| Wed 15 Dec 2010, 16:20 | | REM - Remgro Limited - Terms Announcement |
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REM
REM
REM - Remgro Limited - Terms Announcement
Remgro Limited
(Incorporated in the Republic of South Africa)
(Registration number 1968/006415/06)
(ISIN: ZAE000026480)
(Share code: REM)
("Remgro" or "the Company")
TERMS ANNOUNCEMENT RELATING TO THE TRANSFER OF:
- FirstRand shares to RMBH, in exchange for RMBH shares;
- FirstRand and MMI Holdings shares to the Founders of RMBH, in exchange for
RMBH shares; and
- Remgro`s interest in MMI Holdings to RMI Holdings, in exchange for RMI
Holdings` shares.
1. Introduction
Remgro shareholders are referred to the detailed terms announcement published
today by its 25% held associate, RMB Holdings Limited ("RMBH") (the "RMBH
Announcement").
In that announcement RMBH advised its shareholders that its directors had
resolved to embark on a restructuring and re-alignment of its investment
portfolio to enhance shareholder value through the creation of separate,
focussed insurance and banking entities. This separation of RMBH`s insurance
and banking interests will be effected through the transfer of RMBH`s
insurance assets to a newly incorporated wholly-owned subsidiary of RMBH,
Main Street 796 Limited, which will be renamed Rand Merchant Insurance
Holdings Limited, ("RMI Holdings"), in exchange for RMI Holdings shares. RMI
Holdings will subsequently be unbundled to RMBH shareholders ("the RMI
Unbundling") and separately listed on the securities exchange operated by the
JSE Limited ("JSE").
RMBH`s portfolio of strategic investments in South African financial services
groups comprises:
- MMI Holdings Limited ("MMI Holdings") (18%), Discovery Holdings Limited
("Discovery")(25%), FirstRand STI Holdings Limited ("OUTsurance") (45%), and
RMB-SI Holdings Limited ("RMB-SI") (76%); and
- FirstRand (30%), owner of inter alia First National Bank, Rand Merchant
Bank, WesBank and 45% of OUTsurance.
RMBH further advised its shareholders of the terms of the agreements reached
with Remgro relating to the following restructuring steps:
- the acquisition by RMBH of additional FirstRand ordinary shares from
Financial Securities Limited ("FSL"), a wholly-owned subsidiary of Remgro, in
exchange for the issue of new RMBH ordinary shares (the "RMBH FirstRand
Exchange"); and
- the acquisition by RMI Holdings, post the RMI Unbundling, of additional MMI
Holdings ordinary shares from FSL, in exchange for the issue to FSL of new
RMI Holdings ordinary shares (the "RMI MMI Exchange").
In addition, shareholders are referred to the joint announcement published on
SENS on 23 December 2009, by FirstRand Limited ("FirstRand") and RMBH. In
that announcement RMBH and FirstRand advised their shareholders of a private
transaction in terms of which a group of RMBH and FirstRand Directors,
comprising Messrs GT Ferreira, LL Dippenaar and PK Harris ("the Founders")
agreed to dispose of RMBH and FirstRand ordinary shares to a group of senior
executives at RMBH and FirstRand (the "Group Executives") at a price based on
the 30 day volume weighted average prices ("VWAP") in the middle of October
2009 (the "Founders` Disposal"). It was indicated in this announcement that
the Founders would, to the extent that there is an imbalance between the
shares being sold by them and the shares being acquired by the Group
Executives at implementation of the Founders` Disposal, sell RMBH shares and
acquire additional FirstRand shares in the market.
As such the Founders have reached agreement with Remgro to acquire from
Remgro, that number of FirstRand ordinary shares to be delivered under the
Founders` Disposal, together with MMI Holdings ordinary shares (refer
paragraph 3.3 below) (the "Founders` Disposal Shares"), in exchange for RMBH
ordinary shares (the "Founders` FirstRand Exchange").
The RMBH FirstRand Exchange, the RMI MMI Exchange and the Founders` FirstRand
Exchange (collectively the "Remgro Transactions") are each subject to certain
conditions, which are detailed in paragraph 7 below.
The RMBH FirstRand Exchange and the RMI MMI Exchange will be implemented as
"asset-for-share transactions" in terms of section 42 of the Income Tax Act,
1962.
The purpose of this announcement is to provide Remgro shareholders with the
salient terms and conditions of the Remgro Transactions.
2. Rationale for the Remgro Transactions
2.1. Rationale for the RMBH FirstRand Exchange and the Founders` FirstRand
Exchange
Remgro believes that the RMBH FirstRand Exchange and the Founders` FirstRand
Exchange provide an opportune time to consolidate its investment in FirstRand
through the RMBH entry point.
2.2. Rationale for the RMI MMI Exchange
Following the transfer of RMBH`s insurance interests into RMI Holdings, RMI
Holdings will own 18% of MMI Holdings. In order to prevent potential
structural value traps, RMI Holdings intends to increase this stake to more
than 25% over time and Remgro as a material shareholder believes it is
beneficial to facilitate the achievement of such objective through the RMI
MMI Exchange. Remgro is further of the view that the portfolio of assets
owned by RMI Holdings is an attractive investment.
3. Details of the Remgro Transactions
3.1. The RMBH FirstRand Exchange
The RMBH FirstRand Exchange will result in Remgro holding an effective 31.4%
interest in RMBH. It is intended that the RMBH FirstRand Exchange will take
place in two stages:
- Prior to the RMI Unbundling, RMBH will purchase from FSL that number of
ordinary shares in FirstRand which, after the issue of new fully paid
ordinary shares in RMBH (the "First Consideration Shares") to FSL and the
implementation of the RMI MMI Exchange will result in FSL holding 34.9% of
the ordinary shares in RMI Holdings (the "First RMBH FirstRand Exchange").
- Post the RMI Unbundling, RMBH will purchase from FSL that number of further
ordinary shares in FirstRand (the "Second Sale Shares") which, after the
implementation of such acquisition and the First RMBH FirstRand Exchange will
result in FSL holding no more than 34.9% of the ordinary shares in RMBH and
RMBH holding 33.9% of the ordinary shares in FirstRand (the "Second RMBH
FirstRand Exchange"). In consideration for the Second Sale Shares, RMBH
shall issue to FSL new fully paid ordinary shares in RMBH (the "Second
Consideration Shares").
The First Consideration Shares and Second Consideration Shares will be
determined in accordance with a formula based on net asset values ("NAV") of
RMBH, utilising 15 day VWAPs for the listed underlying assets of RMBH, and
the 15 day VWAP of FirstRand, as at the date on which the last of the
suspensive conditions to the First RMBH FirstRand Exchange, as set out in the
RMBH announcement, are fulfilled (the "Pricing Date").
3.2. The RMI MMI Exchange
In terms of the RMI MMI Exchange, RMI Holdings will acquire 105,608,098 MMI
Holdings ordinary shares from FSL in consideration for which RMI Holdings
will allot and issue to FSL that number of RMI Holdings ordinary shares which
will be determined in accordance with a formula based on the NAV of RMI
Holdings, utilising 15 day VWAPs for the listed underlying assets of RMI
Holdings, and the 15 day VWAP of MMI Holdings, as at the Pricing Date.
3.3. The Founders` FirstRand Exchange
The Founders require 20,543,977 FirstRand ordinary shares to deliver in terms
of the Founders` Disposal. As such Remgro will dispose such number of
FirstRand ordinary shares to the Founders in exchange for 12,112,707 RMBH
ordinary shares beneficially held by the Founders. The exchange was
determined based on the 15 day VWAPs of FirstRand (R21.16) and RMBH (R35.88)
as at 3 December 2010. At such date FirstRand was trading cum entitlement to
MMI Holdings ordinary shares and as such, Remgro will deliver to the
Founders, the 20,543,977 FirstRand ordinary shares as well as 3,467,125 MMI
Holdings` ordinary shares (refer to FirstRand`s website www.firstrand.co.za
for details on the FirstRand unbundling of MMI Holdings).
4. Small related party transaction
Two of the Founders, Messrs GT Ferreira and PK Harris are currently directors
of Remgro ("Founder Directors") and as such are classified as related parties
to Remgro in terms of the Listings Requirements of the JSE (the "JSE Listings
Requirements"). The value of the shares disposed by Remgro to the Founder
Directors accounts for 0.45% of Remgro`s current market capitalisation. As a
result, the Founders` FirstRand Exchange relating to the Founder Directors is
considered a small related party transaction.
Messrs GT Ferreira and PK Harris are entitled to 43% and 14%, respectively,
of the total number of FirstRand and MMI Holdings ordinary shares to be
received by the Founders under the Founders` FirstRand Exchange.
In accordance with the relevant provisions of the JSE Listings Requirements,
Remgro has appointed KPMG Services (Proprietary) Limited ("KPMG") as the
independent expert (subject to the approval of the JSE) to advise the Remgro
shareholders on whether the terms and conditions of the related party
transactions are fair to Remgro shareholders. Such opinion will be made
available for inspection by shareholders at the registered offices of Remgro.
The effective date of the Founders` FirstRand Exchange is expected to be 31
January 2011.
5. Indicative shareholdings
The indicative economic interests that Remgro will hold after the
implementation of the Remgro Transactions, based on the formulas contemplated
above applied to market data as at the trading day prior to the date of this
announcement are as follows:
RMBH 31.4%
RMI Holdings 34.9%
FirstRand 3.9%
6. Pro-forma financial effects of the Remgro Transactions
The table below sets out the unaudited pro forma financial effects of the
Remgro Transactions based on the unaudited results of Remgro for the six
months ended 30 September 2010.
The unaudited pro forma financial effects of Remgro are the responsibility of
the Remgro directors and has been prepared for illustrative purposes only to
provide information about how the transaction might have affected the
historical financial information of Remgro. Due to their nature, the
unaudited pro forma financial effects may not be a fair reflection of
Remgro`s financial position after the implementation of the transaction, nor
of its future earnings.
Unaudited Unaudited
before the Change after the
Remgro due to the Remgro %
transaction Transaction(2 transaction Change
Earnings per share
("EPS") (cents) 468.8 933.6 1,402.4 199.1
Headline EPS (cents)
430.2 (22.6) 407.6 (5.3)
Diluted EPS (cents)
451.8 899.7 1,351.5 199.1
Diluted headline EPS
(cents) 413.5 (21.7) 391.8 (5.3)
Net asset value per
share (Rand) 84.97 9.6 94.52 11.2
Net tangible asset value
per share (Rand) 84.27 9.6 93.82 11.3
Number of shares in
issue (million) 513.3 - 513.3 -
Weighted number of
shares (million) 513.0 - 513.0 -
Diluted weighted number
of shares (million) 514.5 - 514.5 -
Notes:
1. The unaudited pro forma financial effects are prepared on the assumption
that the Remgro Transactions were effective 1 April 2010 for purposes of the
effects on earnings and 30 September 2010 for purposes of effects on net
asset value.
2. Represents the unaudited pro forma financial effects of the following
transactions:
i. The reversal of Remgro`s portion of both FirstRand`s and RMBH`s earnings
for the six months to 30 June 2010 as previously accounted for;
ii. The unbundling by FirstRand of MMI Holdings shares to its shareholders;
iii. The Remgro Transactions as set out in detail in the terms announcement;
iv. The unbundling by RMBH of RMI Holdings to its shareholders;
v. Accounting for Remgro`s portion of the pro forma earnings of FirstRand,
RMBH and RMI Holdings for the six months to 30 June 2010 by applying Remgro`s
indicative shareholdings in these entities after completion of the
transactions referred to above;
vi. Tax consequences relating to the Remgro Transactions.
7. Conditions precedent
The Remgro transactions will be subject to the following suspensive
conditions being fulfilled or waived by no later than 17:00 on 31 March 2011
(or such later date as the parties to the respective agreements may agree in
writing):
7.1. The First RMBH FirstRand Exchange
The First RMBH FirstRand Exchange will be subject to the following suspensive
conditions:
- The issue of shares by RMBH to Royal Bafokeng Holdings (Proprietary)
Limited, for cash (the "Royal Bafokeng Placement") having been implemented;
- RMBH having obtained the approval, by ordinary resolution, of its
shareholders for the RMI Unbundling;
- RMBH having obtained the approval, by ordinary resolution, of its
shareholders, for the placing of sufficient authorised but unissued ordinary
shares in RMBH under the control of its directors in order to give effect to
the RMBH FirstRand Exchange, pursuant to the provisions of section 221 of the
Companies Act, 61 of 1973;
- RMBH having obtained the approval, by ordinary resolution, of its
shareholders, excluding FSL, for the RMBH FirstRand Exchange and the RMI MMI
Exchange, in compliance with paragraphs 10.4(d) and 10.4(e) of the JSE
Listings Requirements; and
- RMBH obtaining advice from an independent expert acceptable to the JSE that
the RMBH FirstRand Exchange and the RMI MMI Exchange are fair insofar as the
shareholders of RMBH are concerned, in compliance with paragraph 10.4(f) of
the JSE Listings Requirements.
7.2. The Second RMBH FirstRand Exchange
The Second RMBH FirstRand Exchange will be subject to the following
suspensive conditions:
- the implementation of the First RMBH FirstRand Exchange and RMI Unbundling;
and
- RMI Holdings` ordinary shares having been listed on the JSE.
7.3. The RMI MMI Exchange
The RMI MMI Exchange will be subject to the following suspensive conditions:
- the implementation of the Second RMBH FirstRand Exchange; and
- RMI Holdings having obtained the approval, by ordinary resolution, of its
shareholders, for the placing of sufficient authorised but unissued ordinary
shares in RMI Holdings under the control of its directors, in order to give
effect to the RMI MMI Exchange, pursuant to the provisions of section 221 of
the Act.
7.4. The Founders` FirstRand Exchange
The Founder`s FirstRand Exchange will be subject to:
- Remgro obtaining advice from an independent expert acceptable to the JSE
that the Founders` FirstRand Exchange is fair insofar as the shareholders of
Remgro are concerned, in compliance with paragraph 10.7(b) of the JSE
Listings Requirements.
15 December 2010
Merchant bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Legal advisors
DLA Cliffe Dekker Hofmeyr Inc
Date: 15/12/2010 16:20:01 Produced by the JSE SENS Department.
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