| Wed 18 Feb 2009, 10:46 | | FPF - Finbond - The Acquisition Of The Business Of Moneyline Financial Services |
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FPF
FPF
FPF - Finbond - The Acquisition Of The Business Of Moneyline Financial Services
(Proprietary) Limited ("Moneyline / New World Finance") From Net1 UEPS
Technologies Limited ("Net1") And Its Subsidiaries
Finbond Property Finance Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2001/015761/06)
Share code: FPF & ISIN: ZAE000097259
("Finbond" or "the Company")
ANNOUNCEMENT REGARDING:
- THE ACQUISITION OF THE BUSINESS OF MONEYLINE FINANCIAL SERVICES
(PROPRIETARY) LIMITED ("MONEYLINE / NEW WORLD FINANCE") FROM NET1 UEPS
TECHNOLOGIES LIMITED ("NET1") AND ITS SUBSIDIARIES
- THE CONCLUSION OF A TECHNOLOGY SHARING SERVICE LEVEL AGREEMENT WITH NET1;
AND
- A GENERAL ISSUE OF SHARES FOR CASH
1. Introduction
Finbond shareholders are referred to the cautionary announcement issued by the
Company on 16 January 2009 and are advised that Finbond has concluded an
acquisition of business agreement with Net1 (a NASDAQ and JSE Limited listed
company) in terms of which Finbond will acquire the business of Net1`s
subsidiary Moneyline / New World Finance ("the Acquisition"). Moneyline / New
World Finance operates a network of 60 micro finance branches nationally under
both the `Moneyline` and `New World Finance` names, delivering micro finance
products to the emerging market through low cost delivery platforms.
In addition to the Acquisition, Finbond and Net1 have also agreed to enter into
a Service Level Agreement whereby Net1`s technology and point of sale devices
will be installed in all of Finbond`s micro finance branches ("the Net1 SLA").
Finbond has, in terms of its general authority to issue shares for cash, agreed
to issue new shares to Net1, thereby raising R34,8 million of capital to fund
its growing micro finance activities ("the General Issue for Cash").
2. The business of Moneyline / New World Finance
Moneyline / New World Finance currently operates 60 micro finance branches.
These branches focus on a specific profile of customer, delivering branded micro
finance products to the emerging market through low cost delivery platforms.
Moneyline / New World Finance offers innovative and ethical credit solutions to
unbanked South Africans. Moneyline / New World Finance specialises in the design
and delivery of unique value and solution-based funding options tailored around
borrower requirements rather than rigid institutionalised lending policies,
thereby complementing Finbond`s existing micro finance division. Moneyline /
New World Finance`s micro finance business commenced trading in 1997 and its
current national branch network of 60 `banking hall` type branches - where
direct contact with clients is possible - offer 30 day (short-term), 90 day
(medium term) and 12 month (long term) micro loans to its customers. The advance
of the aforementioned loans creates a continuous relationship with the clients
concerned enabling the business to build a loyal client base to ensure
sustainable growth into the future. The client base of the micro lending
industry primarily fall within the Living Standard Measurement ("LSM") groups 1
to 7 (between R710 and R6 100 gross monthly income). These clients tend to
utilise alternative financial services providers due to limited access to
funding from the formal banking sector.
3. Rationale for the Acquisition
Although Finbond`s current branch network (of 118 branches) currently has a
large national footprint, it is particularly well represented in the Gauteng,
Free State, Western Cape and Eastern Cape provinces. Moneyline / New World
Finance`s branch network in contrast is strong in Kwa-Zulu Natal (30 of its 60
branches) whereas Finbond currently only has six branches in the province. The
Acquisition will therefore give Finbond a larger footprint across South Africa
with strong coverage in the main areas of economic activity. Following the
Acquisition, strategic benefits to Finbond will include:-
- owning the fourth-largest branch network of the JSE-listed micro lenders,
with 178 branches;
- enhanced micro finance volumes and ability to disburse micro finance
products; and
- enhanced product offering and technology capabilities.
All Moneyline / New World Finance branches will be brought onto the same systems
and software platforms as the existing Finbond branches allowing for accurate,
centralised control of the operations. Moneyline / New World Finance is
currently headquartered and managed centrally from Rosebank Johannesburg. From
the effective date of the transaction Finbond management will take operational
control of the business and the head office function will be moved and
integrated into Finbond`s head office in Brooklyn Pretoria. All Moneyline / New
World Finance branches will be rebranded as `Finbond Micro Finance` branches
over the next 3 months.
4. Details of the Acquisition
The consideration in respect of the Acquisition is an amount of R32 909 900
which will be settled by Finbond issuing Net1 with 41 137 375 new Finbond shares
at an issue price of 80 cents per share within three business days of the
effective date of the transaction.
The effective date of the Acquisition will be 1 March 2009.
The Acquisition remains conditional upon Finbond successfully concluding a
comprehensive due diligence investigation on the Moneyline business and its 60
branches and Finbond and Net1 entering into the Net1 SLA.
5. Financial effects of the Acquisition
Set out below are the pro forma financial effects of the Acquisition on the
unaudited interim results published by Finbond in respect of the six months
ended 31 August 2008. The pro forma financial effects have been prepared for
illustrative purposes only, to provide information on how the Acquisition would
have affected the previously published interim financial results. The pro forma
financial effects are the responsibility of the directors of Finbond.
Pro forma
before the Pro forma
Acquisition after the
(cents) Acquisition Change (%)
(cents)
Earnings per share 7.16 6.68 (6.7)
Headline earnings per 7.54 6.94 (7.9)
share
Net asset value per 86.92 86.07 (1.0)
share
Tangible net asset 18.63 20.24 8.64
value per share
Notes:
1. The amounts set out in the "pro forma before the Acquisition" column
have been extracted from the interim results published in respect of
the six months ended 31 August 2008.
2. For the purposes of earnings and headline earnings per share it has
been assumed that the transaction was effective 1 March 2007. For the
purpose of net asset value and tangible net aasset value per share it
has been assumed that the transaction was effective 31 August 2008.
3. Earnings in the "Pro forma after the Acquisition" column have been
based on actual Moneyline / New World Finance results extracted from
management accounts for the six months ended 31 December 2008.
4. Company tax has been calculated at 28% in the "Pro-forma after the
Acquisition" column.
6. The Net1 SLA
Concurrent with and as a condition of the Acquisition and the General Issue for
Cash, Finbond and Net1 have agreed to enter into a service level agreement in
terms of which Net1 will install its technology and point of sale devices for
the marketing of pre-paid electricity, pre-paid cell phone air time and bill
payments into all of Finbond`s branches. These products will not only add
additional revenue sources to Finbond, but will also attract additional
customers to Finbond branches, as the pre-paid products are very sought after.
7. General Issue of Shares for Cash
In terms of the general authority to issue shares for cash granted to Finbond`s
directors and renewed at the Company`s most recent Annual General Meeting,
Finbond`s directors have agreed to issue 43 495 150 new Finbond shares to Net1
at an issue price of 80 cents per share thereby raising capital of R34 796 120.
The issue price of 80 cents per Finbond share represents a premium of 43% to the
volume weighted average price for the 30-day period preceding the date at which
the issue price of 80 cents was agreed upon by Finbond and Net1. The capital
raised through the General Issue of Shares for Cash will be utilised to fund the
further growth of Finbond`s micro lending book.
8. Financial effects of the General Issue of Shares for Cash
Set out below are the pro forma financial effects of the General Issue of Shares
for Cash on the unaudited interim results published by Finbond in respect of the
six months ended 31 August 2008. The pro forma financial effects have been
prepared for illustrative purposes only, to provide information on how the
General Issue of Shares for Cash would have affected the previously published
interim financial results. The pro forma financial effects are the
responsibility of the directors of Finbond.
Pro forma Pro forma
before the after the
General General
Issue of Issue of
Shares for Shares for Change
Cash Cash (%)
(cents) (cents)
Earnings per share 7.16 6.78 (5.3)
Headline earnings per 7.54 7.04 (6.6)
share
Net asset value per share 86.92 86.56 (0.4)
Tangible net asset value 18.63 27.01 45.0
per share
Notes:
1. The amounts set out in the "pro forma before the General Issue of
Shares for Cash" column have been extracted from the interim results
published in respect of the six months ended 31 August 2008.
2. It has been assumed that the cash received from the General Issue of
Shares for Cash will be used to reduce current facilities that Finbond
has in place and utilised to fund its lending book. The assumed
interest saving is 14,5% p.a. being the rate applicable to these
facilities.
3. Company tax has been calculated at 28% in the "Pro-forma after the
Moneyline acquisition" numbers.
9. Withdrawal of cautionary
In light of the aforementioned, shareholders are advised that caution is no
longer required to be exercised by them when dealing in Finbond shares.
Pretoria
18 February 2009
DESIGNATED ADVISER:
GRINDROD BANK LIMITED
Date: 18/02/2009 10:46:01 Produced by the JSE SENS Department.
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