| Thu 15 Feb 2001, 0:00 | | De Beers Consolidated Mines Ltd - Detailed Caution |
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DETAILED CAUTIONARY ANNOUNCEMENT
DB Investments societe anonyme
RC Luxembourg No: B 78 985
Incorporated under the laws of Luxembourg
De Beers Consolidated Mines Limited
1888/000007/06
Incorporated in the Republic of South Africa
De Beers Centenary AG
Incorporated under the laws of Switzerland
DETAILED CAUTIONARY ANNOUNCEMENT
US$17,6 BILLION RECOMMENDED OFFER FOR DE BEERS
15 February 2001
Not for release, publication or distribution in or into Australia, Canada,
Japan or the USA
1. Introduction
De Beers Consolidated Mines Limited ("DBCM") and De Beers Centenary AG
(together "De Beers") and DB Investments ("DBI"), a company to be owned by
Central Holdings Limited ("CHL"), Anglo American plc ("Anglo American") and
Debswana Diamond Company (Proprietary) Limited ("Debswana"), announce that
agreement has been reached on the terms of a recommended offer for De Beers.
The offer will, subject to certain pre-conditions being satisfied, be
implemented, inter alia, by way of a scheme of arrangement under section 311 of
the South African Companies Act ("Scheme of Arrangement"), and will involve the
distribution by De Beers to its Linked Unit holders of its entire holding of
Anglo American shares and the acquisition by DBI of all outstanding De Beers
Linked Units (the "Transaction").
This announcement does not constitute an offer or a statement of a firm
intention to make an offer for De Beers. The launch of the Scheme of
Arrangement is subject to the satisfaction of certain pre-conditions as
described in section 9.1 below. In addition, the Transaction will be subject
to certain conditions including those described in section 9.2 below.
2. Terms of the Transaction
The Transaction will result in independent De Beers Linked Unit holders (being
all the holders other than CHL, Anglo American and Debswana) receiving:
For each De Beers Linked Unit
* 0,43 of an Anglo American share (with dividend, bonus issue and other
entitlements);
* US$14,40 (ZAR113,471) in cash; and
* US$1,00 (ZAR7,882) De Beers combined final dividends.
1. On the basis of an exchange rate of ZAR7,8800 to US$1,00. The actual amount
to be paid to a De Beers Linked Unit holder in a currency other than United
States dollars will depend on the exchange rate at a date or dates to be
determined.
2. On the basis of an exchange rate of ZAR7,8800 to US$1,00. The actual
exchange rate will be fixed as at 26 March 2001.
The aggregate value received by independent De Beers Linked Unit holders will
be US$43,17 (ZAR340,18) per De Beers Linked Unit, on the basis of an Anglo
American share price of US$64,58 at the close of business on 14 February 2001,
being the last business day prior to this announcement.
Independent De Beers Linked Unit holders will receive an amount equal to the
Anglo American final dividend for the year ended 31 December 2000, which Anglo
American has announced will be not less than US$1,20 per share, and will
participate in the proposed Anglo American bonus issue as described in section
10, with respect to the Anglo American shares received by them under the
Transaction.
The Boards of De Beers intend to recommend and declare combined final dividends
totalling US$1,00 per De Beers Linked Unit for the year ended 31 December 2000,
which will accrue to those holders on the register on 23 March 2001 and to
holders of share warrants to bearer, in accordance with De Beers' current
practice. Where these dividends are payable in a currency other than United
States dollars, the exchange rate fixing date will be 26 March 2001.
Based on the fully diluted number of De Beers Linked Units, a consideration of
US$43,17 (ZAR340,18) per De Beers Linked Unit corresponds to a total equity
value for De Beers of US$17,6 billion and:
* represents a premium of 31 per cent. to the price of a De Beers Linked Unit
of US$32,90 on 31 January 2001, the last business day prior to the first
cautionary announcement issued by De Beers in relation to the Transaction;
* represents a premium of 69 per cent. to the average of the daily prices of a
De Beers Linked Unit of US$25,57 over the 12 month period ended 31 January
2001; and
* attributes a value of US$9,3 billion to De Beers' current investment in Anglo
American and a value of US$8,3 billion to De Beers other than its investment in
Anglo American (the "Diamond Business"), which represents a premium of 169 per
cent. to the average daily implied market value of the Diamond Business over
the 12 month period ended 31 January 2001.
Independent De Beers Linked Unit holders will be entitled to elect under the
terms of the Transaction, in respect of certain Anglo American shares and
subject to availability, to vary the proportions in which they receive Anglo
American shares and cash as described further in section 7 below.
3. Independent Directors' Committee Recommendation
Following an approach by DBI to De Beers in November 2000, the Boards of De
Beers appointed a committee of independent directors (the "Independent
Directors' Committee") to act on behalf of De Beers in relation to proposals by
DBI.
The Independent Directors' Committee, which has been so advised by N M
Rothschild & Sons Limited ("Rothschild"), considers the terms of the
Transaction to be fair and reasonable to independent De Beers Linked Unit
holders. In providing its advice, Rothschild has taken into account the
commercial assessment of the Independent Directors' Committee. The Independent
Directors' Committee has therefore unanimously recommended this Transaction to
the Boards of De Beers, which accordingly intend to recommend independent De
Beers Linked Unit holders to vote in favour of the Transaction. Those
independent directors of De Beers who are Linked Unit holders intend to vote in
favour of the Transaction in respect of their De Beers Linked Units.
4. DBI
CHL, Anglo American and Debswana currently hold interests in De Beers Linked
Units of 2,6 per cent., 32,2 per cent. and 5,0 per cent. respectively.
Following completion of the Transaction, De Beers will be wholly-owned by DBI,
which will in turn be owned by CHL, Anglo American and Debswana as to 45 per
cent., 45 per cent., and 10 per cent. respectively. CHL is a holding company
for the Oppenheimer family interests, Anglo American is a leading global
natural resources company and Debswana is a company jointly owned by the
Government of the Republic of Botswana and De Beers. Debswana operates three
diamond mines in Botswana under mining leases granted by the Government of the
Republic of Botswana.
Nicky Oppenheimer will continue to be Executive Chairman of De Beers and will
be Chairman of its new parent company, DBI, following completion of the
Transaction and De Beers will be managed by CHL under a proposed management
contract as described further in section 10 below.
5. Rationale for the Transaction
The Boards of De Beers are committed to maximising value for De Beers Linked
Unit holders and believe that the Transaction will:
* offer fair value for the Diamond Business;
* unlock the cross-shareholding;
* eliminate other inhibitors of value;
* deliver a substantial proportion of the consideration for the Diamond
Business in cash; and
* provide a continuing investment in Anglo American and therefore indirectly
in the Diamond Business.
Under DBI's ownership, De Beers will benefit from:
* commitment and leadership of the Oppenheimer family;
* Anglo American remaining a major shareholder;
* a closer relationship with Debswana and the Government of the Republic of
Botswana; and
* continuity for De Beers' management and employees.
For Anglo American, the Transaction will:
* simplify its structure and increase transparency through the removal of the
cross-shareholding;
* result in a significant net cash inflow;
* increase its interest in De Beers; and
* increase the free float of its shares to approximately 90 per cent.
For Debswana and the Republic of Botswana, the Transaction will:
* strengthen the longstanding relationship with De Beers and the Oppenheimer
family;
* create a strategic partnership and shared interests with Anglo American and
CHL; and
* increase their investment in the diamond industry.
For South Africa, the Transaction will:
* provide immediate foreign funds inflow to South Africa estimated at US$2,9
billion; and
* demonstrate confidence in the new South Africa by a group and a family that
have played a leading role in South Africa's economic development for more than
a century.
6. Details of the Transaction
It is proposed that the Transaction will be implemented, inter alia, by way of
a Scheme of Arrangement between De Beers and its Linked Unit holders under
which, if successfully implemented, the following will take place:
* DBCM will purchase from all De Beers Linked Unit holders (including CHL,
Anglo American and Debswana) part of their respective holdings of DBCM deferred
shares in consideration for which DBCM will distribute to each De Beers Linked
Unit holder, on a pro rata basis, 130,4 million of the 144,3 million Anglo
American shares then held by De Beers;
* following the purchase of DBCM deferred shares, the balance of the DBCM
deferred shares held by independent De Beers Linked Unit holders will be
cancelled; and
* in consideration for such cancellation and the delivery to DBCM of the
relevant De Beers Linked Unit certificates, the independent De Beers Linked
Unit holders will receive additional Anglo American shares such that they
receive (when taken together with Anglo American shares received on the
purchase of DBCM deferred shares described above) 0,43 of an Anglo American
share and US$14,40 in cash for each Linked Unit held.
The Scheme of Arrangement will be subject to, amongst other matters, the
approval of a majority representing at least 75 per cent. of the votes
exercised by independent De Beers Linked Unit holders attending and voting at
the DBCM scheme meeting and the sanction of the terms of the Scheme of
Arrangement by the High Court of South Africa. The Scheme of Arrangement will
also be subject to other conditions as described further in section 9.2 below.
Appropriate arrangements will be made in respect of De Beers option holders
taking into account the consideration to be offered to independent De Beers
Linked Unit holders.
7. Mix and Match Elections
Independent De Beers Linked Unit holders will be entitled to elect under the
terms of the Transaction, subject to availability, to vary the proportions in
which they receive their share of some of the Anglo American shares
(representing approximately 0,07 of an Anglo American share for each Linked
Unit) and cash distributed by DBCM against delivery of the De Beers Linked Unit
certificates (the "Mix and Match Elections"). However, the total number of
Anglo American shares and the total amount of cash to be received by
independent De Beers Linked Unit holders under the Transaction will not be
varied as a result of Mix and Match Elections. Accordingly, the satisfaction
of Mix and Match Elections will be dependent upon the extent to which other
independent De Beers Linked Unit holders make offsetting elections. To the
extent that Mix and Match Elections cannot be satisfied in full, they will be
scaled down on a pro rata basis. Full details will be provided in the
Transaction documentation.
8. Financing
8.1 Financing of the Transaction
Dresdner Bank Luxembourg S.A. and UBS AG have agreed, pursuant to a commitment
letter, subject to the satisfactory completion of due diligence and financing
documentation, and other customary conditions, to underwrite senior credit
facilities consisting of a term loan facility of an amount no greater than
US$3,3 billion (with a maturity of five years), a short term bridge facility of
an amount together with the term loan facility of US$4,4 billion, and a
revolving facility of US$1,0 billion (with a maturity of five years).
In addition, Anglo American and Debswana will hold 10 year, 10 per cent.,
cumulative redeemable preference shares in DBI in the aggregate amount of
US$856,6 million. These preference shares will be redeemable in four equal
instalments in the years 2007 to 2010 inclusive, subject to early redemption in
certain circumstances.
8.2 Financing Post Completion
Following completion of the Transaction, the revolving facility of US$1,0
billion will be available to De Beers to finance its operational activities.
9. Conditions
9.1 Pre-conditions
Approval for the Transaction has been granted by the South African Reserve
Bank. However, the making of the offer to De Beers Linked Unit holders is
subject to the fulfilment of certain pre-conditions including:
* underwriting of the senior credit facilities described in section 8 above
becoming unconditional;
* agreement between DBI and De Beers on detailed mechanics of implementing the
Transaction and related documentation; and
* confirmation by the South African Revenue Services of the tax treatment of a
number of steps under the Transaction.
9.2 Conditions
The Transaction itself will be subject to a number of conditions, including the
following:
* approval of the Scheme of Arrangement by independent De Beers Linked Unit
holders;
* approval by independent Anglo American shareholders at an extraordinary
general meeting;
* the sanction of the Scheme of Arrangement by the High Court of South Africa;
and
* competition and other regulatory approvals, and tax clearances.
10. Interests of CHL, Anglo American and Debswana
Following completion of the Transaction, the interests of CHL, Anglo American
and Debswana in De Beers will be held by DBI, which will in turn be owned by
them in the proportions 45 per cent., 45 per cent., and 10 per cent.
respectively.
The value of the contributions to the Transaction made by Anglo American and
Debswana will exceed the amounts necessary for Anglo American and Debswana to
finance their agreed participations in DBI. Consequently, in addition to the
40,8 million Anglo American shares to which it will become entitled under the
Transaction, Anglo American will receive from DBI a cash payment of US$943,4
million and preference shares in DBI having a redemption value of US$700,9
million. In addition to the 7,1 million Anglo American shares it will receive
under the Transaction, Debswana will receive preference shares in DBI having a
redemption value of US$155,7 million.
Upon completion of the Transaction, the 40,8 million Anglo American shares to
which Anglo American becomes entitled (approximately 10,0 per cent. of Anglo
American's issued share capital), will be cancelled. Anglo American will then
make a bonus issue of Anglo American shares such that Anglo American
shareholders (including the former De Beers Linked Unit holders) will receive,
in total, three new Anglo American shares for each existing Anglo American
share then held.
As part of the Transaction, CHL will contribute 10,4 million of its Anglo
American shares (net of the receipt of its pro rata distribution of shares from
DBCM) and US$37,5 million in cash. As a result, CHL's holding in Anglo
American following completion of the Transaction will reduce to approximately
5,1 per cent.
The relationship between CHL, Anglo American and Debswana, in respect of the
ownership and management of DBI, will be governed by the terms of a
shareholders agreement.
A management contract will also be entered into between DBI and CHL, which has
regard to the unique understanding, knowledge, expertise and connections
available to CHL in relation to the diamond industry. Under the management
contract, CHL will contribute to the strategic development and growth of DBI
and to general marketing initiatives and relationships with key customers and
suppliers. In addition, CHL will be responsible for the appointment of senior
executives and directors of De Beers. CHL will receive management and
incentive fees of between US$5,0 million and US$15,0 million per annum, based
on the attainment of certain performance criteria, in respect of each of the
years 2001 to 2007 inclusive.
11. De Beers Estimated Results
De Beers today announced its estimated results for the year ended 31 December
2000. DTC sales for the year ended 31 December 2000 totalled US$5 670,0
million. Own earnings increased by 84,0 per cent. to US$1 289,0 million, while
headline earnings increased by 137,0 per cent. to US$1 707,0 million.
The Boards of De Beers intend to recommend and declare combined final dividends
totalling US$1,00 per De Beers Linked Unit for the year ended 31 December 2000,
which will accrue to those holders on the register on 23 March 2001 and to
holders of share warrants to bearer, in accordance with De Beers' current
practice.
The full Provisional Annual Financial Statements will be released in due course
12. Anglo American's Current Trading and Dividend Forecast
Anglo American will announce its full year results for the year ended 31
December 2000 on 14 March 2001. Anglo American has announced that the expected
outcome for the year ended 31 December 2000 remains in line with management's
expectations and that the Anglo American board will recommend a final dividend
in respect of the year ended 31 December 2000 of not less than US$1,20 per
Anglo American share.
13. DBCM Preference Shares
Appropriate proposals will be made to DBCM preference shareholders in due
course.
14. Timetable
Approval for the Transaction has been granted by the South African Reserve
Bank. However, launch of the Scheme of Arrangement is subject to the
satisfaction of certain pre-conditions as referred to in section 9.1 above.
The posting of documentation will be further subject to the High Court of South
Africa granting an order convening the De Beers scheme meeting, and the
documentation being approved by the JSE Securities Exchange South Africa and
the Securities Regulation Panel. A further announcement will be made in due
course.
In the event that completion of the Transaction takes place after 30 June 2001,
De Beers Linked Unit holders will be entitled to receive interest on the
US$14,40 per Linked Unit cash consideration at the London Interbank Offered
Rate for the period from 1 July 2001 to completion.
15. Cautionary Announcement
Linked Unit holders are advised to continue to exercise caution when dealing in
De Beers Linked Units until a further announcement is made.
16. Sources and Bases
1. A consideration of US$43,17 in respect of each De Beers Linked Unit,
expressed in ZAR terms as ZAR340,18 is based on a ZAR to US$ exchange rate of
7,8800 which was the noon buying rate in the City of New York for cable
transfers as announced by the Federal Reserve Bank of New York for customs
purposes (the "Noon Buying Rate") on 14 February 2001, being the last business
day prior to this announcement.
2. A consideration of US$43,17 is based on an Anglo American share price of
US$64,58, which was the official close price of an Anglo American share of
#44,30 as quoted on the London Stock Exchange on 14 February 2001, being the
last business day prior to this announcement, converted to US$ at a US$ to #
exchange rate of 1,4578, being the Noon Buying Rate on such date.
3. The price of US$32,90 for a De Beers Linked Unit on 31 January 2001, the
last business day prior to the first cautionary announcement issued by De Beers
in relation to the Transaction, is based on the ruling price of a De Beers
Linked Unit of ZAR255,60 as quoted on the JSE Securities Exchange South Africa
on 31 January 2001, converted to US$ at a ZAR to US$ exchange rate of 7,7700,
being the Noon Buying Rate on such date.
4. The average price of US$25,57 for a De Beers Linked Unit over the 12 month
period ended 31 January 2001 is based on the average of the daily ruling prices
as quoted on the JSE Securities Exchange South Africa over the period,
converted from ZAR to US$ at the Noon Buying Rate prevailing on each day.
5. The implied market value of the Diamond Business on any day is based on De
Beers' market capitalisation less the market value of its investment in Anglo
American on that day.
6. On 14 February 2001, the number of De Beers Linked Units in issue was 399
958 775 and the fully diluted number of De Beers Linked Units was 407 537 615.
17. Analysts' Presentation and Press Conference
An analysts' presentation and press conference will be held on 15 February at
1.00pm Johannesburg time/11.00am London time at the VW Conference Centre in
Midrand, video linked to 20 Carlton House Terrace in London.
Enquiries
De Beers
Rory More O'Ferrall
+44 20 7430 3126
Roger van Eeghen (UK media)
+44 20 7430 3507
Joan Braune (International media)
+44 20 7430 3505
Richard Chetwode (International analysts)
+44 20 7430 3515
Tracey Petersen (SA media)
+27 11 374 7388
Mark Irvine (SA analysts)
+27 11 374 7174
DBI
Nicky Oppenheimer
+ 44 20 7430 3076
Clifford Elphick
+ 27 11 638 2125
CHL
Grant Stubbs
+ 44 20 7242 1216
Clifford Elphick
+ 27 11 638 2125
Anglo American
Nick Von Schirnding (UK IR)
+ 44 20 7698 8540
Edward Bickham (UK Media)
+ 44 20 7698 8547
Mike Spicer (SA Media)
+27 11 638 3301
Anne Dunn (SA Media and IR)
+27 11 638 4730
Debswana
Louis Nchindo
+267 351 131
Joe Matome
+267 351 131
N M Rothschild & Sons
(Adviser to De Beers)
Nicholas Wrigley
+ 44 20 7280 5000
Mark Hill
+ 44 20 7280 5000
Stephen Gorven
+27 11 797 8200
HSBC
(Sponsor in RSA and broker to De Beers
Simon Birkett
+44 20 7336 2202
Michele Acton
+44 20 7336 9000
Keith Rayner
+27 11 481 4378
UBS Warburg
(Adviser to DBI)
Ken Costa
+ 27 11 322 7900
+ 44 207 7568 2822
Campbell Stewart
+ 44 20 7568 2360
Alexander Wilmot-Sitwell
+ 44 20 7568 2165
Merrill Lynch
(Adviser to Anglo American)
Mark Preston
+ 44 20 7867 2524
Kevin Smith
+ 44 20 7867 3356
Nick Pagden
+27 11 305 5555
Cazenove
(Sponsor in RSA and broker to Anglo American)
Nick Wiles
+44 20 7588 2828
Piers Coombs
+44 20 7588 2828
S G Hambros
(Adviser to Debswana)
Michael Sorkin
+ 44 20 7676 6615
Clifford Halvorsen
+ 44 20 7676 6925
Jan Newman
+27 11 784 5050
Dresdner Kleinwort Wasserstein
(Joint Underwriter to DBI)
Dr Peter Kaul
+352 4760 220
Smithfield Financial
(PR adviser to De Beers)
John Antcliffe
+44 20 7360 4900
John Kiely
+44 20 7360 4900
Brunswick
(PR adviser to DBI)
Alan Parker
+44 20 7404 5959
