| Mon 21 Jun 2010, 9:00 | | BJM - Barnard Jacobs Mellet Holdings Limited - Firm intention by Firstrand to |
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BJM FSRP
BJM
BJM - Barnard Jacobs Mellet Holdings Limited - Firm intention by Firstrand to
make an offer to acquire all of the ordinary shares in BJM and withdrawal of BJM
cautionary announcement
Barnard Jacobs Mellet Holdings Limited
Incorporated in the Republic of South Africa)
(Registration number 1995/004798/06)
Share code: BJM ISIN: ZAE000014262
("BJM" or "the BJM Group")
FirstRand Limited
(Incorporated in the Republic of South Africa)
(Registration number 1966/010753/06
Share Code: FSR ISIN: ZAE000060141
("FirstRand")
First National Bank
A division of FirstRand Bank Limited
(Registration number: 1929/001225/06)
FIRM INTENTION BY FIRSTRAND TO MAKE AN OFFER TO ACQUIRE ALL OF THE ORDINARY
SHARES IN BJM AND WITHDRAWAL OF BJM CAUTIONARY ANNOUNCEMENT
1. Introduction
BJM ordinary shareholders ("BJM Shareholders") are referred to the
announcement dated Monday 3 May 2010 regarding the acquisition by
Renaissance Securities Holdings (SA) (Proprietary) Limited ("RenCap
Securities"), a wholly-owned subsidiary of Renaissance Capital ("RenCap")
of the entire issued share capital of Barnard Jacobs Mellet Securities
(Proprietary) Limited ("BJM Securities"), a wholly-owned subsidiary of BJM
for a maximum cash consideration of R207 million ("the Purchase
Consideration") ("the BJM Securities Transaction"), subject to the
fulfilment of certain conditions as set out in the circular to BJM
Shareholders dated Friday 18 June 2010 ("the Circular").
Post the effective date of the BJM Securities Transaction (which is
expected to be on or about Tuesday 13 July 2010) ("the Effective Date"),
businesses of the listed BJM entity will include the private client
operations and some smaller businesses as set out in 2.2 below.
FirstRand and BJM Shareholders are advised that FirstRand has submitted a
firm intention to make an offer to the board of directors of BJM ("the BJM
Board"), to acquire all the ordinary shares in BJM ("the Firm Intention").
FirstRand, or one of its wholly owned subsidiaries acting through the FNB
Wealth operational team, will acquire all the ordinary shares in BJM from
BJM Shareholders by way of a scheme of arrangement in terms of section 311
of the Companies Act 61 of 1973, as amended ("the Act") ("the Scheme"). BJM
Shareholders are advised that the further cautionary announcement dated
Thursday 17 June 2010 was published with reference to the Scheme.
Pursuant to successful implementation of the Scheme, FirstRand will own
100% of the ordinary share capital of BJM. At the date of this
announcement, FirstRand does not hold any ordinary shares in BJM.
2. The BJM Securities Transaction and BJM Group structure
2.1 Background to the BJM Securities Transaction
During 2009 and 2010, the BJM Board undertook to effect a strategy
that would improve the competitive platform of the BJM Group and
create or unlock value for BJM Shareholders. Full details of the BJM
Securities Transaction are set out in the Circular.
The successful closure of the BJM Securities Transaction is a
condition precedent for the Scheme.
2.2 Post the Effective Date, BJM will consist of:
- Barnard Jacobs Mellet Private Client Services (Proprietary)
Limited ("PCS"), an independent private wealth manager and
stockbroker, with approximately 12,000 active clients and some
R35 billion under administration;
- Barnard Jacobs Mellet Corporate Finance Corporate Finance
(Proprietary) Limited, a leading provider of JSE Limited ("JSE")
sponsor, corporate finance and corporate advisory services;
- Barnard Jacobs Mellet Insurance (Proprietary) Limited, a provider
of short term insurance solutions to BJM clients;
- Finsettle Services (Proprietary) Limited, which offers
settlement, administration and scrip lending services;
- Barnard Jacobs Mellet (USA) LLC, which comprises research,
research sales and sales trading to institutional investors in
North America; and
- Barnard Jacobs Mellet UK Ltd, which comprises research, research
sales and sales trading to institutional investors in Europe.
3. Rationale for the Scheme
Although FNB, a division of FirstRand Bank Limited, has a very broad
product offering in the high net worth individual market, operating as FNB
Private Clients and RMB Private Bank (collectively "FNB Wealth"), it does
not have an appropriate product to service FNB Wealth clients looking to
execute their own equity and bond trades. Although RMB Morgan Stanley
(Proprietary) Limited, RMB`s joint venture with Morgan Stanley Inc, is one
of the top institutional brokers on the stock exchange operated by the JSE,
there is no comparable retail offering.
FNB Wealth has developed a strategy to expand its stock broking presence by
targeting its existing 40 000 clients who earn more than R1.1 million per
annum. This strategy would ultimately be successful but would require
significant expenditure of both time and funding in order to achieve
critical mass. As part of the market research for this expansion project,
BJM`s business model was evaluated and the possibility of acquiring this
business was considered. FNB believes that the current situation provides
an opportunity to develop a mutually beneficial transaction.
As well as providing the platform for FNB Wealth to enter a new market, the
Scheme will be extremely beneficial to the PCS business. The provision of
access to the existing FNB Wealth client base, amounting to in excess of 40
000 clients, will enable BJM to significantly increase the size of its
client base and drop the per unit cost base of the business.
4. Details of the Scheme
4.1 The Scheme will be implemented by way of a scheme of arrangement in
terms of section 311 of the Act to be proposed by FirstRand or one of
its wholly owned subsidiaries ("the Offeror") between BJM and the
Scheme Members for a cash consideration of R4.50 per BJM ordinary
share ("the Scheme Consideration").
4.2 Providing that the requisite majority of votes by BJM Shareholders is
obtained at the Scheme meeting, 100% of the BJM ordinary shares in
issue will be acquired by the Offeror pursuant to the Scheme in terms
of the Act and this will result in the delisting of the entire issued
share capital of BJM from the securities exchange operated by the JSE.
4.3 The Scheme Consideration will be adjusted downwards proportionately
if, and to the extent that, the net cash in BJM is less than R190
million as at the last day of the month immediately preceding the
month during which the Scheme is voted on by the Scheme Members. The
cash balance mentioned above does not include any money received for
the acquisition of treasury shares in terms of the Scheme. In the
event the cash balance is more than R210 million the excess cash can
be returned to BJM Shareholders with the approval of the Offeror.
5. BJM Shareholder support
At the date of this announcement, FirstRand has obtained signed
undertakings of support from BJM shareholders who hold 55 721 288 of the
BJM ordinary shares, representing 61.9% of the BJM ordinary shares eligible
to vote at the Scheme Meeting.
6. Key features of the Scheme
The key features of the Scheme are as follows -
6.1 a Scheme price which the Offeror believes is fair;
6.2 a Scheme Consideration which is attractive and which already has the
written support of 61,9% of BJM Shareholders;
6.3 the Scheme is being proposed by a company which does not have the same
skill set as staff in BJM and will result in the development of a new
business in the FNB Group, thus giving rise to career and personal
growth opportunities for entrepreneurial and motivated BJM staff; and
6.4 is a fully-funded offer from one of the largest financial services
groups in South Africa.
7. Funding for the Scheme
FirstRand has provided the Securities Regulation Panel ("SRP") with a cash
confirmation letter in respect of the Scheme Consideration and the SRP has
approved the cash confirmation in terms of Rule 2.3.2(b) and Rule 21.7 of
the SRP Code on Takeover and Mergers and the Rules of the SRP.
8. Conditions precedent to the Scheme
8.1 The proposing of the Scheme (i.e. the posting of the Scheme
documentation) will be dependent upon the fulfilment of the following
conditions precedent:
8.1.1 the approval of the Exchange Control division of the South
African Reserve Bank;
8.1.2 approval of the circular to Scheme members setting out the
details of the Scheme ("the Scheme Document") by the SRP and the
JSE;
8.1.3 the fulfilment of all of the conditions precedent to the BJM
Securities Transaction with no adverse adjustment to the Purchase
Consideration;
8.1.4 the conclusion of the Cornerstone Asset Managers Limited ("CAM")
shareholders agreement between BJM and the remaining 50%
shareholders in CAM;
8.1.5 the confirmation from the BJM Board that there has been no
Material Adverse Change ("MAC") in the business since the date of
the Firm Intention. For the purpose of this clause, a MAC is
defined as any event which would have the effect of reducing the
audited net asset value of BJM at 31 March 2010 by more than 20%;
and
8.1.6 the South Gauteng High Court, Johannesburg ("Court") granting
leave to convene a Scheme meeting.
8.2 The implementation of the Scheme (i.e. effective acquisition of the
BJM ordinary shares by the Offeror) will be dependent upon the
following conditions being fulfilled:
8.2.1 the Scheme being approved by requisite majority of Scheme
Members;
8.2.2 the Scheme being sanctioned by the Court in terms of section
311(2) of the Act;
8.2.3 the Order of Court sanctioning the Scheme being registered by the
Companies and Intellectual Property Registration Office in terms
of section 311(6)(a) of the Act;
8.2.4 the approval by the Registrar of Banks being granted for the
Scheme to be implemented;
8.2.5 the Scheme being approved unconditionally as a merger under the
Competition Act, 89 of 1998 by the South African Competition
Authorities or subject to such conditions as the Offeror may
approve in writing, such approval not to be unreasonably
withheld; and
8.2.6 the written consent of Rencap Securities, which consent shall not
be unreasonably withheld.
9. Scheme Consideration
The Scheme Consideration results in the following premia for BJM
shareholders:
Premium (%)
Based on closing price on 18 June 2010 of 381 cents 18.1%
Based on 30 day VWAP to 18 June 2010 of 382 cents 17.7%
Based on 60 day VWAP to 18 June 2010 of 368 cents 22.3%
Based on 90 day VWAP to 18 June 2010 of 346 cents 29.9%
The Scheme has been based on the assumption that, other than for the
dividend of 4 cents per share declared on 3 June 2010, payable on 5 July
2010, no dividend, distribution or similar payment is made between the date
of this announcement and the implementation of the Scheme.
10 Opinions and recommendations
10.1 The BJM Board has appointed an independent sub-committee comprising
non-executive directors ("the Sub-Committee") to consider, assess,
negotiate and carry out any obligations that may be required of them
on behalf of BJM regarding the Scheme.
10.2 PricewaterhouseCoopers Corporate Finance (Proprietary) Limited
("PricewaterhouseCoopers") has been appointed by the Sub-Committee to
provide independent advice to the Sub-Committee on the terms and
conditions of the Scheme.
10.3 In this regard, PricewaterhouseCoopers provided a favourable
preliminary fairness opinion ("Preliminary Opinion") to the Sub-
Committee based on information available. The Preliminary Opinion will
be formalised at the last practicable date prior to the publication of
the Scheme Document to be posted to BJM Shareholders on the date as
set out in paragraph 11 below. PricewaterhouseCoopers` detailed
opinion will be included in the Scheme Document.
10.4 The Sub-Committee has considered the terms and conditions of the
Scheme and the Preliminary Opinion and, in light of the assurances
given to the Sub-Committee, is of the opinion that the Scheme is fair
to BJM Shareholders.
10.5 The BJM Board is of the opinion, after taking into consideration the
Preliminary Opinion and the opinion of the Sub-Committee, that the
Scheme is fair to BJM Shareholders and recommends that BJM
Shareholders vote in favour of the Scheme at the Scheme meeting.
11. Scheme Documentation and salient dates announcement
The Scheme Document containing, inter alia, the terms of the Scheme, an
explanatory statement as required in terms of the Act, a notice of Scheme
Meeting and a form of proxy will be posted to BJM Shareholders on or about
Friday 23 July 2010. An announcement setting out the salient dates of the
Scheme will be released on the same date.
12. Withdrawal of BJM cautionary announcement
BJM Shareholders are advised that the cautionary announcement dated
Thursday 17 June 2010 is hereby withdrawn and, accordingly, BJM
Shareholders are no longer required to exercise caution when dealing in
their BJM ordinary shares.
Johannesburg
21 June 2010
Merchant bank and sponsor to FNB and FirstRand
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Corporate Advisor to BJM
Deloitte Corporate Finance
Sponsor to BJM
Barnard Jacobs Mellet Corporate Finance (Proprietary) Limited
Independent Sponsor to BJM
Deloitte & Touche Sponsor Services (Proprietary) Limited
Attorneys to FNB and FirstRand
Deneys Reitz
Attorneys to BJM
Werksmans
Independent advisor to the BJM Board
PriceWaterhouseCoopers Corporate Finance (Proprietary) Limited
Date: 21/06/2010 09:00:01 Produced by the JSE SENS Department.
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