separate entities:
- CFR will become a focused luxury goods business, holding all of
Richemont`s luxury assets; it will continue to be headquartered in
Geneva and listed on SWX Swiss Exchange; it is expected to remain
in the blue-chip SMI index of leading Swiss stocks;
- Richemont S.A. will be converted into a Luxembourg investment
vehicle listed on the Luxembourg Stock Exchange, to be renamed
Reinet Investments S.C.A. ("Reinet"), which will focus on long
term capital growth;
- On 3 November 2008, 90 per cent of Richemont`s interest in BAT, being
some 351 million shares representing 17.5 per cent of the ordinary
capital of BAT, will be distributed to Reinet shareholders; the
remaining 10 per cent of the BAT shares, some 39 million shares being
1.9 per cent of the ordinary capital of BAT, will be retained in Reinet;
a further 1.1 per cent of the ordinary capital of BAT (some 21 million
shares) will be contributed by Remgro on the same terms in exchange for
Reinet Depository Receipts ("DRs") for distribution to its shareholders;
at this point, Reinet will hold some 60 million BAT shares and
approximately EUR407 million of cash and other investments;
- Reinet will subsequently launch a rights issue whereby shareholders can
subscribe for Reinet shares using BAT shares. It is expected that
shareholders will be able to subscribe for four new Reinet shares for
every five shares held; the precise terms of the rights issue, including
its size and the subscription exchange ratio, will be determined
immediately prior to its launch. Rupert family interests have committed
to underwrite the entire rights issue and, through a subsequent placing
of Reinet shares at NAV per share, will be able to contribute into
Reinet any remaining BAT shares that they hold; and
- Richemont DRs will be separated into CFR DRs and Reinet DRs. Richemont
DR holders will also participate in the restructuring and receive BAT
shares. Linked to this, Richemont and Remgro have formally requested BAT
to obtain a secondary listing of its shares on the stock exchange in
Johannesburg (the "JSE"), thus fulfilling an undertaking given by BAT in
February 2007.
Comment from the Executive Chairman of Richemont
Commenting on the proposals, Mr Johann Rupert, Executive Chairman of
Richemont, said:
"We have undertaken a detailed review of the alternatives open to the Group
in the light of the need to restructure prior to the end of 2010. The
proposals separate the luxury businesses from the investment holding
activities and establish Compagnie Financiere Richemont as a focused, Swiss
luxury goods company. This reflects the significant development of the luxury
business since we established Richemont 20 years ago and, indeed, since 1999,
when we merged Rothmans International with BAT.
CFR will continue as a significant global company in its own right and will
have a strong balance sheet with the financial resources to allow it to
continue to grow both organically and, potentially, through acquisitions.
Reinet will be an investment vehicle which will invest in a broad-based
portfolio of asset classes targeting long term capital growth.
Finally, Unitholders will obtain direct access to 90 per cent of Richemont`s
interest in BAT."
Benefits of the proposed restructuring
- Unitholders will be able to hold and trade separately their investments
in the luxury goods businesses and BAT currently held through Richemont;
CFR as an independent entity will continue to be one of the world`s
leading luxury goods companies, with strong Maisons, broad geographic
diversification and significant financial resources;
- The separation of the investments in the luxury goods businesses and BAT
should contribute to the elimination of any holding company discount
inherent in the current Richemont unit price;
- Reinet will allow its shareholders to participate in a listed vehicle
controlled by Rupert family interests, which will have an investment
strategy aimed at long term capital growth;
- The rights issue will provide Reinet shareholders with the choice of
either subscribing for additional Reinet shares in exchange for BAT
shares or selling their warrants on the Luxembourg Stock Exchange or the
JSE.
Impact of the proposed restructuring on Unitholders
Each Richemont `A` Unit currently listed on SWX Swiss Exchange comprises one
`A` share issued by CFR and one PC issued by Richemont S.A.
Subject to the proposals being approved, for every 1 000 Richemont `A` Units
held, an investor will hold on 21 October 2008:
- 1 000 `A` shares in CFR, a focused luxury goods vehicle listed on SWX
Swiss Exchange; and
- 1 000 ordinary shares in Reinet, an investment vehicle listed on the
Luxembourg Stock Exchange.
On 3 November 2008, Reinet will distribute 90% of the BAT shares to its
shareholders on the pro rata cancellation of ordinary shares in Reinet. On 10
November 2008, Reinet will issue warrants to its shareholders with one
warrant issued in respect of each ordinary share outstanding; it is expected
that five warrants will be required to subscribe for four new shares.
After the launch on 10 November 2008 and before the end of the rights issue,
for every 1 000 Richemont `A` Units previously held, an investor will
therefore have:
- 1 000 `A` shares in CFR;
- 137 ordinary shares in Reinet;
- 611 shares in BAT; and
- 137 warrants to subscribe for 110 new ordinary shares in Reinet.
An investor will be able to either exercise the warrants by subscribing for
new ordinary shares in Reinet by contributing BAT shares at a subscription
exchange ratio to be determined just prior to the launch date on 10 November
2008 or to sell the warrants on the Luxembourg Stock Exchange or the JSE.
The subscription exchange ratio will be determined by reference to the
prevailing market prices of BAT and Reinet shares and is expected to reflect
a 5-10 per cent discount to the theoretical ex-rights price ("TERP") of
Reinet shares which itself is expected to reflect a discount to the net asset
value per share. This subscription exchange ratio will be announced
immediately prior to the issue of the warrants.
Richemont DRs are currently classified as domestic dual listed securities in
the hands of South African investors. The same dispensation will extend to
the Reinet DRs and the new CFR DRs. Consequently no ownership restrictions
will apply to CFR DRs and Reinet DRs and, in particular, the holding of such
DRs will not be marked against a South African investor`s foreign portfolio
allowance and prudential limits for institutional holders will not apply.
Fractional entitlements will be dealt with according to market practice by
the relevant settlement systems and/or financial intermediaries. The numbers
in the example of the impact of the proposed restructuring on 1 000 Richemont
`A` Units have been rounded for presentational purposes.
Information on the CFR shareholder and Richemont S.A. shareholder and PC
holder meetings
To approve the restructuring proposals, an EGM of CFR shareholders and an EGM
of the shareholder and PC holders of Richemont S.A. will be convened. The
first Richemont S.A. EGM will be held in Luxembourg on 1 September 2008. If a
quorum of PC holders is not present at this meeting, it will be adjourned and
reconvened. It is envisaged that the reconvened Richemont S.A. meeting would
be held on or around 8 October 2008.
The CFR shareholder meeting will be held in Geneva on or around 9 October
2008.
More information on the meetings will be made available in an information
memorandum to be published on or around 15 August 2008.
Further information
Additional information on the current Group structure and the Group structure
post the proposed restructuring, CFR after the proposed restructuring, key
characteristics of Reinet, the principal conditions and approvals required
for the restructuring and the expected timetable of key dates for Richemont
Unitholders can be found in appendices 1 to 5, respectively.
A conference call for investors will take place via webcast at 12.00 noon CET
on Friday, 8 August 2008 on the group`s website, www.richemont.com. A
supplementary slide presentation will also be available on the website prior
to the call.
Press inquiries Alan Grieve
Director of Corporate Affairs
Tel: +41 22 721 3507
Analysts` inquiries: Sophie Cagnard
Director of Investor Relations
Tel: +33 1 5818 2597
Advisors
Goldman Sachs International has acted as lead financial adviser to Richemont
in connection with the proposed restructuring. Goldman Sachs International,
which is regulated in the United Kingdom by the Financial Services Authority,
is acting for Richemont and no one else in connection with the proposed
restructuring and will not be responsible to anyone other than Richemont for
providing the protections afforded to clients of Goldman Sachs International
nor for providing advice in connection with the proposed restructuring or any
other matters referred to in this press release.
Rand Merchant Bank (a division of FirstRand Bank Limited) has acted as
financial adviser to Richemont in relation to South African aspects of the
proposed restructuring and acts as `Sponsor` for Richemont in respect of its
DR program on the JSE.
Richemont owns a portfolio of leading international brands or `Maisons`,
which are managed independently of one another, recognising their
individuality and uniqueness. The businesses operate in five areas: Jewellery
Maisons, being Cartier and Van Cleef & Arpels; Specialist watchmakers, which
is made up of Jaeger-LeCoultre, Piaget, IWC, Baume & Mercier, Vacheron
Constantin, Officine Panerai and A. Lange & Sohne; Writing instrument
manufacturers - Montblanc and Montegrappa; Leather and accessories Maisons,
being Alfred Dunhill and Lancel; and Other businesses, which includes,
specifically, Chloe as well as other, smaller Maisons and watch component
manufacturing activities for third parties.
In addition to its luxury goods business, Richemont currently holds a 19.4
per cent interest in BAT, one of the world`s leading tobacco groups.
`A` bearer units of Richemont are listed on SWX Swiss Exchange and are traded
on SWX Europe. Richemont DRs are listed on the Johannesburg stock exchange
operated by JSE Limited.
Limitations of this announcement
This announcement does not constitute nor does it form part of any offer or
invitation to buy, sell, exchange or otherwise dispose of, or issue, or any
solicitation of any offer to sell or issue, exchange or otherwise dispose of,
buy or subscribe for, any securities, nor does it constitute investment,
legal, tax, accountancy or other advice or a recommendation with respect to
such securities, nor does it constitute the solicitation of any vote or
approval in any jurisdiction, nor shall there be any offer or sale of
securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the applicable
securities laws of any such jurisdiction (or under exemption from such
requirements).
In particular, the information contained herein does not constitute an offer
of securities for sale in the United States. None of the securities described
or directly or indirectly referred to in this announcement have been and nor
will they be registered under the US Securities Act of 1933, as amended (the
"Securities Act"). Such securities may not be offered or sold in the United
States to, or for the account or benefit of, U.S. persons (as such terms are
defined in Regulation S under the Securities Act) unless registered under the
Securities Act or pursuant to an exemption from such registration. If and to
the extent that any such securities may be deemed to be offered or sold as a
result of the transactions described in this announcement, such securities
are being offered and sold only to persons in offshore jurisdictions outside
the United States in accordance with Regulation S under the Securities Act.
This announcement has not been and may not be disseminated or distributed by
any person in the United States or to U.S. persons.
Switzerland
The investment vehicle through which Reinet Investments S.C.A. will invest
has not been approved by the Swiss Federal Banking Commission as a foreign
collective investment scheme pursuant to Article 120 of the Swiss Collective
Investment Schemes Act of 23 June 2008.
Professional advice
The terms of the reconstruction are complex, involving steps in a number of
jurisdictions. Holders of Richemont units and DRs are therefore advised to
contact their professional advisors for advice on fiscal, legal and
investment matters.
Forward looking statements
This announcement includes forward-looking statements that are subject to
risks and uncertainties, including those pertaining to the anticipated
benefits to be realised from the proposals described herein. This
announcement contains a number of forward-looking statements including, in
particular, statements about future events, future financial performance,
plans, strategies, expectations, prospects, competitive environment,
regulation and supply and demand. Forward-looking statements include all
statements that are not historical facts and can be identified by the use of
forward-looking terminology such as the words "may", "will", "expect",
"anticipate", "believe", "estimate", "plan", "intend" and similar expressions
or the negative of these terms or similar expressions in this presentation.
The management of Richemont has based these forward-looking statements on its
views with respect to future events and financial performance. Actual
financial performance of the entities described herein could differ
materially from that projected in the forward-looking statements due to the
inherent uncertainty of estimates, forecasts and projections, and financial
performance may be better or worse than anticipated. Given these
uncertainties, readers should not put undue reliance on any forward-looking
statements. Forward-looking statements represent estimates and assumptions
only as of the date that they were made. The information contained in this
announcement is subject to change without notice and Richemont does not
undertake any duty to update the forward-looking statements, and the
estimates and assumptions associated with them, except to the extent required
by applicable laws and regulations
Appendix 1 - Group structure
Current Group structure
Please refer to press publication for the current Group structure.
Group structure post the proposed restructuring
Please refer to press publication for the Group structure post the proposed
restructuring.
Appendix 2 - CFR after the proposed restructuring
Following the first stage of the restructuring, CFR will be a focused luxury
goods company headquartered in Geneva, Switzerland. CFR`s strategy and
management of its luxury goods business will not be affected by the proposed
restructuring. CFR will continue its long-term strategy of maintaining and
growing each of the Maisons while respecting their individuality and
heritage. The Maisons will be complemented by the Richemont global
distribution and after-sales service platforms and central support functions.
CFR is well positioned, its Maisons benefiting from a strong heritage,
diversified product ranges and a global geographic spread. It is expected to
have in excess of EUR1 billion in net cash resources after the separation
from
Richemont S.A. and will be well placed to grow over the long term; both
organically and through acquisitions, should appropriate opportunities arise.
The existing `A` bearer and `B` registered share classes of CFR will be
maintained. The `A` bearer shares of CFR will continue to be traded on the EU-
regulated segment of SWX Europe and the `B` registered shares of CFR will
continue to be held by Rupert family interests.
Richemont currently accounts for its interest in BAT as an associated
company. Post restructuring, CFR`s consolidated sales and operating profit
will therefore not be impacted by the proposals. Net income, however, will be
reduced by the elimination of the equity accounted contribution from BAT. The
Group`s cash flow will be solely that generated by its luxury operations (and
related net financial income); post restructuring, CFR will no longer receive
any dividends from BAT.
CFR`s future dividend decisions will be based on the profitability and cash
flow generation of the luxury goods business, taking into account the
investment opportunities and requirements of the business. The Richemont
dividend of EUR0.78 per unit for the year ended 31 March 2008, to be paid in
September 2008, is not affected by the proposals.
Appendix 3
Key characteristics of Reinet
Subject to the approval of the proposals, Reinet will have the following key
attributes:
- Reinet Investments S.C.A. will be a securitisation vehicle incorporated
in Luxembourg with its shares listed on the Luxembourg Stock Exchange.
Its investment objective will be to invest into its sole subsidiary,
Reinet Fund S.C.A., which will be a Luxembourg-registered specialised
investment fund;
- Reinet Fund`s investment objective will be long term capital growth. The
Fund intends, over time, to diversify the portfolio of assets in which
it invests and will not have any restrictions on the classes of assets
in which it may invest. It is expected that any investments in luxury
goods businesses will be made through CFR;
- Reinet Investments and Reinet Fund will both be incorporated in
Luxembourg as partnerships limited by shares (`Societes en Commandite
par Actions`);
- The respective Managing Partners (`Actionnaires Commandites`), Reinet
Investments Manager S.A. and Reinet Fund Manager S.A., will be limited
liability companies incorporated in Luxembourg and controlled by Rupert
family interests. Both management companies will be chaired by Mr Johann
Rupert, who will also remain as Executive Chairman of CFR;
- As a consequence of the limited partnership status of Reinet
Investments, the ordinary shareholders of Reinet will have limited
voting rights. However, a `Board of Overseers` will be appointed to
supervise Reinet Investments Manager and Reinet Fund Manager, which will
also act as
the Audit Committee of Reinet Investments and Reinet Fund. The following
are proposed to be the initial members of the Board of Overseers:
Mr Yves-Andre Istel Senior Advisor to Rothschild Inc.
Mr Ruggero Magnoni Vice Chairman of Lehman Brothers Inc.
Mr Alan Quasha Chairman of Quadrant Management Inc.
Mr Jurgen Schrempp Non-Executive Chairman of Mercedes-Benz, South
Africa and former Chairman of the Management
Board of DaimlerChrysler A.G.
- The Boards of Reinet Investments Manager S.A. and Reinet Fund Manager
S.A. will initially comprise:
Reinet Investments Manager S.A.
Mr Johann Rupert Chairman of CFR and Remgro
Mr Eloy Michotte Corporate Finance Director of Richemont
Mr Jo Schwenke Managing Director of Business Partners Limited
Mr Alan Grieve Corporate Affairs Director of Richemont
Reinet Fund Manager S.A.
Mr Johann Rupert (see above)
Mr Eloy Michotte (see above)
Mr Jo Schwenke (see above)
Mr Alan Grieve (see above)
Mr Kurt Nauer Treasury Manager of Richemont S.A.
- Reinet Fund Manager will be advised by Reinet Investment Advisors
Limited (the "Investment Advisor"), which will also be controlled by
Rupert family interests;
- The Board of the Investment Advisor will initially comprise:
Mr Johann Rupert (see above)
Mr Jason Eaglestone Finance Director of Richemont`s
venture capital interests
Mr Frank Vivier Investment Officer of Richemont`s venture
capital interests
Mr Ian Crosby Non-executive director
Mr Niall McCallum Non-executive director
- The Investment Advisor will establish a team of experienced investment
managers with strong investment records, focusing on long term capital
growth, in due course;
- Dividends declared from income generated from the listed and unlisted
investments held by Reinet Fund may be paid to Reinet Investments and
Reinet Investments will remit such dividends in full to its shareholders
and DR holders after deduction of its own operating expenses. Under
current law and practice, dividends will be paid free of withholding
taxes by Reinet Investments to its shareholders and DR holders;
- A management fee will be payable annually to the Investment Advisor
calculated as 1 per cent of the NAV of Reinet Fund adjusted for
corporate net indebtedness of Reinet Investments in respect of
investments other than (i) cash, which will attract a fee of 0.25 per
cent, and (ii) third-party managed assets, on which no management fee
will be payable. No management fee will be charged for the period until
31 March 2009;
- In addition, the Investment Advisor will be entitled to receive a
performance fee from Reinet Fund equal to 10 per cent of the cumulative
total shareholder return from the date of formation; cumulative total
shareholder return will comprise share price appreciation and
distributions to shareholders;
- Costs incurred by Reinet Investments Manager S.A. and Reinet Fund
Manager S.A. will be reimbursed by Reinet Investments and Reinet Fund,
respectively; The amount of the management fee payable to the Investment
Advisor will, however, be reduced by any cost reimbursements made by
Reinet Fund to Reinet Fund Manager;
- The impact of the three steps of the proposed restructuring on Reinet is
expected to be as follows:
Step 1: Reconstruction of Richemont
Reinet Investments is established with 574.2 million shares.
Initial assets will comprise 390.0 million BAT shares and
approximately EUR406.6 million in cash and other assets of
which
it is expected that EUR351.1 million will be in cash and
EUR55.5
million will be in the form of other investments.
Step 2a: Distribution of BAT shares
351.0 million BAT shares, representing 90% of Reinet`s
interest in BAT, are distributed to shareholders. As a result
the number of Reinet shares outstanding will be approximately
78.6 million.
Step 2b: Capital increase in Reinet to be subscribed for by Remgro
10% of Remgro`s interest in BAT (being some 21.4 million BAT
shares) is contributed to Reinet in exchange for approximately
30.3 million new Reinet shares, bringing the total number of
Reinet shares outstanding to approximately 108.9 million. The
new Reinet shares will be distributed to Remgro shareholders
in the form of Reinet DRs. As a result of step 2, Reinet will
own approximately 3.0 per cent of the ordinary capital of BAT.
Step 3a: Reinet rights issue
In total approximately 108.9 million nil-paid warrants will be
issued to subscribe for an expected total of approximately
87.1 million new shares of Reinet, bringing the total number
of Reinet shares to approximately 195.9 million. The Board of
Overseers and the underwriters will set the precise size of
the rights issue and the subscription exchange ratio, which
will determine the number of BAT shares that will be
contributed to Reinet through the rights issue, immediately
prior to the commencement of the rights issue. The rights
issue will be fully underwritten by Rupert family interests.
Step 3b: Optional placing of Reinet shares
The placing of additional new Reinet shares with the Rupert
family interests will be at NAV per share pro forma for the
rights issue. The placing will be at their option and will, if
exercised, result in a minimum of 5.0 million new Reinet
shares and a maximum number of new Reinet shares to be
determined by reference to the remaining total number of BAT
shares held by the Rupert family interests following the
rights issue. The exchange ratio for the placing will be
determined and announced at the same time as the subscription
exchange ratio for the rights issue. The placing will ensure
that Rupert family interests will be in a position to
contribute all of their remaining BAT shares into Reinet on a
basis which is expected to be value neutral to other
shareholders.
Appendix 4
Principal conditions and approvals required for the restructuring
The principal conditions and approvals required for the implementation of the
proposals are:
- the passing of resolutions at an extraordinary general meeting of CFR
shareholders;
- the passing of resolutions at an extraordinary general meeting of the
Richemont S.A. shareholder and PC holders;
- the passing of resolutions at an extraordinary general meeting of
shareholders of Remgro (or the waiver of those approvals by Remgro);
- the admission of the Reinet shares to trading on the Luxembourg Stock
Exchange;
- the continued listing of the de-twinned CFR Shares on SWX Swiss
Exchange; and
- the admission to trading on the JSE of the CFR DRs and the Reinet DRs.
Appendix 5
Expected timetable of key dates for Unitholders
Step/Event 2008
Publication of Richemont information memorandum 15 August
Shareholder/PC holder meetings:
First Richemont S.A. shareholder and PC holder
meeting 1 September
Remgro Limited shareholder meeting 7 October
Second Richemont S.A. shareholder and PC holder
meeting if necessary 8 October
CFR shareholder meeting 9 October
Reconstruction of Richemont:
De-twinning of CFR units effective 20 October
Luxury split on cancellation of CFR`s interest in
Richemont S.A. 20 October
Richemont S.A. converted into Reinet and PCs
converted into Reinet shares 20 October
Separate listings of CFR and Reinet effective 21 October
Distribution of BAT shares:
Distribution of BAT shares to Reinet shareholders
pursuant to a partial capital reduction of Reinet 3 November
Rights offering of Reinet:
Issue of nil-paid warrants 10 November
Trading period for warrants 10-28 November
Practical end of exercise period 3 December
Auction period for unexercised warrants 8-9 December
Capital increase effective 10 December
Final effective date for optional placing of
Reinet 12 December
8 August 2008
Lead Financial Advisor
Goldman Sachs International
Financial Advisor and Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Attorneys
Hofmeyr Herbstein & Gihwala Inc.
Date: 08/08/2008 07:30:02 Produced by the JSE SENS Department.
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