| Thu 9 Dec 2010, 11:30 | | GMB - Glenrand M.I.B Limited - Announcement of firm intention by AON to make an |
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GMB
GMB - Glenrand M.I.B Limited - Announcement of firm intention by AON to make an
offer to acquire the entire issued share capital of Glenrand and withdrawal of
cautionary announcement
GLENRAND M.I.B LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/008001/06)
Share code GMB
ISIN: ZAE000078010)
("Glenrand")
AON SOUTH AFRICA (PROPRIETARY) LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1978/004501/07)
("AON")
ANNOUNCEMENT OF FIRM INTENTION BY AON TO MAKE AN OFFER TO ACQUIRE the ENTIRE
issued share capital of glenrand AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1 INTRODUCTION
1.1 Glenrand and Aon are pleased to announce that, further to the cautionary
announcements released by Glenrand, the last of which was dated 17 November
2010, Aon has submitted to the board of directors of Glenrand ("the
Glenrand board") notice of its firm intention to make an offer to the
shareholders of Glenrand ("Glenrand shareholders") to acquire 100% of the
issued share capital of Glenrand, excluding treasury shares held by
Glenrand subsidiaries ("the treasury shares"), subject to the conditions
set out in paragraph 10 below ("the offer").
1.2 The fully diluted issued share capital of Glenrand comprises two classes of
shares, namely:
1.2.1 247,905,150 ordinary shares ("the ordinary shares") held by Glenrand
ordinary shareholders ("the ordinary shareholders"), other than the
treasury shares and the ordinary shares held by Micawber 427
(Proprietary) Limited, Micawber 428 (Proprietary) Limited and Micawber
429 (Proprietary) Limited, being the Black Business Partner
shareholders ("the BBP shareholders") of Glenrand. The ordinary
shares include up to 16,290,000 shares to be transferred and/or issued
to Glenrand employees who hold in-the-money share options as at the
date of this announcement ("the employee shares"); and
1.2.2 49,448,397 ordinary shares held by the BBP shareholders ("the BBP
shares") pursuant to the Black Economic Empowerment transaction implemented
by Glenrand in 2006 ("the BEE transaction"). The BBP shares are considered
to be a different class of shares to the ordinary shares as a result of
special rights and privileges attaching to them under the BEE transaction.
1.3 In terms of Rule 11.2 of the Securities Regulation Code on Take-overs and
Mergers and the Rules of the Securities Regulation Panel ("SRP") ("the
Code"), separate offers must therefore be made by Aon to each class of
shareholders, being the ordinary shareholders and the BBP shareholders.
Accordingly, the offer comprises two inter-conditional components as
follows:
1.3.1 an offer by Aon to the ordinary shareholders to acquire all the
ordinary shares ("the ordinary offer"), by way of a scheme of
arrangement ("the scheme") in terms of section 311 of the Companies
Act, 1973 as amended ("the Companies Act"), to be proposed by Aon
between Glenrand and the ordinary shareholders ("scheme participants")
registered as such on the record date on which Glenrand shareholders
must be recorded in the share register of Glenrand in order to
participate in the scheme and receive the scheme consideration
("scheme consideration record date"). As set out above, the BBP
shareholders will not be entitled to participate in the scheme.
The ordinary offer will be made for a cash purchase consideration of
200 cents per ordinary share, which is equivalent to an aggregate cash
price of R495,810,300 based on 247,905,150 ordinary shares ("the
scheme shares") as at the date of this announcement, subject to:
1.3.1.1 the final number of employee shares to be transferred and/or issued to
eligible employees, being 16,290,000; and
1.3.1.2 an additional payment of up to 30 cents per ordinary share, which is
equivalent to an aggregate amount of R74,371,545, which will be
deposited by Aon into an interest bearing escrow account, the terms of
release of which are set out in paragraph 3 below; and
1.3.2 an offer by Aon to the BBP shareholders to acquire all the BBP shares
("the BBP offer") for an aggregate cash purchase consideration of
R24,000,000, excluding all performance fees payable by Glenrand to the
BBP shareholders (in terms of the performance agreements entered into
between Glenrand and the BBP shareholders) as at the operative date of
the scheme (being the first business day following the scheme
consideration record date) ("the operative date"), which fees shall be
paid by Glenrand as at such date. Aon, Glenrand and the BBP
shareholders have entered into a separate share purchase agreement in
respect of the BBP offer ("the share purchase agreement"), which is
subject to the scheme becoming unconditional and operative in
accordance with its terms.
1.4 If the scheme is not approved at the scheme meeting, or if so approved, its
completion does not occur by 30 April 2011, or such later date as may be
agreed in writing between Glenrand and Aon ("long stop date"), then Aon
will be entitled to make a conditional offer to the ordinary shareholders
to acquire the ordinary shares on the same terms and conditions of the
scheme, mutatis mutandis ("the substitute offer").
1.5 Upon successful implementation of the offer:
1.5.1 Glenrand will become a wholly owned subsidiary of Aon; and
1.5.2 the listing of Glenrand on the JSE Limited ("JSE") will be terminated.
1.6 The purpose of this announcement is to provide Glenrand shareholders with
the salient terms of the offer.
2 RATIONALE
2.1 Glenrand, which was listed on the JSE in 1998, is a market leader in the
insurance broking and risk consultancy industry, covering the full short-
term insurance spectrum, and servicing South African and international
clients ranging from individuals to large multinational corporations.
2.2 The core business of Glenrand is focused on an extensive risk advisory
capability that caters for the needs of corporates, commercial ventures and
individuals. Glenrand specialises in highly innovative combinations of
conventional short-term and tailor-made solutions, operating throughout
Southern Africa, and has an Empowerdex AA rating, was ranked 6th in the
"Financial Mail Top Empowerment Companies 2009" survey and 3rd most
empowered company in the financial sector in the same year.
2.3 Aon is a risk, actuarial, healthcare and retirement funding consultancy and
insurance broking business, of which the ultimate holding company is Aon
Corporation ("Aon Corporation"), a leading global provider of risk
management services, insurance and re-insurance brokerage and human capital
consulting. Aon Corporation has broking centres around the world and
delivers services through more than 500 offices in more than 120 countries.
Aon Corporation was named best broker by "Euromoney Insurance Survey 2008
and 2009" and ranked highest on the Business Insurance List - World Largest
Insurance Brokers (based on commercial, retail, wholesale reinsurance and
personal lines brokerage revenues) in 2008 and 2009.
2.4 Aon Corporation has significant interests in Sub Saharan Africa and is of
the opinion that the combination of the strengths of the businesses of
Glenrand and Aon will achieve its growth strategy on the continent and
result in an improved service offering to existing and prospective clients
of both companies. The combined entity will own 18 branches in South
Africa, which will improve service capabilities to clients, who will have
direct access to Aon owned offices in 12 African countries, all of which
are managed from South Africa.
3 Terms of the offer
3.1 The ordinary offer
3.1.1 The ordinary offer in relation to the scheme shares will be
implemented by way of the scheme.
3.1.2 Aon will offer the ordinary shareholders a scheme consideration of 200
cents per scheme share ("the scheme consideration"), which, if the
final number of employee shares to be transferred and/or issued to
eligible employees is 16,290,000, will be equivalent to an aggregate
cash price of R495,810,300.
3.1.3 In addition, an amount of 30 cents per scheme share ("the escrow
funds"), which, if the final number of employee shares to be
transferred and/or issued to eligible employees is 16,290,000, will be
equivalent to an aggregate cash price of R74,371,545, and will be
deposited by Aon into an interest bearing escrow account ("the escrow
account") from the operative date. The release of the escrow funds
will be pending and conditional on the final outcome of the claim
which has been instituted by Protector Group Holdings (Proprietary)
Limited ("PGH") (in liquidation) and its liquidators ("the
plaintiffs") against, inter alia, Glenrand, Glenrand MIB Financial
Services (Proprietary) Limited ("GFS"), Freefall Trading 65
(Proprietary) Limited and some of the past directors of PGH ("the
defendants") ("the Protector claim"). Any distribution from the
escrow account to the scheme participants will be treated as an
adjustment to the scheme consideration ("the scheme consideration
adjustment").
3.1.3.1 The Protector claim
3.1.3.1.1 The Protector claim relates to monies allegedly paid out from PGH
prior to its liquidation.
3.1.3.1.2 In terms of the Protector claim, different claims (and in differing
amounts) are made against several of the defendants. Glenrand believes
it acted properly and the Protector claim is being defended. A court
date has been set for 16 February 2011.
3.1.3.1.3 The Protector liability is defined as the total amount, if any, paid
or payable to the plaintiffs by Glenrand arising from the Protector
claim, including all reasonable legal costs of defending the matter
and costs of the committee appointed to manage the legal process as
set out below, net of any recoveries by Glenrand in relation to the
Protector claim ("the Protector liability").
3.1.3.2 The committee
3.1.3.2.1 On or before the operative date, the Glenrand board will appoint a
committee to manage the legal process with regard to the Protector
claim ("the committee").
3.1.3.2.2 The committee will determine Glenrand`s strategy in respect of the
Protector claim from the operative date until 31 December 2012, in
consultation with all key stakeholders. From and after 31 December
2012, if applicable, Aon will manage the legal process with regard to
the Protector claim, and the committee will continue to manage the
escrow account.
3.1.3.3 The scheme consideration adjustment
3.1.3.3.1 To the extent that the Protector liability (if any) amounts to
R12,500,000 or less, there will be no adjustment to the escrow
account, and the full escrow funds plus interest receivable will be
paid to scheme participants.
3.1.3.3.2 To the extent that the Protector liability (if any) is less than
R86,871,545 plus interest accumulated in the escrow account:
- If the date of determination of the Protector liability is before 31
December 2012, scheme participants will be entitled to payment of the
difference between R86,871,545 and the Protector liability, up to a maximum
payment of R74,371,545, together with all interest accumulated in the
escrow account ("the escrow balance").
- If the date of determination of the Protector liability is on or after 31
December 2012, scheme participants will be entitled to payment of 80% of
the escrow balance and Aon will be entitled to payment of 20% of the escrow
balance.
3.1.3.3.3 To the extent that the Protector liability (if any) exceeds
R86,871,545 plus interest accumulated in the escrow account, the
escrow funds plus the interest will revert to Aon, and scheme
participants will accordingly receive no further payment. In the
event that this scenario occurs at any time prior to the operative
date, the event will be deemed to be a material adverse change as set
out in paragraph 10 below.
3.1.3.4 In the event that the Protector claim can be resolved or settled
before the operative date (subject to paragraph 3.1.3.3.3 above), the
scheme consideration will be adjusted, mutatis mutandis, in accordance
with paragraph 3.1.3.3 above and there will be no need to enter into
any escrow arrangements or for the Glenrand board to appoint the
committee.
3.1.4 The operative date of the scheme is expected to be during the first
quarter of 2011.
3.2 The substitute offer
If the scheme is not approved at the scheme meeting as set out in paragraph
4 below, or if so approved, its completion does not occur by the long stop
date, then Aon (or its nominee appointed for this purpose) at its election
and in its sole discretion, will be entitled to make the substitute offer.
The substitute offer will be made by way of a general offer in terms of
Chapter XVA of the Companies Act and will be conditional on acceptance by
ordinary shareholders holding no less than 90% of the total issued ordinary
shares of Glenrand and on such terms that Aon will invoke the provisions of
section 440K of the Companies Act to acquire the remaining ordinary shares
if the substitute offer becomes unconditional.
3.3 The BBP offer
3.3.1 The BBP offer in relation to the BBP shares will be implemented by way
of the share purchase agreement and the BBP shareholders will not be
entitled to participate in the scheme.
3.3.2 Aon will offer the BBP shareholders a cash purchase consideration of
R24,000,000 for the BBP shares and any and all claims which the BBP
shareholders may have against Glenrand at the operative date excluding
all performance fees payable by Glenrand to the BBP shareholders (in
terms of the performance agreements entered into between Glenrand and
the BBP shareholders) as at the operative date, which fees shall be
paid by Glenrand at such date ("the BBP consideration").
3.3.3 The BBP offer is subject to the scheme becoming unconditional and
operative in accordance with its terms.
4 SCHEME MEETING FOR THE ORDINARY SHAREHOLDERS
4.1 The ordinary shareholders will be required to consider and approve the
scheme in a scheme meeting ("the scheme meeting"). It is intended that the
listing of the Glenrand shares on the JSE will be voluntarily terminated
upon the scheme becoming operative.
4.2 In terms of Section 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.
5 Glenrand Shareholder support
5.1 Aon has obtained irrevocable undertakings from ordinary shareholders
representing approximately 53.2% of the scheme shares, excluding the
employee shares, to vote in favour of the scheme.
5.2 Aon has obtained irrevocable undertakings from 100% of the BBP shareholders
who have undertaken to accept the BBP offer and have entered into the share
purchase agreement.
6 CONFIRMATION OF FINANCIAL RESOURCES
As required in terms of Rules 2.3.2(b) and 21.7 of the Code, Standard
Chartered Bank South Africa and Investec Bank Limited have provided
guarantees that Aon has sufficient funds available to pay the full purchase
consideration to the ordinary shareholders and the BBP shareholders if the
scheme becomes operative and the share purchase agreement becomes
unconditional. The purchase consideration payable to the ordinary
shareholders includes the escrow funds.
7 IMPLEMENTATION AGREEMENT
Glenrand and Aon have entered into an implementation agreement setting out
terms and conditions usual for a transaction of this nature, including
details of a retention scheme agreed between the parties in respect of key
employees of Glenrand.
8 SEPARATION AGREEMENT
Andrew Chislett and the Glenrand board have agreed that Andrew will stand
down as Chief Executive Officer ("CEO") of Glenrand with effect from 28
February 2011. Until then, Andrew will continue as CEO of Glenrand and
will ensure that there is a smooth handing over of duties and
responsibilities to his successor. Glenrand acknowledges the exceptional
contribution that Andrew has made to Glenrand during his tenure as CEO of
Glenrand.
9 EXISTING HOLDINGS OF SECURITIES IN GLENRAND
At the date of this announcement, neither Aon nor any entity owned or
controlled by Aon holds or controls any ordinary shares, nor do any such
entities have the option to acquire any shares in Glenrand.
10 Conditions precedent
10.1 The offer and the scheme (or substitute offer, where relevant) are subject
to the fulfilment, or if appropriate, waiver of the following conditions
precedent ("the conditions"). The conditions (except for those relating to
competition commission/tribunal approval) must be fulfilled, or where
appropriate waived, by not later than the long stop date:
10.1.1 the unconditional approval of the scheme (or substitute offer, where
relevant) by the relevant Competition Authorities in South Africa,
Zimbabwe, Swaziland and/or Namibia, or if such approval is
conditional, then on such conditions as may be acceptable to the
parties affected thereby;
10.1.2 the unconditional approval of the scheme (or substitute offer, where
relevant) by the JSE;
10.1.3 the unconditional approval of the scheme (or substitute offer, where
relevant) by the SRP (including, inter alia, approval by the SRP of
the BBP offer);
10.1.4 any other regulatory approvals as may be necessary to give effect to
the scheme (or substitute offer, where relevant), including, without
limitation, such approvals as may be required from the South African
Reserve Bank (which approvals shall be unconditional or on such
conditions as may be acceptable to the parties affected thereby);
10.1.5 the execution of the share purchase agreement and that agreement
becoming unconditional;
10.1.6 Glenrand, not having undertaken or allowed to occur any unusual
corporate action or frustrating action as described in Rule 19 of the
Code, including, but not limited to, any declaration of any unusual or
unplanned dividends, without the consent of Aon;
10.1.7 in respect of the scheme only:
10.1.7.1 the scheme being approved by a majority representing not less than
three-fourths of the votes exercisable by the scheme participants
present and voting, either in person or by proxy, at the scheme
meeting;
10.1.7.2 to the extent still required by law, the sanctioning of the scheme by
the South Gauteng High Court ("court"); and
10.1.7.3 to the extent still required by law, a certified copy of the Order of
Court sanctioning the scheme being registered by the Companies and
Intellectual Properties Registration Office in terms of the Companies
Act; and
10.1.8 no material adverse change such as would be likely to have a material
adverse effect on the company, its operations, reputation and/or the
earnings potential of the company, having occurred prior to the
operative date. For the purposes of determining a material adverse
change, there should be an adverse effect or potential adverse effect
of R60,000,000 or more upon the revenues or net asset value of
Glenrand, which for the purposes hereof will be calculated in a manner
consistent with that used in the most recent published audited results
of Glenrand as at 30 September 2010.
11 OPINIONS AND RECOMMENDATIONS
11.1 In terms of the Code, the Glenrand board is required to obtain appropriate
external advice as to how the offer will affect Glenrand shareholders, and
the substance of such advice must be made known to Glenrand shareholders.
11.2 The Glenrand board has appointed PricewaterhouseCoopers Corporate Finance
(Proprietary) Limited ("PWC") on an independent basis to advise the
Glenrand board as to the fairness of the terms of the offer from a
financial point of view.
11.3 PWC`s full report as well as the recommendation of the Glenrand board to
Glenrand shareholders will be included in the scheme circular to be sent to
Glenrand shareholders in relation to the offer.
12 Salient dates and times and documentation
12.1 Further announcements, containing such further information as may be
relevant, including the salient dates and times of the scheme, will be made
by Glenrand in due course.
12.2 A scheme circular, providing further information on the offer, and
containing, inter alia, a notice of scheme meeting, an order of court, a
form of proxy for the scheme meeting and a form of surrender and transfer,
will be posted to Glenrand shareholders in due course.
13 Withdrawal of cautionary announcement
Glenrand shareholders are advised that, as a result of the publication of
this announcement, caution is no longer required when dealing in Glenrand
securities.
9 December 2010
Randburg
Corporate Advisor and Transactional Sponsor to Glenrand
Sasfin Capital
A division of Sasfin Bank Limited
Legal Advisor to Glenrand
Deneys Reitz Inc.
Independent Financial Advisor to the Glenrand Board
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited
Sponsor to Glenrand
Nedbank Capital
Corporate Advisor to Aon
Grindrod Bank Limited
Legal Advisor to Aon
Edward Nathan Sonnenbergs Inc.
Financial and Tax Due Diligence Advisor to Aon
Deloitte
Date: 09/12/2010 11:30:01 Produced by the JSE SENS Department.
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