| Tue 23 Sep 2008, 14:19 | | ACT / ACTP - AfroCentric / Lethimvula - Proposed Acquisition And Joint |
|
ACT ACTP
ACT
ACT / ACTP - AfroCentric / Lethimvula - Proposed Acquisition And Joint
Cautionary Announcement
Afrocentric Investment Corporation Lethimvula Investments Limited
Limited
(Incorporated in the Republic of (Incorporated in the Republic of
South Africa) South Africa)
(Registration number 1988/000570/06) (Registration number
Share code: ACT/ ACTP & ISIN: 2006/005087/06)
ZAE000078416 / ZAE000082269 ("Lethimvula")
("AfroCentric" or "the Company")
Proposed acquisition by AfroCentric of a 63.2% interest in Lethimvula and
joint cautionary announcement
1. INTRODUCTION
The boards of directors of AfroCentric and Lethimvula hereby announce that
AfroCentric has entered into a share purchase agreement, dated 22 September
2008 to acquire 365 865 029 ordinary shares in the issued ordinary share
capital of Lethimvula (the "Sale Shares"), representing 63.2% of the entire
issued share capital of Lethimvula (the "Acquisition"), from certain
Lethimvula shareholders (the "Sellers"). The Acquisition is subject to the
conditions precedent as set out in paragraph yy5 below ("Conditions
Precedent"). The purchase price payable for the Sale Shares (the "Purchase
Price") is a maximum amount of R568 920 120.60 or R1.555 per Sale Share
plus such additional amount to be determined in accordance with paragraph
4.3.1.2 below.
2. NATURE OF THE ACQUISITION
Lethimvula is an investment holding company with its principal assets being
a 100% beneficial interest in Medscheme Limited ("Medscheme") and Rowan
Angel (Proprietary) Limited ("Rowan Angel").
Medscheme incorporates the Medscheme Health Administration and Medscheme
Health Risk Solutions Divisions of Medscheme Holdings (Proprietary) Limited
as well as Medscheme Financial Services (Proprietary) Limited, the holding
company of Medscheme Life (Proprietary) Limited and Medscheme Asset
Management (Proprietary) Limited. A brief description of these businesses
is set out below:
2.1 Medscheme Health Administration is South Africa`s premier multi-
medical scheme administrator, providing an integrated range of
technology-driven services and solutions to cater for the needs of
medical scheme members, trustees, intermediaries, employers and
healthcare professionals.
2.2 Medscheme Health Risk Solutions provides health risk management
programmes, which include integrated clinical, actuarial and
analytical support services to medical schemes and employer
organisations. As such it facilitates improved access to holistic
quality health care with the participation of healthcare professionals
and hospital service providers.
2.3 Medscheme Financial Services (Proprietary) Limited harnesses its
general risk management expertise to offer highly competitive life,
asset management and cash management products and services.
Rowan Angel is the medical administrator for the Spectramed medical scheme.
Rowan Angel is currently being divisionalised under Medscheme so as to
achieve the system efficiencies and cost benefits through the greater group
operational infrastructure, both for the benefit of the business and scheme
members.
3. RATIONALE FOR THE ACQUISITION
The Acquisition falls in line with AfroCentric`s strategy to operate as a
broad-based, black empowered diversified investment holding company that
will enable the Company and its shareholders to actively and beneficially
participate in economic opportunities available in a transforming South
Africa.
Apart from the expected economic benefits, this acquisition is core to the
investment strategy of AfroCentric to facilitate and extend the
participation in, or the change in ownership of, prestigious traditionally
white-owned enterprises into black hands. In addition, should the
Acquisition become unconditional it will enable Lethimvula shareholders to
participate in the broader investment portfolio of the AfroCentric listed
entity.
South Africa`s private healthcare industry rates as one of the best in the
world and Lethimvula`s subsidiary, Medscheme, has proudly contributed to
that ranking and reputation. Medscheme has been a leading administrator in
the private healthcare sector for the past 37 years, with a growing
membership in excess of 1.7 million lives. Should the Acquisition become
unconditional, Lethimvula will become the only black-owned healthcare
administrator in South Africa listed on the JSE Limited ("JSE").
4. SALIENT TERMS OF THE ACQUISITION
4.1 The Purchase Price
The Purchase Price payable to the Sellers for the Sale Shares is a maximum
amount of R568 920 120.60 or R1.555 per Sale Share plus such additional
amount to be determined in accordance with paragraph y4.3.1.2 below. The
Purchase Price will be discharged in two tranches, R341 352 070.80 in
respect of the first tranche (the "First Tranche") and R227 568 049.80 plus
such additional amount to be determined in accordance with paragraph
y4.3.1.2 below in respect of the second tranche (the "Second Tranche").
4.2 The First Tranche
The First Tranche of the Purchase Price, being R341 352 070.80 or R0.933
per Sale Share, will be settled by AfroCentric on the closing date, being 9
business days after the date upon which the last of the Conditions
Precedent is fulfilled or waived ("Closing Date") by:
4.2.1 paying the Sellers an amount of R126 223 435.00 or R0.345 per
Sale Share in cash, which alternative was made available to and elected by
the Sellers in lieu of receiving the entire First Tranche in AfroCentric
Ordinary Shares; plus
4.2.2 R215 128 635.8 or R0.588 per Sale Share by the issue of 82 741
783 AfroCentric Ordinary Shares to the Sellers at an issue price of R2.60
per AfroCentric Ordinary Share.
4.3 The Second Tranche
4.3.1 The Second Tranche of the Purchase Price, being a maximum amount
of R227 568 049.80 or R0.622 per Sale Share plus such additional amount to
be determined in accordance with paragraph y4.3.1.2 below will be settled
by Afrocentric on the Second Tranche payment date, being within 20 days of
finalising the Lethimvula audited financial statements for the period
ending 30 June 2013 (the "Second Tranche Payment Date"):
4.3.1.1 a maximum of R227 568 049.80 or R0.622 per Sale Share by the
issue of a maximum of 87 526 173 AfroCentric Ordinary Shares or such lesser
number as determined in accordance with paragraph y4.3.2.2 below (the
"Second Tranche AfroCentric Ordinary Shares") to the Sellers at an issue
price of R2.60 per AfroCentric Ordinary Share; and
4.3.1.2 by paying an amount in cash to the Sellers on the Second Tranche
Payment Date equal to the dividends which would have been paid had the
Second Tranche AfroCentric Ordinary Shares been in issue during the period
commencing on the Closing Date and ending on the Second Tranche Payment
Date plus any Secondary Tax on Companies which AfroCentric would have paid
in respect of such dividends.
4.3.2 The number of Second Tranche AfroCentric Ordinary Shares to be
issued or delivered on the Second Tranche Payment Date will be determined
as follows:
4.3.2.1 Should the average profit after tax of Lethimvula for the
financial years ending 30 June 2011, 2012 and 2013 ("Average PAT") be
greater than or equal to R180 000 000.00, then AfroCentric will, on the
Second Tranche Payment Date, issue or procure the delivery of 87 526 173
AfroCentric Ordinary Shares to the Sellers;
4.3.2.2 Should the Average PAT be less than R180 000 000.00, then
AfroCentric will on the Second Tranche Payment Date, issue or procure the
delivery of a reduced number of Second Tranche AfroCentric Ordinary Shares
based upon the formula below:
A = B x (C / D)
Where
A = the reduced number of Second Tranche AfroCentric Ordinary Shares;
B = 87 526 173;
C = Average PAT minus R90 000 000.00; and
D = 90 000 000.
4.4 Warranties and indemnities
Warranties and indemnities as are normal in a transaction of this nature
have been provided by the Sellers. The amount of cash in terms of paragraph
4.3.1.2 above and the number of Second Tranche AfroCentric Ordinary Shares
payable in terms of the Second Tranche will be adjusted by the amount of
such warranty and indemnity claims.
4.5 The effective date
The Acquisition will be effective from the first day of the month following
the month in which the Closing Date falls.
4.6 Lethimvula dividend
Subject to the fulfilment of the Conditions Precedent, a dividend of not
more than R96 000 000.00 or approximately R0.165 per Sale Share shall be
paid to the shareholders of Lethimvula including the Sellers. The Sale
Shares are being sold ex-the right to receive the dividend, it being agreed
that the right to receive the dividend will be retained by the Sellers.
5. CONDITIONS PRECEDENT TO THE ACQUISITION
The Acquisition is subject to the fulfilment of the following Conditions
Precedent:
5.1. approval by the board of directors of AfroCentric, by no later than 15
October 2008;
5.2. approval by the shareholders of AfroCentric, by no later than
30 November 2008 at a general meeting of the AfroCentric shareholders to be
convened to approve, inter alia, the Acquisition (the "AfroCentric General
Meeting");
5.3. if required, approval of the relevant Competition Commission
Authorities by no later than 100 days of submission to such relevant
Competition Commission Authorities;
5.4. such regulatory approvals which will be necessary to implement the
Acquisition, including the approval of the JSE and Securities Regulation
Panel ("SRP"), by no later than 30 November 2008;
5.5. Nedbank Limited agreeing to the delivery of the Sale Shares to
AfroCentric, by no later than 31 October 2008;
5.6. the conclusion of a due diligence of Lethimvula to the satisfaction of
AfroCentric by no later than 15 October 2008; and
5.7. AfroCentric raising such funding which will enable it to discharge the
upfront cash portion of the Purchase Price and fulfil its cash obligations
in respect of any offers which it has to make to offeree shareholders, by
no later than 31 October 2008.
AfroCentric shall be entitled to give written notice to the Sellers, at any
time prior to the date on which the conditions precedent are to be
fulfilled, to extend the date for fulfilment to not later than 30 April
2009 and/or where possible to waive the fulfilment of the condition
precedent relating to the conclusion of a due diligence by AfroCentric.
6. MANDATORY OFFER
Should the acquisition of the Sale Shares become unconditional, the
Acquisition will be an "affected transaction" as defined in the SRP Code on
Take-overs and Mergers ("SRP Code") and, accordingly, AfroCentric shall be
obliged to make an offer to the shareholders of Lethimvula (other than the
Sellers) (the "Offeree Shareholders") in accordance with the provisions of
the SRP Code. AfroCentric, accordingly, undertakes to make the obligatory
offer to the Offeree Shareholders on the same terms and conditions as those
on which the Lethimvula shares are purchased from the Sellers ("the
Mandatory Offer").
The Mandatory Offer will become effective on the fulfilment of the
conditions precedent, following which an offer circular will be sent to
Lethimvula shareholders within 30 days in accordance with the requirements
of the SRP Code.
7. JSE REQUIREMENTS
7.1 Reverse take-over
Given the relative values of Lethimvula and AfroCentric, the structure of
the Acquisition and the Mandatory Offer will result in a reverse take-over
of the Company. The JSE will only permit the Company to retain its listing,
following the reverse take-over, should the JSE be satisfied that the
Company will continue to qualify for a JSE listing in terms of the Listings
Requirements of the JSE ("Listings Requirements"). The directors of the
Company are confident that the Company will continue to qualify for listing
after the implementation of the Acquisition and Mandatory Offer.
7.2 Related party transaction
In terms of the JSE Listings Requirements certain of the Sellers are either
direct or indirect shareholders of AfroCentric and, accordingly, are
related parties in relation to the Acquisition. Consequently, the board of
directors of AfroCentric will appoint an independent expert, acceptable to
the JSE, to provide an independent opinion on the fairness of the
Acquisition to the AfroCentric Shareholders. In addition the relevant
Sellers will recuse themselves from voting at the AfroCentric General
Meeting.
7.3 Circular
A circular setting out the details of the Acquisition and incorporating
revised listing particulars as well as a notice convening the AfroCentric
General Meeting will be posted to AfroCentric shareholders, subject to the
JSE approval, in due course.
8. IMPORTANT DATES AND TIMES
A further announcement setting out salient dates and times of the
Acquisition and including the unaudited pro forma financial effects of the
Acquisition will be made in due course.
9. JOINT CAUTIONARY ANNOUNCEMENT
Given that, inter alia, the pro forma financial effects of the Acquisition
will be communicated to AfroCentric and Lethimvula shareholders in due
course, shareholders of both AfroCentric and Lethimvula are advised to
continue exercising caution in trading their shares until such time as a
further announcement is made. If the Acquisition is implemented, the
Mandatory Offer will replace the composite offer contemplated in the
cautionary announcement published by Lethimvula on 13 March 2008.
For and on behalf of the board For and on behalf of the board
of AfroCentric of Lethimvula
Sandton Sandton
23 September 2008 23 September 2008
Advisors to AfroCentric Advisors to the Sellers and
Lethimvula
Investment Bank and sponsor to the Legal advisors to the Sellers
transaction Rothbart Inc
Investec Bank Limited (Registration number 1995/001105/21)
(Registration number
1969/004763/06)
Sponsor to AfroCentric Lead corporate advisors to the
Sasfin Capital Sellers
(Registration number Sinergi Corporate Advisors
1951/002280/06) (Proprietary) Limited
(Registration number 2004/011875/07)
Legal advisor to AfroCentric Corporate advisors to the Sellers
HR Levin Attorneys, Notaries & Base Capital (Pty) Ltd
Conveyancers (Registration number 2002/008290/07)
(Practice number M2841)
Corporate advisor to AfroCentric Joint Legal Advisors to Lethimvula
Centric Capital Ventures LLC Edward Nathan Sonnenbergs
New York (Registration number 2006/018200/21)
Rothbart Inc
(Registration number 1995/001105/21)
Date: 23/09/2008 14:19:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
