| Fri 21 Jan 2011, 17:44 | | GEN - General - Statement by Kansai Paint Co. Ltd. in response to the circular |
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JSE
GEN
GEN - General - Statement by Kansai Paint Co., Ltd. in response to the circular
to Freeworld shareholders published by the board of directors of Freeworld on 17
January 2011
Kansai Paint Co., Ltd.
(Incorporated in Japan)
(Registration number 1402-01-001093)
(Tokyo Stock Exchange share code: 4613)
(ISIN: JP3229400001)
("Kansai")
Highlights:
- FREEWORLD BOARD CONSIDERS KANSAI`S OFFER PRICE TO BE FAIR AND REASONABLE
- ADDITIONAL IRREVOCABLE UNDERTAKING OBTAINED FROM ANOTHER KEY SHAREHOLDER SINCE
PUBLICATION OF THE FREEWORLD BOARD`S RESPONSE
- KANSAI`S OFFER NOW HAS SUPPORT FROM FREEWORLD SHAREHOLDERS REPRESENTING 68.1%
OF THE OFFER SHARES
- KANSAI`S OFFER, IF IMPLEMENTED, TO HAVE A POSITIVE IMPACT ON FREEWORLD, ITS
EMPLOYEES AND SOUTH AFRICA
- FREEWORLD BOARD APPEARS INTENT ON OBSTRUCTING KANSAI`S OFFER
Kansai hereby responds, for the benefit of Freeworld`s shareholders, employees
and wider stakeholders, to certain aspects of the circular to Freeworld
shareholders published by the Freeworld board on 17 January 2011 ("Freeworld
board circular").
Definitions found on pages 9 to 12 of Kansai`s circular to Freeworld
shareholders dated 15 December 2010 ("Kansai`s circular") have been used in this
announcement. Copies of Kansai`s circular can be found at
http://www.Kansai.co.jp/global_site/ir/offer_documents/index.html.
1. FREEWORLD BOARD CONSIDERS KANSAI`S OFFER PRICE TO BE FAIR AND REASONABLE
Freeworld`s external advisor, Deutsche Securities (SA) (Proprietary) Limited
("the external advisor"), has expressed the opinion that Kansai`s offer price is
fair and reasonable, and the Freeworld board has agreed with this opinion.
In this regard, Kansai notes the following:
the offer price of R12.00 per Freeworld share is in the upper-half of the
valuation range of R10.70 to R13.00 per Freeworld share expressed by the
external advisor; and
in determining the offer price, Kansai considered the likely time period to
achieving the necessary levels of acceptances from Freeworld shareholders and
approvals from all relevant regulatory authorities.
2. ADDITIONAL IRREVOCABLE UNDERTAKING OBTAINED FROM ANOTHER KEY SHAREHOLDER
SINCE PUBLICATION OF THE FREEWORLD BOARD`S RESPONSE
Kansai announces that, notwithstanding the publication of the Freeworld board
circular, it has received further support for the offer from Stanlib Asset
Management Limited ("Stanlib"), which has provided Kansai with an irrevocable
undertaking ("the Stanlib undertaking") to accept the offer in respect of 10 682
148 Freeworld shares (representing 5.24% of the Freeworld shares in issue and
7.23% of the offer shares), and to recommend to its clients to accept the offer
in respect of 3 640 974 Freeworld shares (representing 1.79% of the Freeworld
shares in issue and 2.47% of the offer shares).
A copy of the Stanlib undertaking will be available for inspection at the
offices of Bowman Gilfillan Inc. in Johannesburg during normal business hours
from 21 January 2011, up to and including the closing date.
Stanlib has confirmed that:
(i) as at the date of this announcement, it owns or controls no shares in the
share capital of Kansai and 14,323,122 Freeworld shares; and
(ii) for the period beginning six months prior to the start of the offer period
and ending on the date of this announcement, it has not dealt for value in
shares in the share capital of Kansai and, as a net seller, has dealt for value
in the following Freeworld shares:
NET NUMBER OF
DATE AVERAGE PRICE FREEWORLD SHARES SOLD
15 June 2010 to 21 January 2011 R10.89 1,246,046
3. KANSAI`S OFFER NOW HAS SUPPORT FROM FREEWORLD SHAREHOLDERS REPRESENTING 68.1%
OF THE OFFER SHARES
Kansai had previously advised that it had obtained strong support for the offer
from amongst Freeworld`s largest shareholders, and outlined in Kansai`s circular
the irrevocable undertakings to accept the offer, or to recommend to clients
acceptance of the offer, from certain fund managers representing in aggregate
approximately 42.3% of the Freeworld shares in issue and 58.4% of the offer
shares.
Together with the Stanlib undertaking, Kansai has now obtained in aggregate
irrevocable undertakings to accept the offer, or to recommend to clients
acceptance of the offer, from certain fund managers representing approximately
49.4% of the Freeworld shares in issue and 68.1% of the offer shares. Kansai
already owns 27.56% of the issued share capital of Freeworld.
4. KANSAI`S OFFER, IF IMPLEMENTED, TO HAVE A POSITIVE IMPACT ON FREEWORLD, ITS
EMPLOYEES, AND SOUTH AFRICA
Contrary to the assertions made in the Freeworld board circular regarding the
impact of Kansai`s offer on Freeworld`s business and, more generally, South
Africa, Kansai refers Freeworld shareholders and other interested parties to
sections 2.5 ("Benefits of the offer for Freeworld"), 9 ("Benefits for the South
African Economy and South Africa"), 10 ("Kansai`s intentions regarding
Freeworld, the Freeworld management and the Board of Directors of Freeworld")
and 11 ("Competition aspects of the offer and public interest gains and pro-
competitive gains") of Kansai`s circular, as well as the summary of the
anticipated benefits below.
Benefits for Freeworld:
supplement its product portfolio to enhance its offerings in heavy duty and
protective coatings;
broaden Freeworld`s industrial coatings product portfolio;
provide Freeworld with access to Kansai`s automotive coatings technology; and
act as Kansai`s platform for development in South Africa and more broadly in
Africa (supported by the proposed expansion of Freeworld`s R&D centre).
Benefits for Freeworld management and employees:
provision of financial and operational support to enable Freeworld`s management
and employees to grow Freeworld`s business;
career development opportunities within the geographically diverse businesses
of Kansai in India, the Middle East, South-East Asia, China and Japan; and
extension of Kansai`s international exchange and training programmes into
Freeworld.
Benefits for South Africa:
increased local employment resulting from a likely long-term increase in the
volume of locally manufactured coatings products;
enhanced product offerings to users of coatings products in South Africa;
and
significant foreign direct investment into South Africa, consistent with the
South African government`s initiatives to:
(i) establish South Africa as the "Gateway into Africa";
(ii) further develop South Africa`s broader automotive industry (for example, as
set out in Toyota`s recently announced new investment in South Africa); and
(iii) more broadly enhance skills and create jobs within the South African
economy.
5. FREEWORLD BOARD APPEARS INTENT ON OBSTRUCTING KANSAI`S OFFER
"The Freeworld board does not recommend the offer in all respects..."
Freeworld CE Andre Lamprecht, as quoted in the Business Day on 20 January 2011
Notwithstanding:
the external advisor`s fair and reasonable opinion;
the Freeworld board`s own opinion that Kansai`s offer price is fair and
reasonable;
irrevocable undertakings from shareholders holding more than two thirds of the
offer shares; and
the likely positive impact of Kansai`s offer on Freeworld, its employees and
South Africa,
the Freeworld board seems intent on obstructing the acceptance of Kansai`s offer
by Freeworld`s shareholders instead of using every endeavour to ensure that the
offer proceeds to successful completion.
In the Freeworld board circular, arguments around competition issues and the
offer timetable are raised which seek to undermine the validity of Kansai`s
ability to complete its offer. Kansai believes that these are assertions without
foundation:
5.1 Use of competition law and public interest concerns to question the merits
of the proposed merger:
On 21 January 2011, Kansai submitted to the Competition Commission its merger
filing in relation to the proposed acquisition of Freeworld in order to obtain
the required approvals, and will actively co-operate with the competition
authorities in this regard. In that filing, Kansai demonstrates that the
implementation of the offer will result in significant pro-competitive and
public interest gains. In this regard, Kansai notes that:
The majority of Freeworld`s turnover is generated from the manufacture and sale
of decorative coatings. Kansai`s interest in Freeworld relates primarily to this
aspect of its business. Kansai does not supply decorative coatings in South
Africa and, absent the offer, had no plans to enter the South African market.
The remainder of Freeworld`s turnover is generated from its Performance
Coatings segment, of which only a part relates to automotive coatings. There are
two distinct categories of automotive coatings, namely, those supplied to
original equipment manufacturers ("OEMs") and those supplied to panel beaters
and body shops ("refinish automotive coatings").
Kansai does not supply refinish automotive coatings in South Africa and, absent
the offer, had no plans to enter that South African market segment.
The only area of pontential overlap in the activities of Kansai and Freeworld
is in respect of OEM automotive coatings. However, properly analysed, the
transaction is primarily vertical in nature and is likely to result in
significant pro-competitive gains.
Kansai believes public interest benefits will flow from the proposed merger:
(i) At this time, Kansai sees no need for and has no plans to close any of
Freeworld`s manufacturing capacity or retrench Freeworld employees. In fact,
Kansai anticipates that local manufacturing is likely to increase in due course
as a result of its plans to introduce new products into South Africa and sub-
Saharan Africa;
(ii) Kansai also intends to establish research and development facilities in
South Africa to enhance Freeworld`s innovation capability based on Kansai`s
technology portfolio; and
(iii) Kansai`s plans are aligned with the South African government`s policy to
attract foreign investment, enhance development of the motor industry and make
South Africa a hub for investment into sub-Saharan Africa.
5.2 Freeworld board appeal to the SRP regarding the timing and structure of the
offer:
The Freeworld board has argued that the structure and timing of the offer may
impact the ability and freedom of Freeworld shareholders to make an informed
decision within a reasonable time, and that Freeworld shareholders are
accordingly being treated unfairly. Kansai considers such arguments to be
without merit for, amongst other things, the following reasons:
(i) Kansai`s circular, including the timetable contained therein, was structured
to comply with the rules, guiding principles and practical application of the
SRP Code, and was accordingly approved by both the SRP and JSE prior to its
publication;
(ii) It is market practice for offers to be approved and/or accepted by
shareholders (as the primary decision makers in respect of offers) in advance of
competition approvals being granted;
(iii) The extent of irrevocable undertakings given in respect of Kansai`s offer
(including its timetable) is further evidence of the acceptability of the
timetable to Freeworld shareholders;
(iv) Freeworld shareholders will have been given more time than the minimum
required by the SRP Code (51 days rather than 21 days) in which to consider the
offer prior to it being declared unconditional as to acceptances, with an
additional 14 days prior to closing, and thus the suggestion that Freeworld
shareholders have not had "reasonable time" to consider the offer is not borne
out by the facts; and
(v) No alternative offers have come forward for Freeworld, despite Kansai`s
interest in Freeworld being known to the market well before the announcement of
the offer.
6. CONCLUSION
Kansai`s offer price is fair and reasonable and provides Freeworld shareholders,
as the primary decision-makers in respect of Kansai`s offer, with the
opportunity to realise significant and attractive value for their Freeworld
shares.
Kansai`s offer already enjoys support from amongst Freeworld`s largest
shareholders, as evidenced by the irrevocable undertakings to accept the offer,
or to recommend to clients acceptance of the offer, from certain fund managers
representing in aggregate approximately 49.4% of the Freeworld shares in issue
and 68.1% of the offer shares.
Notwithstanding:
the external advisor`s fair and reasonable opinion;
the Freeworld board`s own opinion that Kansai`s offer price is fair and
reasonable;
irrevocable undertakings from shareholders holding more than two thirds of the
offer shares; and
the likely positive impact of Kansai`s offer on Freeworld, its employees and
South Africa,
the Freeworld board seems intent on obstructing the acceptance of Kansai`s offer
by Freeworld`s shareholders instead of using every endeavour to ensure that the
offer proceeds to successful completion.
7. RESTRICTED JURISDICTIONS
Kansai`s offer is not being made, directly or indirectly, in or into, or by use
of the mails of, or by any means or instrumentality (including, without
limitation, telephonically or electronically) of interstate or foreign commerce
of, or any facility of the national securities exchanges of, Australia, Canada,
Japan or the United States of America, or any other jurisdiction if it is
illegal for the offer to be made or accepted in that jurisdiction ("a restricted
jurisdiction") and the offer cannot be accepted by any such use, means,
instrumentality or facility or from within a restricted jurisdiction.
Accordingly, copies of this announcement are not being nor may be mailed or
otherwise distributed or sent in or into or from a restricted jurisdiction.
8. RESTRICTIONS ON SALE AND TRADE
Offerees are advised that should they notify their Central Securities Depository
Participants ("CSDPs") or brokers, as the case may be, of their acceptance of
the offer, in the case of dematerialised shareholders, or should they surrender
documents of title and accept the offer, in the case of certificated
shareholders, for their offer shares on or before the closing date of Friday, 18
February 2011, or any revised closing date, they are not permitted to sell or
trade their offer shares until the date the contract of sale and purchase
contemplated by the offer does not come into effect due to the conditions not
being fulfilled and, in the case of certificated shareholders, the documents of
title are returned.
9. DIRECTORS` RESPONSIBILITY STATEMENT
The board of directors of Kansai, having considered all information contained in
this announcement, accepts full responsibility for the accuracy of such
information and certifies that, to the best of its knowledge and belief (having
taken all reasonable care to ensure that this is the case), the information
contained in this document is in accordance with the facts and that nothing that
is likely to affect the import of this information has been omitted.
Enquiries
Kansai Nomura Newman Lowther & Associates
Nauman Malik Andrew McNaught Jan Newman
Head of Corporate Strategy +44 (0)207 102 3475 +27 (0)21 673 7000
+603 3341 5333 Jason Hutchings Ben Lowther
+44 (0)207 102 1699 +27 (0)21 673 7000
Financial Dynamics
Grant Henry, +27 (0)11 214 2406 or +27 (0)82 561 7172
Ravin Maharaj, +27 (0)11 214 2410 or +27 (0)83 447 5158
Financial advisors
NOMURA
NEWMAN LOWTHER & ASSOCIATES
Legal advisors
BOWMAN GILFILLAN ATTORNEYS
PR advisors
FD
Date: 21/01/2011 17:44:03 Produced by the JSE SENS Department.
