| Wed 31 Mar 2010, 17:50 | | FWD - Freeworld/Bidco - Joint announcement relating to a notice of firm |
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FWD
FWD
FWD - Freeworld/Bidco - Joint announcement relating to a notice of firm
intention by Bidco to make an offer to acquire all of the shares in Freeworld
other than those shares already held by Bidco and/or its holding company by way
of a scheme of arrangement in terms of section 311 of the companies act 61 of
1973, as amended
FREEWORLD COATINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2007/021624/06)
Share code: FWD ISIN: ZAE000109450
("Freeworld")
SAPHIREFIELD INVESTMENTS (PROPRIETARY) LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2008/027236/07)
("Bidco")
JOINT ANNOUNCEMENT RELATING TO A NOTICE OF FIRM INTENTION BY BIDCO TO MAKE AN
OFFER TO ACQUIRE ALL OF THE SHARES IN FREEWORLD OTHER THAN THOSE SHARES ALREADY
HELD BY BIDCO AND/OR ITS HOLDING COMPANY BY WAY OF A SCHEME OF ARRANGEMENT IN
TERMS OF SECTION 311 OF THE COMPANIES ACT 61 OF 1973, AS AMENDED
1. INTRODUCTION
Shareholders of Freeworld are advised that the board of directors of
Freeworld ("board") has received an offer from a private equity consortium,
led by private equity funds under the management of Brait Societe Anonyme
("Brait Private Equity"), to acquire all of the shares in Freeworld (other
than those shares already held by Bidco`s holding company, VVT
Infrastructure Investments (Proprietary) Limited ("Holdco"), representing
18.86% of the entire issued share capital of Freeworld) ("scheme shares")
for an amount equal to R10.45 per share (subject to adjustment in terms of
paragraphs 4.2.2 and 4.2.4) ("offer"), by way of a scheme of arrangement
("scheme") in terms of section 311 of the Companies Act 61 of 1973, as
amended ("Companies Act").
2. RATIONALE FOR THE OFFER
The offer represents an opportunity for Freeworld shareholders (other than
Holdco) ("scheme members") to dispose of their Freeworld shares at a fair
premium to the price at which Freeworld shares have historically traded at
on the securities exchange operated by the JSE Limited ("JSE").
The offer represents a premium of 34.6% to the closing 30 day volume
weighted average traded price ("VWAP") and a premium of 29.8% to the 60 day
VWAP of Freeworld shares on the JSE on Tuesday, 16 February 2010 being the
date of publication by Freeworld of the cautionary announcement on the
Securities Exchange News Service of the JSE ("SENS") and a premium of 20.1%
to the closing price of Freeworld shares on the JSE on Monday, 29 March
2010, being the last business date prior to the delivery of the notice of
firm intention by Bidco.
3. SHAREHOLDERS OF HOLDCO AND BIDCO
Freeworld is advised that private equity funds under the management of
Brait Private Equity currently hold 100% of the entire issued share capital
of Holdco at the date of this announcement, and that Bidco is a wholly-
owned subsidiary of Holdco.
Freeworld is further advised that, following the implementation of the
scheme, the shareholders of Holdco will comprise:
- Private equity funds under the management of Brait Private Equity;
- ADP I Holding 3 ("ADP"), a private company limited by shares incorporated
in Mauritius being a subsidiary of the African Development Partners I Fund,
whose investment advisor is Development Partners International LLP, a
limited liability partnership established in accordance with the laws of
the United Kingdom;
- African Paints Investments, L.P. ("African Paints"), a Cayman Islands
exempted limited partnership, the General Partner of which is Citigroup
Venture Capital International Africa Fund, G.P. Limited, a company
organised under the laws of Jersey, Channel Islands and a wholly owned
subsidiary of Citigroup Incorporated;
- the Decor Trust ("Decor Trust"), a trust established to house the interests
of Freeworld`s executive management;
- the Kildrummy Trust ("Kildrummy Trust"), a trust established to house the
interests of black economic empowerment ("BEE") beneficiaries, which
beneficiaries have not yet been finalised but will include a Black Employee
Staff Trust and Skills Development Trust, amongst other parties ("BEE
Shareholding") and Sanlam Life Insurance Limited ("Sanlam") as a funding
beneficiary;
- Sanlam Private Equity, a division of Sanlam, the private equity division of a
South African based life insurer; and
- Standard Chartered Private Equity (Mauritius) III Limited ("Standard
Chartered"), the private equity division of the global emerging markets
investment bank.
4. THE OFFER
Bidco intends that the offer be implemented, subject to the terms and conditions
set out below, by way of the scheme pursuant to which Freeworld will become a
subsidiary of Bidco, thereby enabling Bidco to acquire control and ownership of
the underlying assets and business of Freeworld.
The scheme will result in the delisting of the entire issued share capital of
Freeworld from the JSE.
4.1 The Holdco shareholding structure
Freeworld is advised that the equity shares in Holdco will, upon implementation
of the scheme ("operative date"), be held as follows:
- 28.0% by private equity funds under the management of Brait Private Equity;
- 19.7% by ADP;
- 8.3% by African Paints;
- 10.0% by the Decor Trust;
- 10.0% by the Kildrummy Trust (the BEE Shareholding);
- 6.0% by Sanlam; and
- 18.0% by Standard Chartered.
As at the date of this announcement:
- Holdco holds 38 448 095 shares (18.86%) in the issued share capital of
Freeworld; and
- the executive directors of Freeworld collectively hold 125 884 shares in the
issued share capital of Freeworld.
4.2 Scheme consideration
4.2.1. Based on there being 203 871 939 Freeworld shares in issue, Bidco will be
bound to pay an aggregate consideration in cash equal to R10.45 per scheme
share, prior to the deduction of the amounts referred to in paragraph 4.2.4, if
applicable, and prior to any adjustment in terms of paragraph 4.2.2. This
amounts to an aggregate consideration of R1 728 679 170 (prior to any
adjustments) payable to the scheme members ("scheme consideration").
4.2.2 The scheme consideration will be reduced if and to the extent that the
consolidated net interest-bearing debt (ignoring the impact of the payment of
any dividend or tax as contemplated in 4.2.4, prior to the date of
determination) of the Freeworld Coatings South Africa (Proprietary) Limited
group as at the last day of the calendar month immediately preceding the month
during which the scheme is voted on by the scheme members is greater than R921
000 000.
4.2.3 All eligible Share Appreciation Rights will be settled in cash prior to
the operative date by Freeworld.
4.2.4 The scheme consideration will be decreased by an amount equal to the sum
of i) the aggregate of any dividend declared and paid or distribution made after
1 February 2010 and before the settlement of the scheme consideration, and ii)
any amount for which Freeworld itself is liable to pay by way of taxes on such
dividends or distributions (that is, excluding any obligation on Freeworld to
withhold any amount payable by any shareholder).
4.3 BEE transaction
For various reasons, including the recent constraints in the debt market,
Freeworld has not yet implemented its black economic empowerment ("BEE") equity
ownership transaction.
Bidco has stated its support for BEE and that it intends to enhance the BEE
profile of Freeworld after the implementation of the scheme.
It is intended that in time shares comprising 15% of the entire issued share
capital of Holdco will be held by BEE parties, with 10% initially being held by
the Kildrummy Trust and, subsequent to the scheme being implemented, a further
5% being made available to BEE parties.
The offer is predicated upon any dilutionary impact associated with the
implementation of the BEE shareholding being borne by Holdco and its
shareholders.
5. FUNDING AND GUARANTEE
Nedbank Limited ("Nedbank") has provided the SRP with a guarantee in respect of
the scheme consideration and the SRP has approved that guarantee in terms of
rule 2.3.2 (b) and Rule 21.7 of the Code.
6. MARKET AND FINANCIAL INFORMATION
The table below sets out information regarding the price at which Freeworld
shares traded prior to the publication of the cautionary announcement or this
announcement in relation to the scheme consideration, as well as a comparison of
the scheme consideration to the net asset value and net tangible asset value per
Freeworld share at 30 September 2009, Freeworld`s financial year end.
Rand Scheme Premium
per considera /
share tion per (Discou
(R) share nt) (%)
(R)
Closing market price per share on 8.70 10.45 20.1%
Monday, 29 March (Note 1)
30 day VWAP prior to Tuesday, 16 7.77 10.45 34.6%
February (Note 2)
8.05 10.45 29.8%
60 day VWAP prior to Tuesday, 16
February (Note 2)
Net asset value per share at 30 14.12 10.45 (26.0%)
September 2009 (Note 3)
Net tangible asset value per
share at 30 September 2009 (Note 0.93 10.45 1 023.7%
4)
Notes:
1. Closing price of a Freeworld share on the JSE on Monday, 29 March 2010,
being the day prior to the delivery of the notice of firm intention by
Bidco.
2. 30 day and 60 day VWAPs as at Tuesday, 16 February 2010, being the date of
publication by Freeworld of the cautionary announcement on SENS.
3. Net asset value per share at financial year end of 30 September 2009.
4. Net tangible asset value per share at financial year end of 30 September
2009.
7. CONDITIONS PRECEDENT
The scheme will be subject to the fulfillment (or, where possible, the waiver
thereof, wholly or partially, by agreement in writing between Freeworld and
Bidco) of the following conditions precedent:
- by not later than 17:00 on the day preceding the date on which the scheme is
voted on by the scheme members ("test date") the acquisition by Bidco of all the
scheme shares pursuant to the scheme, is approved in terms of the merger control
provisions of the Competition Act 89 of 1998, as amended ("Competition Act"),
either unconditionally or subject to such conditions as Freeworld and Bidco may
approve in writing, which approval shall not unreasonably be withheld;
- to the extent not received at the time of the despatch of the circular, by not
later than 17:00 on the test date, the receipt of all other required regulatory
approvals in relation to the scheme and its implementation (which shall be
required to be unconditional or subject to such conditions as the boards of
directors of each of Bidco and Freeworld may reasonably approve in writing, such
approval not to be unreasonably withheld) from, inter alia, the JSE, the SRP and
the Exchange Control Division of the South African Reserve Bank;
- by not later than 09 August 2010, the approval of the scheme by the requisite
majority of scheme members registered as such on the voting record date, in
terms of section 311(2) of the Companies Act, is obtained;
- by not later than 17 August 2010, the scheme is sanctioned by the Court in
terms of section 311(2) of the Companies Act ("scheme sanction");
- by not later than 19 August 2010, the Order of Court sanctioning the scheme
having been registered with the Registrar of Companies in terms of section
311(6)(a) of the Companies Act;
- by no later than 17:00 on the test date, there having been no valid
termination of the agreement entitled "Transaction Process Agreement", entered
into between Bidco, Holdco, Brait Private Equity and Freeworld (""the
parties""), on or about 24 November 2009, as amended and restated on 18 February
2010, in terms of which agreement the parties have agreed the process which they
shall follow in implementing the scheme ("Transaction Process Agreement");
- no material adverse change, being either:
I. the occurrence after 30 September 2009 of any act/s or event/s which
individually or in aggregate has or have resulted, or is/are, with at least the
threshold probability, likely to result, in either (i) a reduction by R50
million or more of Freeworld`s adjusted EBITDA(refer to note 1 below), in any
consecutive 12 calendar month period commencing within 12 months after 30
September 2009 or (ii) a loss or liability to Freeworld (or to any subsidiary
company of Freeworld) resulting in a reduction at the end of any calendar month
falling within 24 months after 30 September 2009 in the NTAV (refer to note 2
below) of the Freeworld group on a consolidated basis in an amount exceeding R50
million; or
II. Freeworld`s adjusted EBITDA for the 6 month period ending 31 March 2010
being less than 75% of Freeworld`s group EBITDA reported for the 6 month period
ending 31 March 2009;
having come to the attention of Bidco at any time prior to 17:00 on the test
date, provided that in the event that any material adverse change comes to the
attention of Bidco and/or HoldCo, this condition shall be capable of waiver by
Bidco by notice in writing to Freeworld prior to 17:00 on the test date;
- the all-in borrowing rate (refer to note 3 below), measured as at 11:00 on the
test date, not exceeding 17% (refer to note 4 below); and
- it is not unlawful as at 12:00 on the date of scheme sanction for Bidco or any
of the subsidiaries or affiliates of Bidco to comply with its obligations under
the long term funding documents and the bridge finance documents as defined in
the bridge loan facility agreement(refer to note 5 below) entered into by Bidco
to fund the scheme consideration.
Notes:
1. Adjusted EBITDA is EBITDA excluding any net non-cash adjustments as may
otherwise result from marking to market the values of foreign exchange exposures
on the procurement of finished goods, raw materials or packaging in the ordinary
course of business; and any impairments of goodwill or of the Freeworld group`s
brands and trademarks.
2. The net tangible asset value of the Freeworld group on a consolidated basis
(that is, excluding any nett non-cash adjustments as may otherwise result from
marking to market the values of foreign exchange exposures on the procurement of
finished goods, raw materials or packaging in the ordinary course of business),
calculated by applying the same accounting principles and conventions as applied
by Freeworld in its financial statements.
3. Details on defined terms are reflected in the Transaction Process Agreement
which will lie open for inspection at the registered offices of Freeworld and
its sponsor, Rand Merchant Bank, and such details will be further set out in the
circular to be posted to shareholders.
4. Shareholders are advised that the all in borrowing-rate as at 11:00 on the
day prior to this announcement was 13.99%. An announcement will be published on
SENS and in the press immediately should the all-in borrowing rate move in
excess of 0.5% from 13.99% up until the test date.
5. The signed bridge loan facility agreement will lie open for inspection at
the registered offices of Nedbank.
Should all of the conditions precedent referred to above not be fulfilled or
waived, as the case may be, the scheme shall not become operative and shall be
of no force or effect. Should this occur, Freeworld will remain listed on the
JSE.
An announcement will be released on SENS and published in the South African
press as soon as practicable after the last of the conditions precedent referred
to above has been fulfilled or waived, as the case may be.
8. INDEPENDENT PROFESSIONAL EXPERT
Deutsche Securities (SA) (Proprietary) Limited ("Deutsche") has been appointed
to act as an independent professional expert for the purposes of providing
independent advice to the board on the terms of the offer.
In this regard, Deutsche provided a favourable preliminary fairness opinion
("preliminary opinion") to the board based on information available to 29 March
2010. The preliminary opinion will be formalised at the last practicable date
prior to the publication of the circular to be posted to scheme members on the
date set out in paragraph 10.
Deutsche`s detailed opinion will be included in the scheme circular to be sent
to scheme members as set out in paragraph 11 below.
9. RECOMMENDATION OF THE BOARD
The board of directors of Freeworld has considered the terms and conditions of
the offer and the preliminary opinion provided by Deutsche and, in light of the
assurances given to the board, including those set out in the Transaction
Process Agreement, is of the opinion that the offer is fair and reasonable to
Freeworld shareholders and that Freeworld shareholders should vote in favour of
the offer at the scheme meeting.
10. SALIENT DATES AND DOCUMENTATION
The anticipated salient dates and times of the scheme are set out in the table
below. A circular containing details of the offer and the scheme will be posted
to Freeworld shareholders on or about Wednesday, 21 April 2010.
2010
Circular sent to Freeworld shareholders and Wednesday, 21 April
notice convening scheme meeting published
in the South African press on
Last day to trade in Freeworld shares on Wednesday, 26 May
the JSE in order to be recorded on the
register to vote at the scheme meeting, by
the close of trade on the JSE (refer to
note 2 below) on
Record date to vote at the scheme meeting Wednesday, 2 June
Last day to lodge forms of proxy (pink) for Thursday, 3 June
the scheme meeting (refer to note 5 below)
(for use by certificated and dematerialised
shareholders with own-name registration) by
10:00 on
Test date for the conditions precedent to Sunday, 6 June
the scheme as per paragraph 7 above
Scheme meeting to be held at 10:00 on Monday, 7 June
Results of the scheme meeting released on Monday, 7 June
SENS on
Scheme chairperson`s report lies open for Tuesday, 8 June
inspection from
Results of the scheme meeting published in Tuesday, 8 June
the South African press on
Court hearing to sanction the scheme Tuesday, 15 June
expected at 10:00 (or as soon thereafter as
counsel may be heard) on
If the scheme is sanctioned:
Subject to the fulfilment or waiver of all Thursday, 17 June
the conditions precedent, the Order of
Court sanctioning the scheme registered by
the Registrar of Companies on or about
Fulfilment of the conditions precedent Thursday, 17 June
anticipated to be released on SENS on
Fulfilment of the conditions precedent Friday, 18 June
anticipated to be published in the South
African press on
Expected last day to trade in Freeworld Friday, 18 June
shares on the JSE in order to be recorded
on the register on the record date of the
scheme on
Expected suspension of listing of Freeworld Monday, 21 June
shares on the JSE at the commencement of
trade on the JSE on
Expected record date of the scheme on which Friday, 25 June
Freeworld shareholders must be recorded as
such in the register to receive the scheme
consideration by 17:00 on
Expected operative date of the scheme at Monday, 28 June
the commencement of trade on the JSE on
Payment expected to be transferred Monday, 28 June
electronically or posted to certificated
scheme participants (if document(s) of
title are received on or prior to 12:00 on
the operative date) on or about
Tuesday, 29 June
Expected termination of listing of
Freeworld shares on the JSE at the
commencement of trade on the JSE on
Notes:
1. Any material change to the above dates and times will be advised to
Freeworld shareholders by announcement on SENS and in the South African
press.
2. Freeworld shareholders should note that, as trade in Freeworld shares on
the JSE is settled through STRATE, settlement for trade takes place 5
(five) business days after any such trade. Therefore, Freeworld
shareholders who acquire Freeworld shares on the JSE after Friday, 28 May
2010 will not be eligible to vote at the scheme meeting.
3. Dematerialised scheme participants, other than those with ownname
registration, must provide their CSDP or broker with their instructions for
voting at the scheme meeting by the cutoff time and date advised by the
CSDP or broker for instructions of this nature.
4. No dematerialisation or rematerialisation of Freeworld shares may take
place after Friday, 18 June 2010.
5. Forms of proxy for the scheme meeting (pink) may also be handed to the
chairperson of the scheme meeting by no later than 10 minutes before the
commencement of the scheme meeting.
11. CIRCULAR TO SHAREHOLDERS AND NOTICE OF SCHEME MEETING
The scheme meeting is intended to be held at 10:00 on Monday, 7 June 2010 at 1st
Floor, Balvenie Building, Kildrummy Office Park, Umhlanga Drive, Paulshof, 2191,
or such other venue as may be announced on SENS. The South Gauteng High Court,
Johannesburg, will be requested to grant an Order that, inter alia, the
chairperson of the scheme meeting shall be obliged to adjourn the scheme meeting
from time to time so as to ensure that the scheme is not voted on by the scheme
members prior to the implementation of the scheme having been approved as a
merger under the Competition Act, either unconditionally or subject to such
conditions as may be approved in writing by Freeworld and Bidco.
A circular providing additional information on the scheme and containing, inter
alia, a notice of scheme meeting and a form of proxy will be posted to scheme
members on or about Wednesday, 21 April 2010.
Johannesburg
31 March 2010
Merchant Bank and Sponsor to Freeworld
Rand Merchant Bank (a division of FirstRand Bank Limited)
Attorneys to Freeworld
Read Hope Phillips Thomas & Cadman Incorporated
Financial PR Advisers to Freeworld
College Hill
Investment Bank to Bidco
Standard Bank
Attorneys to Bidco
Cliffe Dekker Hofmeyr
Tax Advisor to Bidco
Ernst & Young
Transaction Communications Advisor to Bidco
Brunswick Group LLP
Bankers to Bidco
Nedbank
Attorneys to Nedbank
Deneys Reitz Incorporated
Independent advisor
Deutsche Securities
Date: 31/03/2010 17:50:20 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
