| Thu 2 Jul 2009, 13:36 | | HCI - HCI - Transaction between Johnnic Holdings Limited a wholly- |
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HCI
HCI
HCI - HCI - Transaction between Johnnic Holdings Limited, a wholly-
owned subsidiary of HCI
HOSKEN CONSOLIDATED INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1973/007111/06)
(Share code: HCI ISIN: ZAE000003257)
("HCI")
Transaction between Johnnic Holdings Limited, a wholly-owned
subsidiary of HCI, and Tsogo Sun Gaming (Proprietary) Limited
pursuant to which the HCI group decreases its indirect interest
in Tsogo Sun KwaZulu-Natal (Proprietary) Limited
1. Introduction
HCI has an aggregate indirect interest of 46.6% in the issued
share capital of Tsogo Sun KwaZulu-Natal (Proprietary) Limited
("TS-KZN"), the licensee and operator of Suncoast Casino and
Entertainment World in Durban. HCI`s indirect interest in TS-KZN
is held as to 30% via HCI`s wholly-owned subsidiary Johnnic
Holdings Limited`s ("Johnnic") shareholding in The Millennium
Casino Limited ("Millennium"), and as to 16.6% via HCI`s interests
in Tsogo Investment Holding Company (Proprietary) Limited ("TIH").
Shareholders of HCI are advised that Johnnic has entered into an
agreement with Tsogo Sun Gaming (Proprietary) Limited ("TSG") in
terms of which TSG shall purchase all of the shares in the issued
share capital of Millennium from Johnnic ("the transaction"). TIH
has a 51% indirect interest in TSG. As a result of the
transaction, HCI`s aggregate indirect interest in TS-KZN will
decrease from 46.6% to 28%.
2. Rationale
HCI believes it would be optimal to manage its casino interests
through a single entry point being TIH. The transaction simplifies
the group structure and facilitates this.
3. Particulars of the transaction
In terms of the transaction, Johnnic will sell all of its shares
in Millennium (comprising 100% of the issued share capital of
Millennium) ("Sale Shares") to TSG in exchange for the cash
consideration dealt with in 5 below, with effect from the fifth
business day after the transaction becomes unconditional (see 4
below) ("Effective Date").
Upon implementation of the transaction, TSG will own 100% of the
issued share capital of Millennium, giving it an additional
indirect interest of 30% in the issued share capital of TS-KZN,
and an overall interest of 73,5% in TS-KZN.
Upon implementation of the transaction, TSG has agreed to lend and
advance the sum of R1 billion to Millennium in order to enable
Millennium to discharge its obligation to pay Johnnic R1 billion
in respect of the amount owing by Millennium to Johnnic on loan
account as at the Effective Date.
4. Conditions Precedent
The transaction is subject to the fulfilment of the following
conditions precedent:
4.1 the subscription agreement referred to in 5 below becoming
unconditional;
4.2 the unconditional written approval of the Competition Authorities
and the KwaZulu-Natal Gambling Board;
Implementation of the transaction is accordingly conditional upon
the aforesaid conditions being fulfilled or waived within the
agreed time constraints.
5. Purchase consideration
The purchase consideration for the Sale Shares is the sum of
R1.00, which sum will be adjusted depending on whether certain
agreed targets in respect of the gaming win achieved by TS-KZN for
the financial years ending on 31 March 2010, 2011 and 2012 are
met, subject to the aggregate adjustment over the three years
being limited to a maximum of R330 million.
If the agreed targets are met, TSG shall pay to Johnnic the
increased adjusted purchase price, determined in accordance with
an agreed formula, on 30 April 2010, 30 April 2011 and 30 April
2012. If the agreed targets are not met, an amount, determined in
accordance with an agreed formula, will be refunded by Johnnic to
TSG.
Any such payments shall be escalated by a factor determined in
accordance with an agreed formula so as to take into account
interest that would have accrued on such amounts during the period
from the Effective Date until the date of actual payment.
The purchase price (as adjusted above) shall be subject to further
adjustment in accordance with an agreed formula, such that if the
Effective Date occurs after the expiry of 90 days from the
signature date of the transaction agreement, the purchase price
shall be increased, and if the Effective Date occurs before the
expiry of such 90 day period, the purchase price shall be reduced.
6. Funding of the transaction
In order to fund the transaction, TSG, SABSA Holdings
(Proprietary) Limited and Johnnic have entered into a written
subscription agreement in terms of which TSG shall issue, and each
of SABSA and Johnnic shall subscribe for redeemable cumulative
preference shares of R0,10 each in the capital of TSG, at the
subscription price of R490 million and R510 million, respectively,
with each such preference share having the special rights,
privileges and conditions as contained in TSG`s articles of
association.
Any additional funding that is required for the transaction shall
be funded from cash resources of the TSG group existing at the
relevant time.
7. Pro forma financial effects
The preparation of the unaudited pro forma financial effects of
the transaction is the responsibility of the directors of HCI.
The unaudited pro forma financial effects of the transaction are
presented for illustrative purposes only to provide information on
how the transaction may impact on an HCI shareholder and, due to
the nature thereof, may not give a fair reflection of HCI`s actual
financial position after the transaction.
The pro forma financial effects of the transaction are based on
the published reviewed abridged consolidated group results of HCI
for the year ended 31 March 2009. The pro forma financial effects
of the transaction on HCI`s earnings, headline earnings, net asset
value ("NAV") and net tangible asset value ("NTAV") are set out
below.
Per HCI share Before After % change
Earnings (cents) 890 1179 32.47
Headline earnings 254 256 0.79
(cents)
NAV (cents) 3371 3655 8.42
NTAV (cents) 1797 2080 15.75
Notes:
The unaudited pro forma financial effects of the transaction are
indicative only and have been based on the assumptions set out
below:
1. The transaction was effected on 1 April 2008 for income statement
purposes and on 31 March 2009 for balance sheet purposes.
2. HCI`s interest in the shareholding of Johnnic was based on a 90%
weighted average holding for the year.
3. The proceeds from sale are invested with financial institutions at
daily call rates. An average rate of 7,5%, after deducting taxation at
a rate of 28%, was used for the year.
4. The coupon on the preference shares issued was assumed to be an
average of 9,76% for the year.
5. The net profit on disposal is included in the earnings per share
in the "after column" and is excluded from the headline earnings per
share in the "after column".
6. Goodwill and intangible assets have been excluded in the
calculation of NTAV per HCI ordinary share.
8. Categorisation of transaction
In terms of the Listings Requirements of the JSE limited, this
transaction is categorised as a Category 2 transaction.
2 July 2009
Cape Town
Investment Attorneys to
bank and HCI
Sponsor
Investec Edward
Corporate Nathan
Finance Sonnenbergs
Inc.
Date: 02/07/2009 13:36:01 Produced by the JSE SENS Department.
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