| Thu 23 Apr 2009, 16:31 | | FPF - Finbond - Announcement regarding the acquisition by Finbond |
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FPF
FPF
FPF - Finbond - Announcement regarding the acquisition by Finbond
of the remaining 50% shareholding in its subsidiary Blue Chip
Finance no. 1 (Proprietary) Limited
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 BY FINBOND OF THE REMAINING
50% SHAREHOLDING IN ITS SUBSIDIARY BLUE CHIP FINANCE NO. 1
(PROPRIETARY) LIMITED ("BLUE CHIP")
1. Introduction
Finbond currently owns 50% of the issued ordinary shares in Blue
Chip and has entered into an agreement in terms of which it will
acquire the remaining 50% shareholding in Blue Chip ("the
Transaction"). The Transaction will accordingly result in Blue Chip
becoming a wholly owned subsidiary of Finbond.
2. Rationale for the Transaction
Blue Chip 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. Blue Chip offers innovative and ethical
credit solutions to unbanked South Africans. Blue Chip specialises
in the design and delivery of unique value and solution-based
funding options tailored around borrower requirements rather than
rigid institutionalised lending policies. Blue Chip currently
operates through a national branch network of 60 `banking hall`
type branches, predominantly situated in the Free State province,
where direct contact with clients is possible - offering 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 falls 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.
Finbond has concluded the Transaction as part of an ongoing
strategic centralisation and standardisation program, in order to
achieve synergies through a centralised management, decision making
and control environment. All Blue Chip branches will be brought
onto the same systems and software platforms as the existing
Finbond branches allowing for accurate, centralised control of the
operations. Blue Chip is currently headquartered and managed
centrally from Bloemfontein. Finbond management will take
operational control of the business with immediate effect and the
head office function will be moved and integrated into Finbond`s
head office in Brooklyn, Pretoria, although certain functions will
still be performed in Bloemfontein. All Blue Chip branches will be
rebranded as `Finbond Micro Finance` branches over the next 3
months.
3. Details of the Transaction
In terms of the Transaction, Finbond will acquire the remaining
outside shareholding, consisting of 3 471 734 shares in Blue Chip
("the sale shares") (representing 50% of the issued ordinary share
capital of Blue Chip).
The purchase consideration payable is an aggregate amount of R33
502 666 including R19 094 537 in respect of the sale shares at
(R5,50 per Blue Chip share) and R14 408 129 in respect of the
sellers` outstanding shareholder loans to Blue Chip ("the sale
claims"). The purchase consideration will be paid in cash as
follows:
* R19 094 537 in respect of the sale shares on the closing
date;
*R4 322 439, representing 30% of the sale claims on the closing
date;
*R4 322 439, representing 30% of the sale claims six months
after the closing date; and
*R5 763 251, representing 40% of the sale claims twelve months
after the closing date.
The effective date of the Transaction is 1 March 2009. The closing
date in respect of the Transaction is the commencement of business
on the seventh business day after the fulfilment or waiver of the
last of the conditions precedent (as detailed in 4. below).
The sale shares are held by each of the sellers as follows:-
Seller Shares held
Martinus Johannes Els 1 183 083
Janetha Elizabeth Els 177 110
Gerben Trust (IT 322/02) 379 979
Gert Hendrik Els 169 000
Jan Hendrik Els 158 027
Elize Weinrich 115 853
Cornelius Wilhelmus Els 25 677
Ryno Engels 477 632
Jacobus Wessels 17 341
Cora Greef 13 168
Ronald Arthur Heys 2 568
Pierre Le Roux 477 632
Thea Van Vuuren 115 853
Thomas Francois Oberholzer 74 647
Werner Botha 51 355
Deon Basson 25 677
Kevin Smith 5 136
Johan Ferdinand Botha 1 996
TOTAL 3 471 734
Martinus Johannes Els, Thea Van Vuuren, Pierre Le Roux and Bennie
JJ Potgieter (the Gerben Trust (IT 322/02)) are currently directors
of Blue Chip and Elize Weinrich is a member of Blue Chip`s senior
management. These parties are considered related parties for
purposes of the Listings Requirements of the JSE Limited ("the
JSE").
Details of sale claims by sellers are as follows:-
Seller Shareholders
loans
Martinus Johannes Els 6 316 033
Janetha Elizabeth Els 153 275
Gerben Trust (IT 322/02) 1 827 867
Gert Hendrik Els 250 000
Jan Hendrik Els 30 000
Elize Weinrich 500 000
Cornelius Wilhelmus Els 210 000
Ryno Engels 391 411
Ronald Arthur Heys 1 500 000
Pierre Le Roux 563 543
Thea Van Vuuren 595 000
Thomas Francois Oberholzer 500 000
Werner Botha 200 000
Johan Ferdinand Botha 1 371 000
TOTAL R14 408 129
Following implementation of the Transaction, the only seller who
will remain in the employ of the company is Thea van Vuuren. The
remaining sellers have undertaken that for a period of 3 years from
the closing date that they will not carry on any business or
activity within South Africa in competition with Blue Chip and its
subsidiaries.
4. Conditions Precedent
The Transaction is subject to the fulfillment of, inter alia, the
following conditions precedent:-
1. Finbond`s completion of a satisfactory due diligence
investigation by 29 April 2009;
2. Finbond entering into a service agreement with Thea van Vuuren
by 5 May 2009;
3. The sellers being released from various guarantees and
suretyships by 5 May 2009;
4. The waiver of any pre-emptive rights by 5 May 2009;
5. The conclusion of agreements by 5 May 2009 with each of the
sellers such that the sales claims are treated as commercial arms-
length loans;
6. Finbond being given an option to cancel a rental agreement in
place in respect of Blue Chip`s currently occupied head office
space;
7. The cancellation of the agreement currently in place between
Blue Chip and Blue Chip Results (Proprietary) Limited (outsourcing
financial functions through a company owned by one of the sellers,
Pierre Le Roux) by 5 May 2009; and
8. The approval of Finbond shareholders as required by the
Listings Requirements of the JSE.
The agreement is subject to warranties usual for a transaction of
this nature.
5. Financial Effects of the Transaction
Set out below are the pro forma financial effects of the
Transaction on the unaudited interim results published by Finbond
in respect of the six months ended 31 August 2008. The pro forma
financial effects are the responsibility of the directors of
Finbond and have been prepared for illustrative purposes only, to
provide information on how the Transaction would have affected the
previously published interim financial results and because of their
nature may not fairly present Finbond`s financial position, changes
in equity and results of operations.
A B C D E
Before Pro forma Pro Pro Change Pro forma Change
after the forma forma B % after B %
acquisiti after and C (D vs and C and (E vs
on of the the combine A) the D)
business general d Transacti
of issue of on
Moneyline shares
/ New for cash
World
Finance
Earnings 7.16 6.68 6.78 6.40 (10.6) 8.04 25.7
per share
(cents)
Headline 7.55 6.94 7.04 6.57 (12.9) 7.70 17.1
earnings
per share
(cents)
Net asset 86.92 86.07 86.56 85.86 (1.2) 80.59 (6.1)
value per
share
(cents)
Tangible 18.63 20.24 27.01 27.54 47.8 22.27 (19.1)
net asset
value per
share
(cents)
Notes:
1. The amounts set out in column A have been extracted from the
interim results published in respect of the six months ended 31
August 2008.
2. The amounts reflected in columns B and C show the effects,
individually, of the acquisition by Finbond of the business of
Moneyline Financial Services (Proprietary) Limited ("the Moneyline
/ New World Finance acquisition") and the general issue of shares
for cash on the before numbers presented in column A and as
presented in the announcement published on SENS on 18 February
2009.
3. The amounts reflected in column D show the combined effect of
the the Moneyline / New World Finance acquisition and the general
issue of shares of cash on the before numbers presented in column
A.
4. The amounts reflected in column E show the effect of the
Transaction on the numbers presented in column D and incorporate
the following key assumptions:
a. For the purpose of earnings and headline earnings per share it
has been assumed that the transaction was effective 1 March 2008.
For the purpose of net asset value per share and tangible net asset
value per share it has been assumed that the transaction was
effective 31 August 2008 and that the full transaction
consideration relating to the sale shares and 30% of the payment in
respect of the sale claims took place on that date, as per 3.
above.
b. The sale shares transaction consideration of R19 094 537 was
funded from existing facilities which bear interest at a rate of
14,5% per annum.
c. Negative goodwill is accounted for in the income statement as
per IFRS 3 as the difference between the minority interest acquired
and the cash purchase price of the shares. Negative goodwill has
been excluded from headline earnings as per SAICA circular 08/07.
d. The net asset value of the 50% interest acquired in Blue Chip
is R21 638 998 and is equivalent to minority interest reflected in
the balance sheet prior to the Transaction of R21 638 998.
e. Profit attributable to minority interest amounting to R4 722
133 in the income statement for the six months ended 31 August
2008, represents the profits of the net assets acquired in terms of
the Transaction. The minority interest in the income statement is
no longer accounted for as Blue Chip becomes a wholly owned
subsidiary of Finbond.
6. Additional disclosure
In accordance with the Listings Requirements of the JSE, the
articles of Blue Chip will be amended to conform to Schedule 10.
Shareholders are referred to the Finbond announcement dated 18
February 2009 wherein the financial effects of the Moneyline / New
World Finance acquisition and general issue of shares for cash were
shown separately. The combined effect of both is presented in
Column D of 5. above. The net assets acquired in terms of the
Moneyline / New World Finance acquisition amounted to R17,3
million.
7. Circular to shareholders
The Transaction is classified as a related party transaction in
terms of the Listings Requirements of the JSE and is accordingly
subject to shareholder approval. Finbond will, in due course, send
a circular to shareholders, including a fairness opinion from an
independent expert on the terms of the Transaction, and a notice
convening a general meeting of Finbond shareholders.
Pretoria
23 April 2009
CORPORATE AND DESIGNATED ADVISOR:
GRINDROD BANK LIMITED
Date: 23/04/2009 16:31:46 Produced by the JSE SENS Department.
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