| Thu 19 May 2011, 11:50 | | MTL - Mercantile Bank Holdings Limited - Company Announcement |
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MTL
MTL
MTL - Mercantile Bank Holdings Limited - Company Announcement
Mercantile Bank Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1989/000164/06)
Share code: MTL ISIN: ZAE000064721
("Mercantile")
ACQUISITION BY MERCANTILE OF 51% OF THE ISSUED SHARE CAPITAL OF AN INSURANCE
BROKING BUSINESS, MULTI RISK INVESTMENT HOLDINGS (PROPRIETARY) LIMITED
("MULTIRISK" OR "THE ACQUISITION") AND THE WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
The directors of Mercantile are pleased to announce that Mercantile have
entered into an agreement with Syndicate Investments (Proprietary) Limited,
Izarox Investments (Proprietary) Limited, Stephen Eugene Wiseman and
Michael James Raymond (collectively, "the Sellers") to acquire 51% of the
issued share capital of MultiRisk for an amount of R 51million (fifty one
million rand) ("the Purchase Price").
2. MULTIRISK - BRIEF COMPANY PROFILE
Multi Risk Investment Holdings (Proprietary) Limited ("MultiRisk") holds
87.3% of the issued share capital of Commrisk Insurance Brokers
(Proprietary) Limited ("Commrisk"), a national commercial insurance
brokerage licensed in accordance with the Long Term- and the Short Term
Insurance Acts and registered as a Financial Services Provider in terms of
the requirements of the Financial Advisory and Intermediary Services Act.
3. SALIENT FEATURES OF THE TRANSACTION
MultiRisk currently makes an after tax profit of approximately R
13,5million which would equate to a return on equity of approximately 13%
per annum on the R 51million investment. The Sellers have warranted certain
levels of profits to Mercantile over the next 4 years. If the warranted
profits are not achieved the purchase price will be adjusted accordingly.
The tangible Net Asset Value of the Acquisition as at the effective date is
estimated to be R 5million.
The effective date of the acquisition is 1 July 2011 or such later date as
the parties may agree in writing. The purchase price will be settled in
cash, with 90% of the purchase price payable on the effective date and the
balance within 90 days thereof.
4. RATIONALE OF THE TRANSACTION
The parties to the transaction recognise the scale of potential business
opportunities such a relationship presents, as Mercantile and MultiRisk
have different and complementary strengths. Leverage from the combined
strengths will result in developing new revenue opportunities for
Mercantile and MultiRisk.
5. CONDITIONS PRECEDENT
The Acquisition is subject to the following conditions precedent:
- Regulatory approvals by the South African Reserve Bank and the
Financial Services Board;
- Compliance by the Sellers with the issues identified in the due
diligence investigation conducted by Mercantile;
- Signature by all shareholders of a shareholders` agreement; and
- Finalisation of group audited financial statements of MultiRisk.
6. FINANCIAL EFFECTS OF THE ACQUISITION
The unaudited pro forma financial effects of Mercantile before and after
the acquisition are based on the audited results of Mercantile for the year
ended 31 December 2010. The unaudited financial effects are presented for
illustrative purposes only, to provide information on how the acquisition
may have impacted on the results and financial position of Mercantile. The
unaudited pro forma financial effects are the responsibility of
Mercantile`s directors. Due to the nature of the unaudited pro forma
financial effects, they may not fairly present Mercantile`s financial
position and the results of its operations after the acquisition. It has
been assumed for the purpose of the financial effects that the acquisition
took place with effect from 1 January 2010. The financial effects do not
purport to be indicative of what the financial results would have been, had
the acquisition been implemented on a different date. The unaudited pro
forma financial information has been presented in a manner consistent in
all respects with IFRS and Mercantile`s accounting policies applied
consistently throughout the period.
The financial effects of the acquisition are set out below:
Before the After the % change
acquisition acquisition
Amount Amount
Basic earnings per share (EPS) (cents) 2.6 2.7 5.0
Diluted earnings per share (EPS) (cents) 2.6 2.7 5.0
Headline earnings per share (HEPS) 2.6 2.7 5.0
(cents)
Diluted headline earnings per share 2.5 2.7 5.0
(HEPS) (cents)
Net asset value per share (NAV) (cents) 39.4 39.5 0.3
Tangible net asset value (TNAV) (cents) 33.6 32.5 -3.3
Shares in issue (million) 3 912 3 912 0.0
Weighted average number of shares in 3 911 3 911 0.0
issue (million)
Diluted weighted average number of 3 935 3 935 0.0
shares in issue (million)
Notes:
1. The "% Change" column of the table is the result of the actual
calculations whereas the "Before" and "After" columns of the table are
rounded figures, as reflected in the annual financial statements of
Mercantile for the financial year ended 31 December 2010.
2. The EPS and HEPS in the "Before" column of the table are based on the
audited statement of comprehensive income of Mercantile for the
financial year ended 31 December 2010 and 3 911 254 874 Mercantile
shares in issue (being the weighted number of ordinary shares in issue
for the year ended 31 December 2010, net of treasury shares).
3. The Diluted EPS and HEPS in the "Before" column of the table are based
on the audited statement of comprehensive income of Mercantile for the
financial year ended 31 December 2010 and 3 935 364 874 Mercantile
shares in issue (being the weighted diluted number of ordinary shares
in issue for the year ended 31 December 2010)
4. The EPS and HEPS in the "After" column of the table are based on 3 911
254 874 Mercantile ordinary shares in issue and the assumptions that:
- the acquisition became effective on 1 January 2010 and the
purchase price was settled on that date;
- the purchase price was settled in cash; and
- the cash was invested on the Money Market at an after tax rate of
3.6%, yielding an annual after tax interest of R1 836 000.
5. The Diluted EPS and HEPS in the "After" column of the table are based
on 3 935 364 874 Mercantile ordinary shares in issue and the
assumptions that:
- the acquisition became effective on 1 January 2010 and the
purchase price was settled on that date;
- the purchase price was settled in cash; and
- the cash was invested on the Money Market at an after tax rate of
3.6%, yielding an annual after tax interest of R1 836 000.
6. The NAV per share and TNAV per share in the "Before" column of the
table are based on the audited balance sheet of Mercantile at 31
December 2010 and 3 911 254 874 Mercantile shares in issue.
7. The NAV per share and TNAV per share in the "After" column of the
table are based on the assumptions that the acquisition was completed
on 1 January 2010.
8. The pro forma financial effects have not been reviewed by Mercantile`s
auditors.
7. ARTICLES OF ASSOCIATION
Mercantile undertakes that the Articles of Association of the Acquisition
will conform to Schedule 10 of the Listings Requirements of the JSE, as
required.
8. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Following the disclosure of financial effects of the acquisition,
shareholders are no longer required to exercise caution when dealing in
their Mercantile shares and accordingly, the cautionary announcement
renewal released by Mercantile on 18 April 2011 is hereby withdrawn.
Johannesburg
19 May 2011
Sponsor Bridge Capital Advisors (Pty) Limited
Date: 19/05/2011 11:50:42 Produced by the JSE SENS Department.
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