| Fri 9 Jul 2010, 12:30 | | BRT/BRN - Brimstone Investment Corporation Limited - Announcement regarding the |
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BRT BRN
BRT
BRT/BRN - Brimstone Investment Corporation Limited - Announcement regarding the
acquisition by Brimstone of the remaining 26% interest in lion of Africa
holdings Company (Proprietary) Limited
Brimstone Investment Corporation Limited
(Registration number 1995/010442/06)
(Incorporated in the Republic of South Africa)
ISIN Number: ZAE000015277 Share Code: BRT
ISIN Number: ZAE000015285 Share Code: BRN
("Brimstone" or the "Company")
ANNOUNCEMENT REGARDING THE ACQUISITION BY BRIMSTONE OF THE REMAINING 26%
INTEREST IN LION OF AFRICA HOLDINGS COMPANY (PROPRIETARY) LIMITED
1 Introduction
The holders of ordinary shares and "N" ordinary shares in Brimstone
("Brimstone shareholders") are advised that Brimstone has entered into an
agreement ("the Agreement") with Commlife Holdings (Proprietary) Limited
("Commlife") to acquire the remaining 26% of the shares in and claims on
loan account against Lion of Africa Holdings Company (Proprietary) Limited
("LOAH") which it does not already own ("the Acquisition").
2 Rationale for the Acquisition
The only asset of LOAH is a 100% shareholding in Lion of Africa Insurance
Company Limited ("Lion"). Lion was founded in 1999 as a joint venture
between Brimstone, Commlife and Guardian National Insurance Company
Limited, which was later acquired by Santam Limited ("Santam"), and carries
on business as a registered short term insurer. It presently focuses on the
commercial, corporate, special risks and personal lines sectors. Commlife
is a company controlled by Mr Fred Robertson, who is also the executive
deputy chairman of Brimstone.
Towards the end of 2009, and in line with its strategy of establishing a
controlling position in what has become the leading black owned and managed
short term insurance company in South Africa, Brimstone acquired Santam`s
35% interest in LOAH ("the Santam Transaction"), resulting in Brimstone
holding a 74% interest and Commlife retaining its 26% interest in LOAH.
Brimstone regards Lion as a strategic and quality asset, with good growth
potential. Following a review of its investment portfolio, Brimstone
concluded that it should endeavour to acquire the remaining 26% interest in
Lion, as this would allow Brimstone to better leverage the asset,
rationalise capital management synergies within the group and explore
related opportunities in the insurance industry. Brimstone therefore
engaged in negotiations with Commlife, which resulted in the conclusion of
the Agreement.
Through his involvement with Brimstone as executive deputy chairman, and in
his capacity as chairman of Lion, Mr Fred Robertson will continue to play a
major role in the further development and growth of Lion.
3 Terms of the Acquisition
The purchase consideration payable in terms of the Acquisition is R53 372
000 (fifty three million three hundred and seventy two thousand Rand), and
is subject to a possible upwards adjustment by an amount not exceeding R2
500 000 (two million five hundred thousand Rand), and will be paid in cash.
4 Conditions precedent
As at the date of this announcement, the only outstanding condition
precedent to the Acquisition is the obtaining of the requisite approvals
from the Registrar of Short-term Insurance.
5 Independent fairness opinion
Commlife is a "related party" in relation to Brimstone and the Acquisition
is a "related party transaction" as contemplated by the JSE Limited
Listings Requirements ("Listings Requirements").
Having regard to the price payable under the Acquisition and Brimstone`s
market capitalisation, the Acquisition is classified as a "small related
party transaction" in terms of the Listings Requirements. Accordingly, and
in order to comply with the Listings Requirements, Brimstone has appointed
Ernst & Young Services (Proprietary) Limited ("Ernst & Young") as
independent professional expert to provide an opinion confirming that the
terms and conditions of the Acquisition are fair to Brimstone shareholders
("the fairness opinion"). The fairness opinion provided by Ernst & Young is
still subject to approval by the JSE and a further announcement will be
made once the fairness opinion has been approved by the JSE.
6 Unaudited pro forma financial effects
Based on Brimstone`s published consolidated audited results for the
financial year ended 31 December 2009, the unaudited pro forma financial
effects of the Santam Transaction and the Acquisition (collectively "the
Transactions") on Brimstone`s earnings and headline earnings per share
("EPS" and "HEPS" respectively) and net asset value and net tangible asset
value per share ("NAV" and "NTAV" respectively) are set out below. The
unaudited pro forma financial information has been prepared for
illustrative purposes only and because of its nature may not give a fair
presentation of Brimstone`s financial position and results of operations
after taking into account the effect of the Transactions on Brimstone. The
preparation of the unaudited pro forma financial information is the
responsibility of Brimstone`s directors.
Before After % After %
the the Change the Change
Transact Santam Santam
ions(1) Transa Transa
ction( ction
74%) and
the
Acquis
ition(
100%)
EPS (cents)(2) (3) 136.7 140.8 3.0% 142.3 1.0%
HEPS (cents) (2) 130.9 135.0 3.1% 136.5 1.1%
(3)
NAV (cents) (4) 1 030.3 1 - 1 -
(5) 030.3 030.3
NTAV (cents) (4) 938.1 938.1 - 932.2 (0.6%)
(5)
Number of shares 239 324 239 - 239 -
in issue (000) 324 324
Weighted average 238 238 238 - 238 -
number of shares 238 238
in issue (000)
Notes:
1 The "Before the Transactions" financial information has been
extracted, without adjustment, from Brimstone`s published consolidated
audited results for the 12 months ended 31 December 2009.
2 The EPS and HEPS figures as reflected in the "After the Santam
Transaction" and "After the Santam Transaction and the Acquisition"
columns are based on the assumption that the Transactions were
implemented on 1 January 2009 for statement of comprehensive income
purposes.
3 The EPS and HEPS were adjusted for:
* a reversal of dividends of R10.725m received from LOAH while
it was an associate of Brimstone and a reversal of STC
credits of R1.0725m;
* a reversal of equity accounted earnings of R0.129m accounted
for while LOAH was an associate of Brimstone; and
* a loss of interest on investments of R3.631m after payment
of the purchase price and a tax saving of R1.017m.
4 The NAV per share and NTAV per share figures as reflected in the
"After the Santam Transaction" and "After the Santam Transaction and
the Acquisition" columns are based on the assumption that the
Transactions were implemented on 31 December 2009 for statement of
financial position purposes.
5 The NAV per share was not adjusted and NTAV per share was adjusted for
an increase in goodwill of R14.318m.
Cape Town
9 July 2010
Investment Bank & Attorneys Independent expert
Sponsor
- LOGO - - LOGO -
- LOGO - Cliffe Dekker Ernst & Young
Nedbank Capital Hofmeyr Inc
Date: 09/07/2010 12:30:01 Produced by the JSE SENS Department.
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