| Fri 3 Oct 2008, 16:20 | | ACC - Acc-Ross Holdings - Acquisition And Withdrawal Of Cautionary |
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ACC
ACC
ACC - Acc-Ross Holdings - Acquisition And Withdrawal Of Cautionary
Announcement
Acc-Ross Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2000/000059/06)
JSE share code: ACC
ISIN Number: ZAE000077335
("Acc-Ross" or "the Company")
ACQUISITION BY ACC-ROSS OF THE PINNACLE GROUP AND RELATED TRANSACTIONS,
SPECIFIC ISSUES OF SHARES, PROPOSED CHANGE IN NAME OF THE COMPANY AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Acc-Ross shareholders were advised in announcements on SENS dated 16
April 2008, 12 June 2008, 24 July 2008 and 4 September 2008 that Acc-
Ross has entered into an agreement with Pinnacle Point Holdings (Pty)
Ltd, Property Promotions and Management (Pty) Ltd and New Port Finance
Company (Pty) Ltd, in terms of which Acc-Ross were to acquire all of the
shares in the following
Pinnacle Point holding companies:
- Pinnacle Point Investments (Pty) Ltd ("Pinnacle Point
Investments");
- Pinnacle Point Resorts (Pty) Ltd ("Pinnacle Point Resorts");
- Pinnacle Point Platinum Ltd (A Class shares);
- Annford Investments (Pty) Ltd;
- Goldfields Plaza (Pty) Ltd;
- Festival Bay Trading 55 (Pty) Ltd;
- Flashing Star Trading 98 (Pty) Ltd;
- Wheatfields Investments No 170 (Pty) Ltd;
- Manupont 105 (Pty) Ltd;
- Grindstone Investments 127 (Pty) Ltd;
- Mascodor 182 (Pty) Ltd; and
- Pinnacle Point Financial Services (Pty) Ltd,
which comprised the entire business of the Pinnacle Point holding
companies and subsidiaries ("the Pinnacle Point Group") (collectively
"the Acquisition")
It was also announced that the combined businesses of Acc-Ross and the
Pinnacle Point Group ("New Group") intended to raise approximately
R400.0 million from interested offshore investors and the local market
within the next twelve months. Shareholders are referred to paragraph 2
below in this regard.
Subsequent to these announcements, the following changes have occurred:
i) Goldman Assets Management Limited ("GMA Consortium"), a public
company registered and incorporated in Nigeria, were issued 20 898
ordinary shares in Pinnacle Point Investments for cash amounting to
R250.0 million, GMA invested directly into the Pinnacle Point Group
pursuant to the Pinnacle Point Group entering into heads of agreement
with respect to a substantial property development on the coast of
Nigeria in Lagos, thereby becoming one of the sellers.
ii) Executive management also became holders of 10 472 ordinary shares
in Pinnacle Point Investments, thereby becoming part of the sellers; and
iii) Pinnacle Point Resorts and Business Venture Investments No 1303
(Pty) Ltd ("PPR Newco") entered into an agreement on 15 September 2008
resulting in PPR Newco acquiring the business of Pinnacle Point Resorts,
consisting of the Pinnacle Point Beach and Golf Estate development and
certain immovable properties of Pinnacle Point Resorts ("Pinnacle Point
Beach and Golf Estate Business"), as a going concern ("Pinnacle Point
Resorts Business Sale Agreement"). The effective date of the sale of
business transaction is the first business day after the date of
fulfilment of the last of the conditions precedent relating to the
Acquisition. The consideration due to Pinnacle Point Resorts in terms of
the Pinnacle Point Resorts Business Sale Agreement, shall be an amount
equivalent to the net asset value of the Pinnacle Point Beach and Golf
Estate Business, as determined with reference to the effective
date accounting records and will be settled through the creation of a
loan account in favour of Pinnacle Point Resorts in PPR Newco. The
consideration amounts to approximately R60.0 million. Consequently,
Pinnacle Point Resorts, as the owner of all the shares in PPR Newco and
the aforementioned loan account, became one of the sellers and all the
shares in PPR Newco as well as the loan account is being acquired by Acc-
Ross as a part of the Acquisition.
The shares in Pinnacle Point Resorts will no longer be acquired by Acc-
Ross as part of the Acquisition.
The aggregate purchase consideration payable by Acc-Ross to the sellers
in respect of the Acquisition amounts to R1 764 670 297, which shall be
settled by Acc-Ross through the issue of 2 714 877 381 Acc-Ross shares,
to be issued as fully paid up shares at 65 cents per Acc-Ross share.
The Acquistion results in a reverse takeover and, therefore, an opinion
as to the fairness of the Acquisition from an independent advisor, Moore
Stephens Corporate Finance (Pty) Ltd ("Moore Stephens"), has been
obtained by Acc-Ross in terms of the Securities Regulation Code and
Rules of the SRP ("SRP Code").
2. Specific issues of shares
In addition, Acc-Ross has entered into the following agreements relating
to
the specific issues of shares for cash:
i) A specific issue of 400 000 000 Acc-Ross shares to Rakeen
Development PJSc ("Rakeen") at 50 cents per Acc-Ross share for cash
amounting to R200.0 million. The issue price represents a discount of
29.2% to the weighted average trade price of Acc-Ross shares of 70.67
cents for the 30 trading days ended 24 April 2008, being the day on
which the issue price was negotiated with Rakeen. Rakeen is regarded as
a strategic partner for the New Group going forward due to a number of
factors. Rakeen will be nominating a director to the board of the New
Group going forward and has signed a voting pool agreement with the
various sellers.
Rakeen is a property development company situated in the United Arab
Emirates and currently has a significant number of developments
underway. Rakeen has a diversified, international development portfolio
and has been investing robustly in emerging markets. Rakeen wish to
utilise the New Group as a partner in its proposed property developments
in Africa and elsewhere and has also expressed interest in partnering
with the New Group in the Seychelles development. The New Group will
provide experience in respect of the local development market and will
utilise its relationship with Rakeen to spearhead its international
expansion programme. Rakeen has already identified a number of new
development opportunities in respect of which it intends to partner with
the New Group, further details of which will be announced in due course.
The numerous strategic and operational benefits that Rakeen contribute
to the relationship are detailed in the circular to Acc-Ross
shareholders dated 2 October 2008; and
ii) A specific issue of 250 000 000 Acc-Ross shares to Lurco Trading
278 (Pty) Ltd ("Lurco Trading") at 80 cents per Acc-Ross shares for cash
amounting to R200.0 million. The issue price represents a discount of
11.5% to the weighted average trade price of Acc-Ross shares of 90.37
cents for the 30 trading days ended on 3 September 2008, being the day
on which the issue price was finalised. Lurco Trading is an exisitng
shareholder in Acc-Ross, is a related party transaction in terms of
Section 10 of the JSE Listings Requirements and a fairness opinion in
realtion to the specific issue of shares for cash has been obtained.
Acc-Ross will also seek shareholder approval for specific issues of
shares in lieu of fees for the various services, introduction of
investors and broker fees for the introduction of BEE and the
Acquisition and professional fees to the following parties, all of whom
have agreed to accept shares in lieu of services rendered:
i. Sales Affiliates 85 (Pty) Ltd - 10 000 000 shares at an issue price
of 100 cents per Acc-Ross share;
ii. Mayibuye Capital (Pty) Ltd - 5 500 000 at an issue price of 90
cents per Acc-Ross share;
iii. QuestCo Sponsors (Pty) Ltd (769 231 shares) and D van Huyssteen (8
461 538 shares) at an issue price of 65 cents per share; and
iv. Rowmoor Investments 756 (Pty) Ltd - 20 000 000 at an issue price of
100 cents per Acc-Ross share.
(collectively "the specific issues of shares").
3. Rationale
It is intended that the businesses of Acc-Ross and the Pinnacle Point
Group will be merged in order to exploit the benefits of the
complementary property development portfolios, the substantial synergies
that exist and cost savings that will be achieved and thereby increasing
shareholder value.
The New Group will have significant residential, leisure, hotel,
retirement, commercial and gaming development opportunities. These
opportunities exist in South Africa, Seychelles, Nigeria and Mozambique.
Approximately 70% of the combined projected revenue from existing
opportunities is expected to be generated in Euros and US Dollars over
the next three to five years.
The combined operations will give the New Group the critical mass to
finance new projects on more favourable terms and give it easier access
to large development opportunities both in South Africa and beyond the
borders of South Africa.
The Pinnacle Point Group has built a strong "in house" sales, marketing
and development capability, which can be utilised by Acc-Ross. Various
other "in house" capabilities, such as project management skills,
fractional unit management, hotel and leisure capabilities, will be
consolidated into the new operation thus making these important and
scarce skills available "in house" to the New Group.
The New Group will be better placed to attract new shareholders, both
local and itnernational, who will invest cash into the New Group which
will assist in the funding of developments and projects.
The rationale for the specific issue of shares for cash is to secure
strategic investors for the New Group going forward as well as to
significantly reduce the New Group`s exposure to financiers and to
strengthen the New Group`s capital base in terms of new development
project funding.
4. BEE
Acc-Ross will obtain the benefit of BEE partners through the Acquisition
as subsequent to the Transactions, a BEE Consortium, headed up by
Lazarus Zim, will indirectly hold 578 707 224 New Group shares, which
equates to 11.9% of the issued share capital of the New Group pursuant
to the Acquisition and the specific issues of shares. The BEE
investment will benefit over 30 000 "Black People" (as contemplated in
the BEE Codes of Good Practice) as indirect shareholders. Pursuant to
the approval of the Acquisition, Lazarus Zim will be nominated for
appointment as non-executive Chairman of the New Group.
5. Acc-Ross shares vesting early
On 04 October 2007, Acc-Ross shareholders approved the specific issue of
Acc-Ross shares to executive directors as a part of their remuneration.
20 000 000 million of these Acc-Ross shares have not yet vested. These
unvested Acc-Ross shares will vest immediately following the successful
conclusion of the Acquisition in terms of the executive directors`
contracts of employment due to the change in control.
6. Share issue
Following the Acquisition, the New Group may want to raise capital for
property development opportunities. Acc-Ross is seeking shareholder
approval, valid until 31 January 2009, to raise fresh equity through the
issue of up to 850 000 000 additional Acc-Ross shares at a minimum price
of 80 cents per Acc-Ross share to interested off-shore investors and the
local market ("share issue"). This specific authority will only be
utilised by Acc-Ross if it is required. As the discount at which the
Acc-Ross shares will be issued is unknown and some of the Acc-Ross
shares may be issued to related parties, a fairness opinion in respect
of the share issue has been obtained from Moore Stephens.
7. Forecast information on the New Group
A summary of the forecast financial information regarding the New Group
for the 12 months ending 28 February 2009 and 2010 is set out below.
Forecast Forecast
12 months ending 12 months ending
28 February 2009 28 February 2010
R`000 R`000
Revenue 292 785 603 811
Cost of sales (188 274) (368 902)
Gross profit 104 511 234 909
Other income 24 000 -
Operating expenses (91 286) (120 386)
Operating profit 37 225 114 523
Finance costs (6 173) (4 521)
Profit before taxation 31 052 110 002
Taxation (10 486) (30 800)
Profit for the year 20 566 79 202
Profit attributable to equity 14 380 73 457
shareholders
Minority shareholders 6 186 5 745
Weighted average number of 3 709 030 790* 5 697 337 609*
shares in issue
Earnings per share (cents) 0.39 1.29
Headline (loss)/earnings per (0.26) 1.29
share (cents)
* excludes treasury shares
8. Pro forma financial information
The table below sets out the unaudited pro forma financial effects of
the following:
- the Acquisition;
- the specific issues of shares to Sales Affiliates 85;
- the specific issue of shares to Lurco Trading;
- the specific issue of shares to Mayibuye Capital;
- the specific issues of shares to QuestCo Sponsors and D van
Huyssteen;
- the specific issue of shares to Rakeen;
- the specific issue of shares to Rowmoor Investments 756;
- the share issue; and
- Acc-Ross shares early vesting;
collectively, the Transactions (as defined in paragraph 7 below) on Acc-
Ross. The specific issues of shares to Sales Affiliates 85, the specific
issue of shares to Mayibuye Capital, specific issues of shares to
QuestCo Sponsors and D van Huyssteen and the specific issue of shares to
Rowmoor Investments 756 all relate to the issue of shares in lieu of
fees ("issue of shares in lieu of fees") relating to the Acquisition
and, therefore, the pro forma financial effects have been shown
collectively.
For purposes of the pro forma financial information the following
assumptions have been made:
- the Acquisition, the specific issues of shares in lieu of fees, the
specific issue of shares to Lurco Trading, the specific issue of shares
to Rakeen, the share issue, Acc-Ross shares vesting early and,
collectively, the Transactions took place with effect from 29 February
2008 for balance sheet purposes; and
- the specific issues of shares in lieu of fees, the specific issue
of shares to Lurco Trading, the specific issue of shares to Rakeen, the
share issue, Acc-Ross shares vesting early and, collectively, the
Transactions (but excluding the Acquisition) took place with effect from
1 March 2007 for income statement purposes; and
- the 850 000 000 Acc-Ross shares have been issued at 80 cents per
share in terms of the share issue.
The unaudited pro forma financial effects are presented for illustrative
purposes only and because of their nature may not give a fair reflection
of Acc-Ross` financial position, on a "stand alone" basis, after each of
the Acquisition, the specific issues of shares in lieu of fees, the
specific issue of shares to Lurco Trading, the specific issue of shares
to Rakeen, the share issue, Acc-Ross shares vesting early and,
collectively, the Transactions. The directors of Acc-Ross are
responsible for the preparation of the unaudited pro forma financial
effects.
After the After the
specific specific After the
issues of issue of specific
shares in shares to issue of
Per Acc- Before the After the lieu Lurco shares to
Ross share Trans- Acquisition of fees Trading Rakeen
actions
Loss per (10.61) *
share (10.25) (8.56) (2) (7.79) (2)
(cents)
Headline (1.31) *
loss per (1.26) (0.78) (2) (0.71) (2)
share
(cents)
Net asset 20.79 30.32 (3,)
value per 30.98 (3, 5) 33.15 (3, 5) 32.06 (3,
share 5)
(cents)
Net 18.14 22.24 (3, )
tangible 22.00 (3, 4, 25.53 (3, 4, 24.69 (3,
asset value 5) 5) 4,5)
per share
(cents)
Weighted
average 1 275 558 * 1 320 288 1 525 558 1 675 558
number of
shares in
issue
(`000)
Number of 1 417 729 4 132 607 4 177 338 4 382 607 4 532 607
shares in
issue
(`000)**
Table continue:
After the
Transactions
excluding
the
Acquisition
for income
statement
After the purposes/
Acc-Ross After the
After the shares Transaction % change
Per Acc-Ross share issue vesting for balance
share early sheet
purposes
Loss per share 54.6%
(cents) (6.14) (2) (10.93) (4.82) (2)
Headline loss 51.1%
per share (0.56) (2) (1.77) (0.64) (2)
(cents)
Net asset value 100.4%
per share 38.80 (3, 5) 30.33 41.67 (3, 5)
(cents)
Net tangible 93.4%
asset value per 32.09 (3, 22.28 35.09 (3, 4,
share (cents) 4,5) 5)
Weighted average 122.7%
number of shares 2 125 558 1 295 558 2 840 288
in issue (`000)
Number of shares 4 982 607 4 152 607 5 697 338 301.9%
in issue
(`000)**
* The unaudited earnings and headline earnings per share of the
Acquisition have not been presented as Acc-Ross is defined as a property
entity in terms of the Listings Requirements and has, therefore,
presented profit forecasts in respect of the New Group in compliance
with paragraph 13.7(a) and 13.4 (b)(i) of the Listings Requirements. The
profit forecasts are considered to be more meaningful to shareholders
than the presentation of pro forma earnings and headline earnings per
share based on the historical financial information of Acc-Ross and the
Pinnacle Point Group.
** Excluding treasury shares of 2 445 205.
Notes:
1. Based on the published audited consolidated financial information
of Acc-Ross as at 29 February 2008.
2. Earnings and headline earnings per share have been adjusted to
reverse finance costs amounting to R6.59 million that were written off
through the income statement of the Pinnacle Point Group and the related
taxation saving calculated at 29% due to the settlement of debt with the
cash received in respect of the specific issue of shares to Lurco
Trading, the specific issue of shares to Rakeen and the share issue.
3. Net asset value and net tangible asset value per share have been
adjusted to include the assets and liabilities relating to the Pinnacle
Point Group at fair value, the goodwill arising on the Acquisition and
the cash portion of the transaction costs which have been capitalised to
the cost of the Acquisition in terms of IFRS 3: Business Combinations.
4. Net tangible asset value per share has been further adjusted to
exclude the goodwill arising on the Acquisition.
5. Net asset value and net tangible asset value per share have been
adjusted for the increase in the share capital and the reduction of
borrowings.
9. Documentation and various transactions and actions associated with
the implementation of the Acquisition, including proposed change in name
of the company.
In addition to the Acquisition, the specific issues of shares and the
share issue, Acc-Ross shareholders will be asked to approve the
following:
- an increase in the Company`s authorised share capital;
- placing the authorised but unissued shares under the control of the
Acc-Ross directors;
- amendments to the Company`s articles of association;
- a waiver of the obligation on the Sellers and Rakeen, in terms of
Rule 8 of the SRP Code, to make an offer to all minority sharesholders
to acquire all or part of their ordinary shares in Acc-Ross ("Mandatory
Offer");
- the change of name of the Company to Pinnacle Point Group Limited;
and
- the reconstitution of the board of directors of the Company.
(collectively "the Transactions")
A circular, incorporating Revised Listing Particulars, and setting out
details of the Acqusition, the specific issues of shares, the
Transactions, the text of the fairness opinions obtained from Moore
Stephens Corporate Finance in respect of the waiver of the Mandatory
Offer, the specific issue of shares to Lurco Trading and the share issue
and including a notice of general meeting which contains ordinary and
special resolutions to give effect to the above, was posted to Acc-Ross
shareholders on Thursday, 02 October 2008.
10. The waiver of the Mandatory Offer and confirmation of no special
arrangements On implementation of the Acquisition, the sellers and
Rakeen`s aggregate shareholdings in Acc-Ross will increase from 0% to
over 60%. Rakeen is a party to a voting pool agreement signed by the
various sellers. The Acquisition and specific issue fo shares for cash
is thus an "affected transaction" under the Securities Regulation Panel
("SRP") Code which ordinarily would require the sellers and Rakeen to
make a Mandatory Offer to acquire the Acc-Ross shares owned by all Acc-
Ross shareholders at an offer price of 65 cents per share.
The SRP has advised that it is willing to consider an application to
grant dispensation to the Sellers and Rakeen, in terms of the SRP Code,
from the obligation to make a Mandatory Offer to acquire the ordinary
shares of Acc-Ross shareholders if Acc-Ross shareholders in general
meeting (other than shares held by subsidiaries of Acc-Ross) waive their
right to require the sellers and Rakeen to make a Mandatory Offer and
subject to the SRP considering any representations made by Acc-Ross
shareholders, as contemplated below.
Any Acc-Ross shareholder who wishes to object to the dispensation shall
have 10 days from the date of posting of the circular to raise such an
objection with the SRP. Objections should be made in writing and
addressed to "TheExecutive Director, Securities Regulation Panel" at the
following addresses:
Physical: Ground Floor
2 Sherborne Road (off Jan Smuts Avenue)
Parktown, 2193
Postal: PO Box 91833
Auckland Park, 2006
Fax: +27 11 482 5635,
and should reach the SRP by not later than the close of business on
Monday, 13 October 2008 in order to be considered.
If any submissions are made to the SRP within the permitted timeframe,
the SRP will consider the merits thereof and, if necessary, provide
the sellers and Rakeen with an opportunity to make representations to
the SRP. Thereafter, subject to the waiver in general meeting being
granted by the Acc-Ross shareholders, the SRP will rule on the
requirement for a Mandatory Offer.
The granting of the aforesaid waiver and of the dispensation is
a condition precedent to the Acquistion.
11. Salient dates and times
2008
Circular posted to shareholders on Thursday, 2 October
Opening of period in which Acc-Ross
shareholders can object to the proposed SRP
dispensation to the Sellers and Rakeen
releasing them from the obligation to make a
mandatory offer to all Acc-Ross shareholders
on Friday, 3 October
Closing of period in which Acc-Ross
shareholders can object to the proposed SRP
dispensation to the Sellers and Rakeen
releasing them from the obligation to make a
mandatory offer to all Acc-Ross shareholders
at 17:00 on Monday, 13 October
Forms of proxy to be received by 10:00 on Wednesday, 22 October
General meeting to be held at 10:00 on Friday, 24 October
Results of the general meeting released on
SENS on Friday, 24 October
Finalisation announcement regarding the name
change becoming unconditional and providing
details of the last day to trade and the
record date released on SENS on or before Friday, 7 November
Last date to trade under the old name "Acc-
Ross Holdings Limited" on Friday, 14 November
Shares begin trading under new name under JSE
code PNG and ISIN: ZAE000127122 on Monday, 17 November
Record date for the name change on Friday, 21 November
New share certificates reflecting the name
change posted if received on or before 12:00
on Friday 14, November 2008 (or if received
thereafter within five business days of
receipt by the transfer secretaries of
existing share certificates) on Monday, 24 November
Dematerialised shareholders will have their
accounts at their CSDP or broker updated with
the name change on Monday, 24 November
These dates and times are subject to amendment. Any such amendment will
be released on SENS.
Share certificates in the name of Acc-Ross may not be dematerialised or
rematerialised after Friday, 14 November 2008.
Share certificates in the new name may be dematerialised or
rematerialised as from Monday, 24 November 2008.
12. Withdrawal of cautionary announcement
Shareholders are advised that the previous cautionary announcements
regarding dealings in Acc Ross securities are hereby withdrawn
Johannesburg, 3 October 2008
Designated Advisor: Transaction Attorneys to the
Advisor: Pinnacle Point
Arcay Moela QuestCo Sponsors Group and Acc-Ross
Sponsors (Proprietary) shareholders:
(Proprietary) Limited Cliffe Dekker
Limited Hofmeyr Inc
Independent expert: Reporting Attorneys to Acc-
Moore Stephens accountants to the Ross:
Corporate Finance Pinnacle Point Webber Wentzel
Group and Acc-Ross:
Mazars Moores
Rowland
Date: 03/10/2008 16:20:57 Produced by the JSE SENS Department.
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