| Thu 18 Jun 2009, 13:15 | | FPF - Finbond Property Finance - Transaction Announcement - Sale Of Part Of |
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FPF
FPF
FPF - Finbond Property Finance - Transaction Announcement - Sale Of Part Of
The Business Of Subsidiary Blue Chip Finance No. 1 (Proprietary) Limited
("Blue Chip") Resulting In Finbond Becoming The Sole Shareholder In Blue Chip
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")
TRANSACTION ANNOUNCEMENT - SALE OF PART OF THE BUSINESS OF SUBSIDIARY BLUE
CHIP FINANCE NO. 1 (PROPRIETARY) LIMITED ("BLUE CHIP") RESULTING IN FINBOND
BECOMING THE SOLE SHAREHOLDER IN BLUE CHIP
1. Introduction
Finbond shareholders are referred to the announcement made by the company on 8
June 2009 wherein they were advised that:
- the conditions precedent to the agreement whereby Finbond was to
acquire the remaining 50% shareholding in Blue Chip, as announced on
23 April 2009, were not fulfilled by the parties within the
stipulated time periods and the agreement was accordingly of no
force or effect; and
- that Finbond continued to engage in negotiations with the other
shareholders in Blue Chip to conclude a transaction that would lead
to Blue Chip becoming a wholly owned subsidiary of Finbond.
Finbond shareholders are accordingly advised that Finbond and Blue Chip have
entered into an agreement in terms of which the other shareholders in Blue
Chip ("the exiting shareholders") would acquire part of the business of Blue
Chip from Blue Chip in exchange for the return of their shares in and claims
against the company, resulting in Blue Chip becoming a wholly owned subsidiary
of Finbond ("the transaction").
2. Details of the Transaction
In terms of the transaction, a newly formed company owned by the exiting
shareholders, Indomark (Proprietary) Limited ("the acquirer"), will acquire
part of the business of Blue Chip comprising 30 micro finance branches
operated by Blue Chip ("the sold branches"), and the business carried on
through those micro finance branches as a going concern. Following the
transaction, Blue Chip will retain 30 of its micro finance branches (`the
retained branches").
The purchase consideration attributed to the transaction is an amount of R40
276 395. This will be settled as follows:
- the delivery to Blue Chip of the 50% of the issued ordinary shares
in Blue Chip held by the exiting shareholders to which a value of
R21 053 759 has been attributed;
- the cession by the exiting shareholders of all loan claims held by
them against Blue Chip with a current book value of R15 560 721; and
- the payment in cash by the exiting shareholders of R3 661 895 in six
equal monthly installments, commencing in July 2009 and subject to
interest at the prime lending rate.
The cash proceeds of R3 661 895 from the transaction will be utilised to fund
Finbond`s micro lending book.
The acquirer is owned by the exiting shareholders. The names of the exiting
shareholders and their respective interests in Blue Chip prior to the
transaction are as follows:
Seller Interest in Blue Chip
Martinus Johannes Els 21.9%
Janetha Elizabeth Els 0.5%
Gerben Trust (IT 322/02) 6.3%
Gert Hendrik Els 0.9%
Jan Hendrik Els 0.1%
Elize Weinrich 1.7%
Cornelius Wilhelmus Els 0.7%
Ryno Engels 1.4%
Ronald Arthur Heys 5.2%
Pierre Le Roux 2.0%
Thea Van Vuuren 2.1%
Thomas Francois Oberholzer 1.7%
Werner Botha 0.7%
Johan Ferdinand Botha 4.8%
TOTAL 50.0%
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 JSE Limited ("the JSE")
Listings Requirements.
The effective date of the transaction is 1 March 2009. The transaction is
subject to warranties usual for a transaction of this nature.
Finbond will attain full operational control over the retained branches with
immediate effect so as to ensure that conflicting objectives in the management
of the retained branches as discussed further below under the rationale for
the transaction are eliminated immediately. The transaction is subject to the
fulfillment of the resolutive condition that Finbond shareholders approve the
transaction as required by the JSE Listings Requirements by 8 August 2009 and
the approval of the transaction by Finbond`s facility providers.
In accordance with the JSE Listings Requirements, the articles of Blue Chip
will be amended to conform to Schedule 10.
3. The business of Blue Chip
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.
4. Rationale for the transaction
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 the retained 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. The exit of outside shareholders will
eliminate conflicting objectives and assist Finbond, as a public company, in
accounting to its shareholders and ensuring the maintenance of the highest
levels of corporate governance.
5. Financial effects of the transaction
Set out below are the pro forma financial effects of the transaction on the
audited results published by Finbond in respect of the year ended 28 February
2009. 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 financial results and, because of their nature, may not fairly
present Finbond`s financial position, changes in equity, results of operations
or cash flows.
Before Pro forma after Change
the transaction
Earnings per share (cents) (23.0) (22.7) 1.2%
Headline earnings per share (1.0) (0.7) 29.2%
(cents)
Net asset value per share 65.1 65.4 0.4%
(cents)
Tangible net asset value per 23.6 23.9 1.5%
share (cents)
Notes:
1. The amounts set out in the `Before` column have been extracted from the
audited results published in respect of the year ended 28 February 2009.
2. The amounts reflected in the `Pro forma after the transaction` column
show the effects of the transaction. The primary effect of the
transaction is that Blue Chip is consolidated at 100% of the remaining 30
branches with no minority interest, opposed to the year-ended 28 February
2009 effect where 100% of 60 branches were consolidated in, and the
minority interest of 30 branches sold is adjusted out through the
minority interest in terms of IAS27.
3. 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 28 February 2009.
4. Interest savings at 14% p.a. in respect of interest accrued on R15 560
721 exiting shareholders` loan claims as detailed in paragraph 2 of this
announcement has been calculated and treated as an interest saving.
5. Operating expenses have been reduced by R300 000 per month in respect of
regional head office overhead savings as the head office forms part of
the sold branches and these expenses will be automatically eliminated.
6. The taxation at 28% of has been taken account of.
7. Net assets amounting to R21 053 759 have effectively been sold to
Indomark, which equates to the minority interest in the balance sheet of
R20 196 152 and the profits attributable for the year ended 28 February
2009 amounted to the minority interest in the audited results published
by Finbond in respect of the year ended 28 February 2009 of R3 279 287.
8. The source of adjustments for Blue Chip is the audited results published
by Finbond in respect of the year ended 28 February 2009, Blue Chip
individual subsidiary annual financial statements for the year ended 28
February 2009 and the transaction agreement,
6. Circular to shareholders and withdrawal of cautionary announcement
The transaction is classified as a related party transaction in terms of the
JSE Listings Requirements 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. Shareholders
are advised that caution is no longer required when dealing in Finbond shares.
Pretoria
18 June 2009
CORPORATE AND DESIGNATED ADVISOR:
GRINDROD BANK LIMITED
Date: 18/06/2009 13:15:02 Produced by the JSE SENS Department.
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