| Wed 26 Nov 2008, 13:00 | | AFO - Aflease Trading Statement Acquisition Issue Financial Effects Of The |
|
AFO
AFO
AFO - Aflease Trading Statement, Acquisition Issue, Financial Effects Of The
Acquisition Issue And The Scheme Relating To BMA, And Withdrawal Of
Cautionary Related To The Scheme
Aflease Gold Limited
(Incorporated in the Republic of South Africa)
(Registration number 1984/006179/06)
JSE Share code: AFO
ISIN: ZAE0000758867
International Prime QX (OTCQX): AFSGY
("Aflease")
AFLEASE TRADING STATEMENT, ACQUISITION ISSUE, FINANCIAL EFFECTS OF THE
ACQUISITION ISSUE AND THE SCHEME RELATING TO BMA, AND WITHDRAWAL OF CAUTIONARY
RELATED TO THE SCHEME
Further to the announcement dated 20 November 2008 regarding the execution of an
acquisition agreement by Aflease and BMA in relation to a scheme of arrangement
("scheme"), the following information is provided:
The terms used below are as defined in the announcement dated 20 November 2008,
save where a different definition appears herein.
1 Trading statement
In terms of the Listings Requirements of the JSE Limited, a listed company must
publish a trading statement as soon as it is satisfied that a reasonable degree
of certainty exists that the financial results for the period to be reported
upon next will differ by at least 20 percent from that of the previous
corresponding period.
Aflease expects that for the year ending 31 December 2008, headline and
attributable earnings per ordinary share will be between 8 and 12 cents per
share. The basic and headline loss per share reported in 2007 were (16.31) and
(15.70) cents per share respectively reported.
In December 2007 Aflease issued 600 convertible bonds at a value of R1 million
per bond to raise gross proceeds of R600 million, primarily to finance the
development of the Modder East project. The Aflease convertible bonds mature 5
years from the issue date at the redemption value of 109.6 percent of the
nominal value, unless converted into Aflease shares at the holders` option. All
or some of the Aflease convertible bonds can be converted at a fixed rate of 266
058 shares per bond. The Aflease convertible bonds are reported at fair value
with changes to the fair value recognised through the income statement.
Similarly, the conversion option within the Aflease convertible bond is a
derivative embedded in the liability which is measured at fair value with
changes in fair value recognised in the income statement. With changes in
market conditions from June 2008, the value of the conversion option has
reduced, resulting in an accounting non-cash gain to Aflease.
The information in this trading statement has not been reviewed and reported on
by the auditors of Aflease.
The results for the year ending 31 December 2008 will be published on 31 March
2009.
2 Acquisition issue by Aflease
2.1 Introduction
In terms of an agreement ("the Trinity Agreement") entered into on 25 November
2008 ("signature date") between Aflease and Trinity Asset Management Proprietary
Limited ("Trinity"), Aflease is undertaking a 10 for 1 share swap with Trinity
and will acquire, in a number of separate tranches, not less than 3 million and
not more than 7.5 million Randgold & Exploration Company Limited ("Randgold")
shares at a price per Aflease share of not less than 95 percent of the 30 day
volume weighted average traded price of Aflease shares on the date of
acquisition by Aflease of each tranche of Randgold shares to be acquired by it
from Trinity ("acquisition"). The first tranche will consist of 3 million
Randgold shares in exchange for 30 million Aflease shares at an agreed price of
R13.00 per Randgold share and R1.30 per Aflease share. The remaining tranches
will be swapped during the period of 3 months following on the signature date at
the price per Aflease share and the swap ratio as stated above. At the end of
that period all obligations with regard to Randgold shares not yet swapped, will
terminate.
Trinity currently holds 44 million Aflease shares (i.e. 8.36% of the current
issued share capital before the acquisition).
2.2 Rationale
Aflease will look to dispose of the Randgold shares in order to raise additional
capital.
Trinity has undertaken to use its best commercial endeavours to assist in the
sale of the Randgold shares for and on behalf of Aflease.
2.3 Randgold
Randgold is an investment holding company with assets in the mining industry.
It aims to invest in high quality assets that will ensure maximum return for its
shareholders. It currently holds prospecting rights directly and indirectly
through subsidiary companies which it plans to develop further in order to add
value to its investments. Randgold will only consider mining where the resource
analysis proves that it is commercially prudent to do so. There are no
operational mines in the group. (source: www.randgold.co.za)
2.4 Conditions precedent
The acquisition of the first tranche of Randgold shares is not subject to any
conditions precedent.
Aflease will not be obliged to acquire from Trinity any subsequent tranches of
Randgold shares put to Aflease in terms of the Trinity Agreement, unless all
Randgold shares already acquired by Aflease in terms of the agreement have been
disposed of to the satisfaction of Aflease.
3 Financial effects of the acquisition and the scheme
The tables below set out the unaudited pro forma financial effects of the
acquisition and the scheme on Aflease ordinary shareholders for the period ended
30 June 2008. The first table reflects the minimum 30 million Aflease shares to
be issued in terms of the acquisition. The second table reflects the potential
maximum 75 million Aflease shares to be issued.
The unaudited pro forma financial effects have been prepared for illustrative
purposes only to reflect the pro forma results of BMA after:
* the acquisition; and
* the implementation of the scheme and the replacement of the Aflease
convertible bonds with BMA convertible bonds, including the accounting loss
which results from the proposed waiver in terms of the convertible bonds to
allow for the technical change of control of Aflease.
Because of its nature, the unaudited pro forma financial effects may not give a
fair reflection of BMA`s financial position, changes in equity, results of
operations or cash flows. The unaudited pro forma financial effects are the
responsibility of the Aflease directors and the BMA directors.
These financial effects may be subject to amendment. Any changes to the
financial effects will be released on the Securities Exchange News Service
("SENS") and published in the press.
Based on a minimum of 30 million Aflease shares in terms of the Trinity
Agreement:
Before the scheme
Aflease
Aflease adjusted/
Aflease adjusted Aflease
(Note 2) (Note 3) % change
Net asset value/
share (cents) 42.85 47.55 11.0%
Tangible net
asset value/
share (cents) 42.85 47.55 11.0%
Total number
of shares 524 457 006 554 457 006
Loss per
share (cents)
* Basic (3.77) (3.56) 5.6%
* Headline (3.77) (3.56) 5.6%
Weighted average number
of shares 524 186 173 554 186 173
After the scheme
BMA after/
Aflease
BMA after adjusted
(Note 4) % change
Net asset value/
share (cents) 28.24 (40.6%)
Tangible net asset
value/ share (cents) 28.24 (40.6%)
Total number
of shares 578 607 712
Loss per share (cents)
* Basic (25.89) (627.2%)
* Headline (25.89) (627.2%)
Weighted average number
of shares 578 607 545
Based on a maximum of 75 million Aflease shares in terms of the Trinity
Agreement:
Before the scheme
Aflease
Aflease adjusted/
Aflease adjusted Aflease
(Note 2) (Note 3) % change
Net asset value/
share (cents) 42.85 52.24 21.9%
Tangible net
asset value/
share (cents) 42.85 52.24 21.9%
Total number
of shares 524 457 006 599 457 006
Loss per
share (cents)
* Basic (3.77) (3.30) 12.5%
* Headline (3.77) (3.30) 12.5%
Weighted average number
of shares 524 186 173 599 186 173
After the scheme
BMA after/
Aflease
BMA after adjusted
(Note 4) % change
Net asset value/
share (cents) 34.14 (34.7%)
Tangible net asset
value/ share (cents) 34.14 (34.7%)
Total number
of shares 623 607 712
Loss per share (cents)
* Basic (24.02) (627.9%)
* Headline (24.02) (627.9%)
Weighted average number
of shares 623 607 545
Notes to both tables:
1 The pro forma financial effects are based on the accounting policies adopted
by Aflease, which are in accordance with International Financial Reporting
Standards ("IFRS"). It is assumed that all changes and transactions described
below are effective on:
* 1 January 2008 for purposes of preparing the pro forma financial effects on
earnings.
* 30 June 2008 for purposes of preparing the pro forma financial effects on net
asset values.
2 The "Aflease" column has been extracted from the published unaudited
financial information of Aflease for the six months ended 30 June 2008.
3 The "Aflease adjusted" column represents the effects of the acquisition,
after transaction costs assumed at R100 000. The number of Aflease shares to be
issued in terms of the Trinity Agreement is assumed at 30 000 000, being the
minimum per the Trinity Agreement in the first table and is assumed at 75 000
000, being the potential maximum number of shares in the second table. The
investment in Randgold shares will be held for sale and will be fair valued at
the effective date of the acquisition.
4 The "BMA after" column is based on the published unaudited financial
information of BMA for the six months ended 30 June 2008, adjusted for the
following:
* Amounts have been converted from Australian Dollar to Rand at the following
assumed exchange rates:
- Income statement: R7.10: AUD1
- Balance sheet: R7.62: AUD1
* Significant corporate action within BMA after 30 June 2008 but prior to the
implementation of the scheme. The corporate action includes the issue of
shares, the exercise of share options and a share consolidation of 20:1.
* An accounting policy change relating to the expensing of exploration costs to
align the BMA accounting treatment with Aflease post the scheme.
* The business combination as proposed in the scheme takes into consideration
the accounting principles relating to reverse acquisitions in terms of IFRS3
Revised: Business Combinations. It is assumed that BMA will elect to early
adopt IFRS3R: Business Combinations.
* Transaction costs of R36.8 million, which are non-recurring. Costs
associated with the issue of shares of R7 million are set off against share
capital while other transaction costs are expensed in terms of IFRS3R: Business
Combinations. An interest impact after tax is assumed.
* In terms of the scheme the convertible bonds in Aflease will be replaced with
convertible bonds in BMA with adjustments to certain terms and conditions to be
agreed with the convertible bondholders. A fair value adjustment of R90
million, based on preliminary calculations, is assumed, which increases the
carrying value of the liability and results in an equivalent charge to the
income statement. While fair value adjustments are accounted on an ongoing
basis, the nature of this charge to the income statement is non-recurring as it
relates directly to the replacement of the Aflease convertible bonds. Fair
value changes will be determined on the effective date of the transaction.
* Charges for IFRS2: Share-based payments are assumed to be the same as
reported and will have to be calculated as at reporting periods.
* The issue of BMA shares in terms of the scheme. The number of shares at 30
June 2008 and the weighted average number of shares for the period then ended
are for the BMA legal entity after the scheme. Effectively one previous share
in Aflease per the "Aflease adjusted" column is equivalent to one BMA share per
the "BMA after" column.
5 The trading update for Aflease included in paragraph 1 of this announcement
refers to market movements after 30 June 2008 to date which have resulted in the
fair value of the convertible bonds liability reducing subsequent to the 30 June
2008 reporting date. While not a consequence of the scheme, the current market
movements are taken into consideration by the directors of Aflease in their
renegotiation of the terms for the replacement of the convertible bonds.
Preliminary valuations of the bonds indicate that, currently, the R90 million
fair value charge, as described in note 4 above, is absorbed by the positive
fair value adjustments arising as a consequence of the current market
conditions. The net impact of these adjustments on the fair value of the
convertible bond liability may therefore result in a significantly different
carrying value of the convertible bond liability at the effective date of the
scheme, compared to the liability assumed in the pro forma financial effects.
On the assumption that the market related fair value adjustments to the
convertible bonds result in a set-off of the R90 million impact of the
renegotiation of the terms, the pro forma net asset value per share would have
been 43.80c to 48.58c and the pro forma earnings per share would have been
(10.34c)to (9.59c). Fair value changes will be determined at the effective date
of the transaction.
6 Diluted earnings per share are anti-dilutive.
4 Withdrawal of cautionary
Given that the financial effects of the scheme have now been provided in
paragraph 3 above, the cautionary relating to the scheme is withdrawn.
5 Ongoing cautionary
As Aflease is still in discussions regarding transactions aimed at raising
development capital, the outcome of which may have a material effect on the
price of Aflease`s shares, Aflease shareholders are advised to continue to
exercise caution when dealing in Aflease`s shares until a further announcement
is made.
Parktown, Johannesburg
26 November 2008
Corporate adviser and sponsor to Aflease:
MACQUARIE FIRST SOUTH ADVISERS (PTY) LIMITED
Date: 26/11/2008 13:00:01 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.
