| Tue 15 Dec 2009, 18:07 | | CAE / DYM - Cape Empowerment / Dynamic - Joint det |
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CAE DYM
CAE DYM
CAE / DYM - Cape Empowerment / Dynamic - Joint detailed terms announcement
regarding a proposed merger of CET and Dynamic
Cape Empowerment Trust Limited Dynamic Cables RSA Limited
(Incorporated in the (Incorporated in the
Republic of South Africa) Republic of South Africa)
(Registration number (Registration number
1998/014606/06) 1987/001807/06)
("CET") ("Dynamic")
Share Code: CAE Share Code: DYM
ISIN: ZAE000016952 ISIN: ZAE000028270
JOINT DETAILED TERMS ANNOUNCEMENT REGARDING A PROPOSED MERGER OF CET AND DYNAMIC
1 INTRODUCTION
Further to the joint cautionary announcement released on SENS on 8
December 2009 by CET and Dynamic, CET and Dynamic are pleased to
announce that they have in principle agreed to a merger of the two
companies and that to this end Dynamic has submitted to the board of
directors of CET a notice of its firm intention to make an offer to
acquire the entire issued ordinary share capital of CET ("the
transaction").
1.2 Following the implementation of the transaction:
1.2.1 CET will be a subsidiary of Dynamic;
1.2.2 the name of Dynamic will be changed to "Cape Empowerment Limited" or a
similar name;
1.2.3 Dynamic will remain listed on the exchange operated by the JSE Limited
("JSE") and application will be made for the transfer of its listing
to the Main Board of the JSE list; and
1.2.4 the listing of CET on the JSE will be terminated (the "delisting").
1.3 The purpose of this announcement is to provide Dynamic and CET
shareholders with the salient terms of the transaction.
2 Mechanism of the merger
2.1 It is proposed that Dynamic will acquire, by way of a scheme of
arrangement in terms of section 311 of the Companies Act, No. 61 of
1973, as amended (the "Companies Act") ("the scheme"), all the issued
shares in the capital of CET ("CET shares"). Should the scheme fail
for any reason whatsoever, Dynamic will offer to acquire CET ordinary
shares by way of a general offer in terms of Chapter XVA of the
Companies Act (the "back-up offer") on the same terms and conditions,
mutatis mutandis, as the scheme.
2.2 It is the intention of Dynamic to invoke the provisions of section
440K of the Companies Act, should the transaction be implemented by
way of the back-up offer and the back-up offer be accepted by CET
shareholders holding more than 90% of the CET shares.
2.3 The transaction will be subject to the conditions precedent referred
to in paragraph 10.2 below. The implementation of the scheme will be
subject to the further conditions precedent set out in paragraph 12
below.
3 Terms of the offer
3.1 In terms of the transaction CET shareholders will receive a
consideration per CET share comprising a cash price of 40 cents ("cash
consideration") or, if a CET shareholder so elects, 2 (two) ordinary
par value shares in the capital of Dynamic ("Dynamic shares") ("share
consideration").
3.2 The operative date of the transaction is expected to be during the
second quarter of 2010.
4 Rationale
4.1 CET is a broad-based black controlled and managed black economic
empowerment ("BEE") diversified investment holding company. CET has
significant investments in, inter alia, property, security and
services, gaming and leisure, and Dynamic. CET shares are listed on
the Main Board of the JSE list in the Investment Instruments sector.
4.2 Dynamic is a broad-based black controlled and managed BEE company
whose operating companies are suppliers of infrastructure equipment
and connectivity supplies in the telecommunications, electrical and
engineering sectors. CET holds a shareholding of 33,4% in Dynamic and
is the single largest shareholder of Dynamic. Dynamic shares are
listed on the Development Capital Board of the JSE list.
4.3 The boards of Dynamic and CET have explored the possibility of
simplifying the ownership and cost structures of Dynamic and CET by
merging the two companies. Dynamic has a very small market
capitalisation and it is the view of the Dynamic board that, given the
current state of the equity markets, the costs of a continued listing
on the JSE outweighs the benefits thereof.
4.4 The board of CET believes that Dynamic remains an attractive asset and
that it would be in the interests of its shareholders if they were to
increase their effective interest in Dynamic.
4.5 The merger has numerous benefits for both Dynamic and CET
shareholders.
4.6 For Dynamic shareholders, the benefits of the merger include the
following:
4.6.1 Dynamic shareholders will be invested in a much more substantial group
and will have an investment exposure to a much broader portfolio of
businesses and growth assets;
4.6.2 Dynamic shares have historically traded in very small volumes on the
JSE. CET shares have however historically been very liquid, and
Dynamic shares are therefore expected to become equally liquid;
4.6.3 the BEE credentials of Dynamic is critical for the business to remain
competitive in its markets. Given the shareholder profile of CET the
merger is likely to improve the BEE shareholding of Dynamic. It is
also anticipated that the pooling arrangement referred to in paragraph
9 below will assist in preserving the excellent BEE status of the
reconstituted group;
4.6.4 the merger will result in substantial cost savings, as only one
company will be listed on the JSE.
4.7 For CET shareholders, the benefits of the merger include the
following:
4.7.1 CET believes that Dynamic remains an attractive asset and the merger
will have the result that CET shareholders who elect to receive the
share consideration will increase their effective interest in Dynamic;
4.7.2 the merger will result in substantial cost savings, as only one
company will be listed on the JSE.
5 Pro forma financial effects of the transaction on dynamic shareholders
The unaudited pro forma financial effects of the transaction on Dynamic
shareholders set out below are based on the published unaudited Dynamic
results and the published unaudited CET results for the six months ended 30
June 2009. The unaudited pro forma financial effects are the
responsibility of the board of directors of Dynamic and have been prepared
for illustrative purposes only and because of their pro forma nature may
not give a fair reflection of Dynamic`s financial position or results of
operations after the transaction.
Before After- % After- %
scenario change scenario change
1 2
Loss per share 12.2 3.1 74 5.1 58
(cents)
Headline Loss 7.8 2.7 66 4.4 44
per share
(cents)
NAV per share 46.9 39.7 (15) 49.4 5
(cents)
Tangible NAV per 46.9 38.8 (17) 48.0 2
share (cents)
Number of shares
in issue (`000) 97 246 638 660 428 752
Weighted average 97 246 638 660 428 752
number of shares
in issue (`000)
Notes and assumptions:
1 The financial information in the "Before" column is based on the published
unaudited interim results of Dynamic for the six months ended 30 June 2009
after taking into account the Tri-Invest 5 (Pty) Ltd acquisition as set out
in that results announcement.
2 The financial information in the "After" column assumes that:
A Dynamic acquired CET with effect from 1 January 2009 for income
statement purposes, and with effect from 30 June 2009 for balance
sheet purposes;
B In Scenario 1, a total of 287 209 060 CET shares are eligible to and
elect to accept the share consideration of 2 Dynamic shares for every
1 CET share held;
C In Scenario 2, a total of 182 076 790 CET shares have irrevocably
undertaken to accept the share consideration of 2 Dynamic shares for
every 1 CET share held; the balance of 104 953 352 shares have
accepted the cash offer of 40 cents per CET share; and
D An after-tax cost of capital 0f 8.64% was applied to the cash portion
of the offer.
6 Pro forma financial effects of the transaction on CET shareholders
The unaudited pro forma financial effects of the transaction on CET
shareholders set out below are based on the published unaudited CET interim
results and the published unaudited Dynamic interim results for the six
months ended 30 June 2009. The unaudited pro forma financial effects are
the responsibility of the board of directors of CET and have been prepared
for illustrative purposes only and because of their pro forma nature may
not give a fair reflection of CET`s financial position or results of
operations after the transaction.
The unaudited pro forma financial effects of the transaction on CET
shareholders are set out below:
Before After- % After- %
scenario change scenario change
1 2
Loss per share 2.4 6.3 (162) 10.2 (325)
(cents)
Headline Loss 2.8 5.3 (90) 8.8 (214)
per share
(cents)
NAV per share 71.7 79.5 11 98.8 38
(cents)
Tangible NAV 69.7 77.6 11 96.1 38
per share
(cents)
Number of 290 241 - -
shares in issue
(`000)
Weighted 338 276 - -
average number
of shares in
issue (`000)
Notes and assumptions:
1 The financial information in the "Before" column has been based on the
published unaudited interim results of CET for the six months ended 30 June
2009.
2 The financial information in the "After" column assumes that:
A Dynamic acquired CET with effect from 1 January 2009 for income
statement purposes, and with effect from 30 June 2009 for balance
sheet purposes;
B In Scenario 1, all shareholders has accepted the share consideration
of 2 Dynamic shares for every 1 CET share held and therefore
illustrates the effect of each CET share effectively becoming 2
Dynamic shares post the transaction; and
C In Scenario 2, a total of 182 076 790 CET shares have irrevocably
undertaken to accept the share consideration of 2 Dynamic shares for
every 1 CET share held; the balance of 104 953 352 shares have
accepted the cash offer of 40 cents per CET share.
7 GENERAL MEETING of dynamic SHAREHOLDERS
7.1 In terms of the JSE Listings Requirements, the transaction will be
categorized as a reverse take-over and the implementation of the
transaction will therefore require the approval of Dynamic
shareholders by way of an ordinary resolution. In addition, the JSE
Listings Requirements relating to reverse take-over transactions
include that the issuer must continue to meet the JSE`s requirements
for a continued listing following the transaction. Dynamic believes
that it will meet such requirements, but shareholders should note that
application has not yet been made to the JSE in this regard. As
indicated in paragraph 12 below, it is a condition precedent to the
scheme that the JSE approves the continued listing of Dynamic shares
on the JSE following the transaction.
7.2 Dynamic shareholders will be required to consider and approve the
various resolutions required to effect the transaction (either in
terms of the scheme or the back-up offer)(as the case may be) in a
general meeting, including -
7.2.1 an ordinary resolution to approve the transaction in terms of the JSE
Listings Requirements;
7.2.2 a special resolution for the proposed change of name of Dynamic;
7.2.3 an ordinary resolution to waive the potential mandatory offer
requirement (refer paragraph 9.6 below).
8 GENERAL MEETING AND SCHEME MEETING FOR CET SHAREHOLDERS
8.1 CET shareholders will be required to consider and approve the scheme in a
scheme meeting. It is intended that the listing of the CET shares on the
JSE will be voluntarily terminated upon the scheme becoming operative.
8.2 If the scheme fails and the back-up offer is implemented, the voluntary
termination of the listing of CET shares in terms of the JSE Listings
Requirements will require the approval of CET shareholders by way of a
majority vote. CET shareholders will accordingly further be required, in a
general meeting to consider and approve the delisting (subject to the back-
up offer being implemented), and also the waiver of the mandatory offer
requirement (refer paragraph 9.6 below) and such other resolutions as may
be required.
8.3 In terms of the JSE Listings Requirements, controlling shareholders, their
associates and concert parties of the issuer will not be taken into account
for purposes of determining a quorum and may not vote on a resolution for
the termination of the listing of securities of the issuer.
8.4 In terms of S 311(2)(b) of the Companies Act, the scheme must be approved
by a majority representing not less than three-fourths of the votes
exercisable by the scheme members present and voting, either in person or
by proxy, at the scheme meeting.
9 the code and waiver of potential mandatory offer requirement
9.1 As required under the Securities Regulation Code on Take-overs and Mergers
("the Code") Dynamic has provided confirmation to the satisfaction of the
Securities Regulation Panel ("SRP") that it has sufficient financial
resources to pay the cash consideration in respect of all the CET shares in
issue in respect of which Dynamic has not received irrevocable undertakings
that the share consideration will be elected, as referred to in paragraph
10 below.
9.2 It is vitally important to the various businesses within the reconstituted
group that Dynamic maintains a suitable BEE status and shareholding. Mr
Shaun Rai, the chairman of CET, and his immediate family ("the Shaun Rai
parties") holds approximately 21,4% of the CET shares currently in issue.
With a view to preserving the level of BEE shareholding in Dynamic after
the transaction, the Shaun Rai parties and a number of independent
shareholders, a number of whom are black, have agreed to contribute some or
all of the Dynamic shares they will hold after the transaction into a
voting and pre-emptive pooling arrangement which will be controlled by the
Shaun Rai parties. Such agreement is conditional upon the transaction being
implemented and the waiver contemplated in this paragraph 9 being obtained.
9.3 Mr Rai has also indicated to Dynamic and CET that the Shaun Rai parties
will elect to receive the share consideration and further that, after the
date of this announcement and before the implementation of the transaction,
they intend to acquire further CET and/or Dynamic shares in the open market
or otherwise at a price not exceeding the cash consideration. CET and
Dynamic have given Mr Rai clearance to deal in CET and Dynamic shares for
this purpose, in accordance with the JSE Listings Requirements.
9.4 It is expected that the Dynamic shares forming part of the proposed voting
and pre-emptive pool will represent more than 35% of the Dynamic shares in
issue after the transaction. In addition, the intended share dealings by
the Shaun Rai parties may have the result that (1) before the transaction
is implemented the Shaun Rai parties holds 35% or more of the CET shares in
issue and/or (2) when the transaction is implemented, the Shaun Rai parties
holds 35% or more of the Dynamic shares in issue.
9.5 In either case this would constitute an affected transaction under the Code
in respect of either CET or Dynamic, as may be applicable, and would
ordinarily result in an obligation on the Shaun Rai parties to extend a
mandatory offer to CET or Dynamic shareholders, as the case may be, to
acquire their shares for a comparable cash consideration.
9.6 The SRP has indicated that, provided that the obligation to make such
mandatory offer is waived by the majority of the independent CET and/or
Dynamic shareholders, as may be applicable, as contemplated in Rule 8.7 of
the Code, the SRP will give consideration to dispensing with the
requirement that a mandatory offer be made by the Shaun Rai parties.
Accordingly, it is intended that at the respective meetings of CET and
Dynamic shareholders, they be requested to consider and vote on such waiver
resolutions.
10 dynamic and cet Shareholder support
10.1 As at the date of this announcement:
10.1.1 shareholders of Dynamic holding 56,5% of the total number of Dynamic
shares eligible to vote (which excludes CET`s shareholding) at the
general meeting of Dynamic to be convened for this purpose have
irrevocably undertaken to vote in favour of the transaction and the
waiver resolution referred to in paragraph 9 above; and
10.1.2 shareholders of CET holding 63,4% of the total number of CET shares
eligible to vote at the relevant meeting/s of CET shareholders to be
convened for the purposes of voting on the transaction have
irrevocably undertaken (1) to vote in favour of the transaction and
the waiver resolution referred to in paragraph 9 above and (2) to
elect to receive the share consideration.
10.2 Dynamic holds 105 000 CET shares. Neither Dynamic nor any entity owned
or controlled by Dynamic holds or controls any other CET shares, nor
do they have any option to acquire CET shares.
11 Conditions precedent to the transaction
11.1 Dynamic will only propose the scheme once the following conditions
have been fulfilled (or waived by Dynamic, if applicable):
11.1.1 by no later than 28 February 2009, the board of directors of CET pass
a resolution in terms of which they state that:
11.1.1 1 they have considered the terms and conditions of the scheme and at the
time of such statement they are, given the circumstances and market
conditions at the time and subject to the opinion of the party which
will be providing the appropriate independent advice to the CET
directors, reasonably satisfied with the terms and conditions of the
scheme;
11.1.1.2 they intend to support the scheme and to facilitate the scheme to the
extent that a board of directors will normally be required to do so
for purposes of the implementation of a scheme; and
11.1.13 they intend to recommend that scheme members vote in favour of the
scheme;
11.1.2 by no later than 30 April 2010, approval having been obtained from the
Exchange Control Division of the South African Reserve Bank, the JSE,
the SRP and any other relevant regulatory authorities (either
unconditionally or subject to conditions acceptable to the party
against whom the condition will be enforceable).
11.2 Dynamic will be entitled to waive either or both of the first two
conditions above upon written notice to that effect to CET prior to
the date of the fulfilment of the condition. The dates for fulfilment
of all or any of the offer conditions may be extended by agreement in
writing between Dynamic and CET.
12 Conditions precedent to the scheme
The scheme (if proposed) will be subject to, inter alia, the fulfilment or
waiver (where appropriate) of the following conditions precedent:
12.1 approval by the Dynamic shareholders in general meeting of the
resolutions referred to in paragraphs 7.2.1, 7.2.2 and 7.2.3;
12.2 the High Court of South Africa authorising the convening of a scheme
meeting of CET shareholders;
12.3 approval by CET shareholders in general meeting of the various
resolutions referred to in paragraph 8;
12.4 the scheme being approved by a majority representing not less than
three-fourths of the votes exercisable by the scheme members present
and voting, either in person or by proxy, at the scheme meeting;
12.5 the sanctioning of the scheme by the High Court of South Africa;
12.6 a certified copy of the Order of Court sanctioning the scheme being
registered by Companies and Intellectual Properties Registration
Office in terms of the Companies Act; and
12.7 all applicable regulatory and statutory approvals being obtained,
including the requisite approvals of the JSE (including the JSE`s
approval of the continued listing of Dynamic shares on the JSE
following the transaction) and the SRP.
13 OPINIONS AND RECOMMENDATIONS
13.1 In terms of the Code, the directors of CET must obtain appropriate
external advice as to how the transaction will affect CET
shareholders, and must disclose the substance of such advice to
shareholders. The directors of CET have appointed Mazars Moores
Rowland Corporate Finance to provide such advice and their full report
will be included in the circular to be sent to CET shareholders in
connection with the transaction.
13.2 Certain CET shareholders may be considered by the JSE as related
parties to Dynamic in terms of section 10.1 of the JSE Listings
Requirements. As such, and if so, a fairness opinion from an
independent professional expert, acceptable to the JSE, will be
required to be included in the circular to Dynamic shareholders to
consider whether the terms and conditions of the transaction are fair
to Dynamic shareholders. The full opinion of the independent
professional expert will be included in the circular to Dynamic
shareholders.
14 salient dates and times and DOCUMENTATION
14.1 A further joint announcement, containing such further information as
may be relevant including the salient dates and times of the
transaction, will be made in due course.
14.2 A circular containing full details of the transaction will be posted
to Dynamic shareholders in due course.
14.3 A circular containing full details of the transaction, including an
explanatory statement as required in terms of S 312 of the Companies
Act, will be posted to CET shareholders in due course.
15 Withdrawal of cautionary announcement
Dynamic and CET shareholders are advised that, as a result of the publication of
this announcement, the relevant cautionary announcement is now withdrawn.
Cape Town
15 December 2009
Sponsor to Dynamic and CET
Sasfin Capital
A division of Sasfin Bank Limited
Independent Financial Advisor to the Transaction
Mazars
Attorneys
Cliffe Dekker Hofmeyr
Date: 15/12/2009 17:43:02 Produced by the JSE SENS Department.
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