| Tue 2 Aug 2011, 12:00 | | DSY - Discovery Holdings Limited - Abridged pre-listing statement |
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DSY
DSY
DSY - Discovery Holdings Limited - Abridged pre-listing statement
Discovery Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1999/007789/06)
ISIN: ZAE000022331
Share Code: DSY
("Discovery" or "the Company")
ABRIDGED PRE-LISTING STATEMENT
Prepared in terms of the Listings Requirements of the JSE Limited ("JSE")
relating to the listing of the non-cumulative, non-participating, non-
convertible, voluntarily redeemable no par value preference shares in the
share capital of Discovery ("B Preference Shares") on the JSE with effect
from the commencement of business on or about Monday 15 August 2011.
Discovery issued a Pre-listing Statement today, Tuesday 2 August 2011,
relating to listing of the B Preference Shares under the "Specialist
Securities - Preference Shares" sector of the JSE. The information in
this abridged Pre-listing Statement has been extracted from the Pre-
listing Statement.
1. Introduction and rationale
Discovery actively manages its capital base in order to enhance
shareholder value through its capital management framework. On 2 August
2011, at a general meeting of Discovery shareholders, various resolutions
were proposed and passed, including, inter alia, the resolutions to
create the B Preference Shares and place the B Preference Shares under
the directors` control (as required by Discovery`s memorandum of
incorporation ("MOI")).
Discovery intends to issue B Preference Shares in terms of an offer for
subscription by way of a private placement. Proceeds from the issue are
intended to provide additional capital to support the continued growth of
Discovery`s existing businesses, enhance Discovery`s ability to take
advantage of future growth opportunities and aide Discovery in further
diversifying its funding structure and strengthening its regulatory
capital base.
2. Information relating to Discovery
Discovery is a leading financial services institution founded on the
principles of consumer engagement, product innovation and product
integration. Discovery is incorporated in South Africa and was first
listed on the JSE in 1999.
The Discovery Group operates across a number of markets including health
insurance, life assurance, long term savings, financial services,
wellness, and most recently, short term insurance. Discovery is domiciled
in South Africa, but has operations in the United Kingdom, the United
States and China, as follows:
2.1 Consumer-engaged health insurance
Discovery offers health insurance products through Discovery Health in
South Africa, PruHealth in the United Kingdom and Ping An Health in
China.
Discovery Health, a wholly-owned subsidiary, provides administration
services and managed care services to over 2.5 million lives and 14
medical schemes.
PruHealth Discovery`s health insurance joint venture with Prudential plc,
offers policyholders in the United Kingdom consumer-directed products
linked to the Vitality wellness programme and provides cover for a range
of private healthcare related claims. In August 2010, Discovery increased
its shareholding in the joint venture from 50% to 75% through the
acquisition of Standard Life HealthCare. Following the acquisition
PruHealth covers around 650,000 lives.
In November 2010 Discovery acquired a 20% stake in Ping An Health,
Discovery`s health insurance joint venture with the Ping An Group of
China, The joint venture will draw on Discovery`s extensive health
product intellectual property and risk management structures and
expertise, and the Ping An Group`s comprehensive distribution network
infrastructure and brand in the Chinese market.
2.2. Consumer-engaged life assurance
In South Africa, Discovery offers life assurance products through
Discovery Life, a wholly-owned subsidiary. Discovery Life offers a range
of insurance and financial solutions to both individual and group
policyholders. The Discovery Life products reflect Discovery`s underlying
philosophy to make members healthier and to enhance and protect their
lives, and offer some unique benefits that integrate with the benefits
offered by Discovery Health, Vitality and Discovery Invest.
Discovery has a 75% share in PruProtect, Discovery`s life insurance joint
venture with Prudential plc in the United Kingdom. PruProtect products
sells pure protection products which are based on the Vitality structure
that enables dynamic pricing to be employed in the UK life assurance
market.
2.3. Investment and long-term savings
Discovery Invest, a wholly-owned subsidiary operates in the long-term
savings and investment market in South Africa. Discovery Invest was
launch at the end of 2007 and to date has attracted over R16.5 billion in
assets under management.
2.4. Wellness and health
Vitality, Discovery`s wellness programme operates in South Africa, the
United Kingdom and the United States. Vitality, a science-based wellness
programme, has more than 1.6 million members worldwide. Through a range
of health and lifestyle benefits, Vitality encourages its members to
engage in healthy behaviours that have proven to reduce long-term
healthcare costs.
2.5. Short term insurance
Discovery recently launched Discovery Insure, a short-term insurance
company which aims to unlock value for consumers in the South African
short-term insurance market. Through Discovery Insure, the Group aims to
leverage the behavioural expertise developed in Vitality with the latest
motor telematics technology to create an incentive-based short term
insurer.
2.6. Financial services
The DiscoveryCard, which is offered to Discovery clients in South Africa,
integrates with the Vitality programme to reward members for healthy
behaviour.
3. Directors
The full names, ages, nationalities (if not South African), addresses,
occupations and profiles of the directors are set out below:
Executive directors
Adrian Gore (47)
Group Chief Executive Officer (Appointed to the board on
17/9/1999)
Business address: 155 West Street, Sandton, 2146
BSc (Hons), FFA, ASA, MAAA, FASSA
Adrian founded Discovery in 1992 after conceiving the idea
of a specialist risk management company offering clients
innovation, flexibility, value and service. He is the
group chief executive officer.
Richard Farber (40)
Group Financial Director (Appointed to the board on
1/7/2009)
Business address: 155 West Street, Sandton, 2146
BCom (Hons), CA (SA), FCMA
Richard was the group accountant at Investec Bank before
joining Discovery in 2003 as chief financial officer. He
joined the Discovery Board as financial director on 1 July
2009.
Hylton D Kallner (36)
Chief Marketing Officer (Appointed to the board on
3/6/2010)
Business address: 155 West Street, Sandton, 2146
BEconSc, FFA, FASSA
Hylton is the chief marketing officer for the Discovery
Group. He graduated from the University of Witwatersrand
with a degree in actuarial science. Since he joined
Discovery in 1996, he has held several positions in
actuarial and strategic projects as well as marketing.
Neville S Koopowitz (47)Chief Executive Officer of
PruHealth (Appointed to the board on 17/9/1999)
Business address: Marble Arch Tower, 7th Floor, 55
Bryanston Street, London, W1H7AA
BCom, CFP
Neville joined Discovery as Marketing Director in 1996,
playing a defining role in the evolution of the Discovery
brand. He is the chief executive officer of PruHealth.
Herschel P Mayers (51)
Chief Executive Officer of Discovery Life, Discovery
Invest and PruProtect (Appointed to the board on 1/3/2000)
Business address: 155 West Street, Sandton, 2146
BSc (Hons), FIA, FASSA
Herschel held senior positions at Liberty Life before
joining Discovery to co-found Discovery Life in 2000. He
is the chief executive officer of Discovery Life,
Discovery Invest and PruProtect.
Dr Ayanda Ntsaluba (51)
Executive Director (Appointed to the board on 1/7/2011)
Business address: 155 West Street, Sandton, 2146
MBchB,FCOG(SA), MSc (HPPF), Exec MBA
Ayanda is a qualified Obstetrician and Gynaecologist, with
an MSc in Health Policy Planning and Financing from the
University of London, an Executive MBA from the University
of Cape Town. Prior to joining Discovery, Ayanda most
recently served as the Director General of the Department
of International Relations and Co-operation (formerly
Foreign Affairs) of the Republic of South Africa, and
prior to that, as Director General of the Department of
Health.
Alan Pollard (42)
Chief Executive Officer of Vitality (Appointed to the
board on 30/8/2007)
Business address: 155 West Street, Sandton, 2146
BSc (Hons), FIA, FSSA
Alan, an actuary, joined Discovery in 1994. He headed up
research and product development at Discovery Health
before taking on his current role as chief executive
officer of Discovery Vitality.
John M Robertson (62)
Group Chief Information Officer (Appointed to the board on
17/9/1999)
Business address: 155 West Street, Sandton, 2146
BCom, CTA, CA (SA), HDip Tax
After a career in IT consulting, John joined Discovery at
its inception to develop its IT strategy, systems and
finance infrastructure. He is group chief information
officer; also responsible for group risk and compliance.
Barry Swartzberg (46)
Executive Director (Appointed to the board on 3/8/1999)
Business address: 155 West Street, Sandton, 2146
BSc, FFA, ASA, FASSA, CFP
Barry is one of Discovery`s founders and contributed to
the evolution of the group`s marketing approach, risk
management capability and operations. He is currently
group executive director, responsible for international
operations.
Non-executive directors
Monty I Hilkowitz (Chairperson) (70)
Non-executive director (Appointed to the board on
11/4/2002)
Business address: 155 West Street, Sandton, 2146
FIA
Monty`s career has spanned investment management,
financial services and insurance interests in several
countries. He is currently self-employed and holds
directorships with two leading financial services
companies.
Dr Brian A Brink (59)
Non-executive director (Appointed to the board on
19/2/2004)
Business address: 45 Main Street, Johannesburg, 2001
BSc (Med), MBBCh, DA (SA)
Brian is a respected thought-leader in the health arena,
with particular interests in health systems strengthening,
HIV/AIDS and TB management and women`s health issues. He
is the chief medical officer at Anglo American.
Peter Cooper (55)
Non-executive director (Appointed to the board on
1/1/2008)
Business address: 3rd Floor, Great Westerford, Main Road,
Newlands, Cape Town, 7700
BCom (Hons), HDip Tax, CA (SA)
Peter is the chief executive officer of RMB Holdings
Limited and Rand Merchant Insurance Holdings Limited, both
of which are listed on the JSE. He has more than 30 years
of experience in corporate and structured finance in South
Africa.
Steven B Epstein (68) (USA)
Non-executive director (Appointed to the board on
17/2/2005)
Business address: Epstein Becker & Green PC, 1227 25th
Street, M+NW, Suite 700 Washington DC, DC 20037
JD (Columbia University Law School), BA (Tufts University)
Steven is the founder and senior partner of one of the
largest US-based health law firms and a champion of the
concept that healthcare organisations need specialist
legal representation.
Dr T Vincent Maphai (59)
Non-executive director (Appointed to the board on
8/12/2005)
Business address: 155 West Street, Sandton, 2146
BA, BA (Hons), M Phil, D Phil, Advanced
Management Programme (Harvard)
Vincent was formerly BHP Billiton`s chairperson, a
research director at the HSRC and taught at universities
locally and abroad. He is executive director of Corporate
Affairs and Transformation at SAB Miller.
Vhonani Mufamadi (42)
Non-executive director (Appointed to the board on
3/6/2010)
Business address: 155 West Street, Sandton, 2146
BA (Law), LLB
Vhonani is the founder and chairperson of Muvoni
Investment Holdings. After obtaining a BA Law and LLB
degree from the University of Witwatersrand, he started
his career as a consultant on human resources and
management needs.
Les Owen (62) (UK)
Non-executive director (Appointed to the board on
6/12/2007)
Business address: 155 West Street, Sandton, 2146
BSc (Hons), FIA, FPMI
Les, a qualified actuary, has held top insurance positions
in the UK and Australia. He brings to the Discovery board
more than 30 years` experience of international insurance
markets.
Sonja E Sebotsa (39)
Non-executive director (Appointed to the board on
8/12/2005)
Business address: 155 West Street, Sandton, 2146
LLB (Hons), MA
Sonja is the founder and principal partner in Identity
Partners, an investment firm, and has extensive expertise
in corporate advisory work. She was previously a vice
president in Deutsche Bank`s investment banking division.
Tania Slabbert (44)
Non-executive director (Appointed to the board on
1/1/2008)
Business address: 155 West Street, Sandton, 2146
BA, MBA
Tania is the chief executive officer of WDB Investment
Holdings, and uses her investment expertise to facilitate
the socio-political and economic development of women in
South Africa.
Sindi V Zilwa (44)
Non-executive director (Appointed to the board on
20/2/2003)
Business address: 155 West Street, Sandton, 2146
BCompt (Hons), CTA, CA (SA), Advanced Taxation
Certificate, CFP, Advanced Diploma in Financial Planning,
Advanced Diploma in Banking
Sindi is the chief executive officer of Nkonki, a
chartered accountancy firm. She is a thought-leader in the
areas of business, entrepreneurship and transformation.
4. Share capital of Discovery
4.1. Authorised and issued share capital before the offer for
subscription:
Authorised shares
1,000,000,000 ordinary shares of 0,1 cent 1,000
per share (R`000)
40,000,000 A Preference Shares (R`000) ( )*
20,000,000 B Preference Shares (R`000) 2,000,000
20,000,000 C Preference Shares (R`000) ( )*
Issued shares
591 872 390 ordinary shares of 0,1 cent 592
per share (R`000)
Share premium (R`mn) 1,577.4
* Value of share capital to be determined in accordance with each
relevant A Preference Share and C Preference Share resolution passed by
the directors of Discovery, as may be applicable.
4.2. Authorised and issued share capital after the offer for
subscription:
The table below is for illustrative purposes only and sets out the
authorised and issued capital of Discovery (assuming a total subscription
of R400 million):
Authorised shares
1,000,000,000 ordinary shares of 0,1 cent 1,000
per share (R`000)
40,000,000 A Preference Shares (R`000) ( )*
20,000,000 B Preference Shares (R`000) 2,000,000
20,000,000 C Preference Shares (R`000) ( )*
Issued shares
591 872 390 ordinary shares of 0,1 cent 592
per share (R`000)
Share premium (R`mn) 1,577.4
4,000,000 B Preference Shares (R`mn) 400
* Value of share capital to be determined in accordance with each
relevant A Preference Share and C Preference Share resolution passed by
the directors of Discovery, as may be applicable.
At the general meeting of Discovery shareholders on 2 August 2011, an
ordinary resolution was passed to place all of the unissued B Preference
Shares under the control of the directors so that the B Preference Shares
may be issued over a period of 36 months.
5. Details of the offer for subscription by way of a private placement
Subject to the fulfilment of the conditions listed in paragraph 5.3
below, application will be made to the JSE on the closing date of the
offer for subscription to list the B Preference Shares in the "Specialist
Securities - Preference Shares" sector under the abbreviated name "DSY B
PREF", with alpha code "DSBP" and ISIN number ZAE000158564, with effect
from the commencement of business on or about Monday, 15 August 2011. The
number of B Preference Shares to be listed will be determined on the
closing date of the offer for subscription.
5.1. Salient terms of the B Preference Shares
Deemed issue price for dividend R100
calculation purposes
Preference dividend rate on issue 85% of the
prime rate of
South Africa
("Prime
Rate")
Minimum Rand value of subscription per R1 million
applicant who is a single addressee acting
as principal
Minimum Rand value of subscription per No minimum
applicant who is a person named in section
96(1)(a) of the Companies Act, No. 71 of
2008 (as amended or replaced)
Minimum amount to be raised in terms of R250 million
the offer for subscription
5.2. Times and dates of the opening and closing of the offer for
subscription
Opening date of the offer for subscription Tuesday, 2
(12:00) August 2011
Closing date of the offer for subscription Monday, 8
(16:00) August 2011
Proposed listing date (09:00) Monday, 15
August 2011
Any changes to these dates and times will be released on SENS and
published in the press.
Applications to subscribe for B Preference Shares in terms of the offer
for subscription must be made in accordance with the application
procedure set out in the Pre-listing Statement.
Applicants applying for dematerialised B Preference Shares must inform
their CSDP or broker of their application by the cut-off time stipulated
by their CSDP or broker in terms of their agreement.
5.3. Conditions to the listing
The listing of the B Preference Shares is subject to:
- the requirements of the JSE in respect of the requisite spread of B
Preference Shareholders, being a minimum of 50 public shareholders, being
met;
- the minimum subscription size being met; and
- the filing with the Commission of the relevant resolution passed by
Discovery shareholders at the general meeting held on 2 August 2011 to
create the B Preference Shares.
5.4. Reservation of rights
The directors reserve the right to accept or refuse any application(s),
either in whole or in part or to abate any or all application(s) (whether
or not received timeously) in such manner as they may, in their sole and
absolute discretion, determine.
The directors have the right to issue additional B Preference Shares by
undertaking a separate private placement of B Preference Shares during or
subsequent to this offer for subscription. The issue price may be
negotiated between parties subject to the market conditions at the time.
The distribution of this announcement in jurisdictions other than South
Africa may be restricted by law, and persons into whose possession this
announcement comes should inform themselves about and observe any such
restriction. Any failure to comply with these restrictions may constitute
a violation of the securities laws of any such jurisdiction. This
announcement may not be supplied to the public in any jurisdiction in
which any registration, qualification or other requirements exist or
would exist in respect of any public offering of shares. This document
does not constitute or form part of any offer or invitation to sell or
issue, or any solicitation of any offer to purchase or subscribe for, any
securities other than the B Preference Shares by any person in any
circumstances in which such offer or solicitation is unlawful and is not
for distribution in or into Australia, Canada, Japan or the United
States.
6. Salient features of the B Preference Shares
The full terms of the B Preference Shares are set out in Annexure 3 of
the Pre-listing Statement. The summary below is not conclusive or
exhaustive, and potential investors should refer to Annexure 3 of the Pre-
listing Statement for full particulars of the terms and conditions of the
B Preference Shares.
6.1. Voting rights
The holders of the B Preference Shares will only be entitled to vote
during periods when a dividend in respect of a B Preference Share which
has been declared or any part of it, remains in arrear and unpaid from
the due date for payment thereof, any redemption amount which is due and
payable is unpaid and / or when resolutions are proposed to amend the
preferences, rights, limitations and other terms associated with such B
Preference Shares.
Should the B Preference Shareholders be entitled to vote at any meeting,
then the voting rights attaching to the B Preference Shares shall be the
lower of:
i. that proportion of the total votes in the company which the
aggregate deemed issue price (R100) ("Deemed Issue Price") of the B
Preference Shares held by him bear to the aggregate amount of the share
capital and/or stated capital of the company; and
ii. that fraction per B Preference Share held by him such that the
aggregate of all of the votes of all of the preference shares in the
issued share capital of the company are less than 25% (twenty five per
cent) of the aggregate of all votes held by all shareholders in the
company entitled to vote at such meeting.
6.2. Entitlements to dividends
The directors, at their discretion, may resolve to declare and pay in
full or in part dividends on the B Preference Shares. If the directors do
not resolve to pay such dividends, holders of the B Preference Shares
will not have any right to receive any such dividends.
Subject to the above, the holders of the B Preference Shares will receive
a semi-annual dividend based on the dividend rate applicable to the B
Preference Share (which shall be referenced to the Prime Rate) multiplied
by the Deemed Issue Price, on a daily basis. The Deemed Issue Price for
the purpose of calculating a dividend in respect of a B Preference Share
shall be an amount of R100, notwithstanding the actual issue price of a B
Preference Share. The directors have determined that the dividend rate
applicable to the B Preference Shares at the time of the first issue of
the B Preference Shares will be 85% of the Prime Rate.
Dividends, if declared, are payable semi-annually on a date which is the
earlier of not less than five business days prior to the date on which
Discovery pays final and interim ordinary dividends to its ordinary
shareholders, if applicable, and 90 calendar days after the applicable
preference dividend accrual date. If dividends which have been declared
are not paid within the abovementioned timeframe, they will be considered
to be "unpaid" and shall accrue interest at the Prime Rate.
The Company shall not be entitled to pay any dividend in respect of the
Discovery ordinary shares if, in respect of the corresponding period to
which such dividend relates, a dividend in respect of the B Preference
Shares has not been paid.
Following Part VIII of Chapter II of the South African Income Tax Act,
1962 (Act 58 of 1962), as amended ("the Income Tax Act") becoming
effective (the "Dividends Tax Circumstances"), then the dividend rate
applicable to the B Preference Shares will be increased in accordance
with the following formula, namely:
NDR = A/(1 - B)
Where:
NDR = the new dividend rate applicable to the B Preference Shares
following the occurrence of the Dividends Tax Circumstances;
A = the dividend rate prevailing immediately prior to the occurrence of
the Dividends Tax Circumstances;
B = the rate of dividends tax, it being recorded that it is currently
anticipated that dividends tax will be levied at 10% (ten per cent).
If there is any amendment to the Income Tax Act, other than as
contemplated above, that results in the after tax return to the B
Preference Shareholders on account of their holding of the B Preference
Shares being reduced, provided such amendment to the Income Tax Act is
uniformly applicable to all corporate tax payers and not only because of
the particular circumstances of the company or any B Preference
Shareholder, the dividend rate will be increased by the Company to the
extent of the saving by the Company as a result of such amendments to the
Income Tax Act.
If such amendment to the Income Tax Act does not result in a saving by
the Company, then, notwithstanding that such amendment may result in a
reduction in the after tax returns of any B Preference Shareholders on
account of its holding of B Preference Shares, then the dividend rate
shall not be increased. The Company shall be entitled to require its
auditors to verify whether it is obliged to increase the percentage of
the dividend rate.
6.3. Ranking
The B Preference Shares will rank behind any A Preference Shares, pari
passu with the C Preference Shares and in priority to the Discovery
ordinary shares with regard to dividends and repayment of capital on the
winding-up of the Company.
All the B Preference Shares form part of the same class of shares and all
B Preference Shares for which listing will be applied, will rank pari
passu in respect of all rights.
Each B Preference Share shall confer upon the holder of the B Preference
Share the right of a return of capital on the winding-up of the Company
of an amount equal to the sum of:
i. all unpaid dividends;
ii. the redemption dividend as defined in article 53.1.20 of Discovery`s
MOI; plus
iii. the Deemed Issue Price (R100).
6.4. Regulatory redemption option
In terms of a regulatory redemption option ("Regulatory Option"),
Discovery may redeem all of the B Preference Shares within a reasonable
period of time from which the board determines that there has been a
change in the "Regulatory Capital Requirements" (defined below) as a
result of which the B Preference Shares are, or will be, taken into
account in determining the capital adequacy requirements and/or
prudential standards applicable to the Discovery Group, differently to
that applicable, or anticipated to be applicable as at date on which the
resolutions of the shareholders in relation to the creation of the B
Preference Shares were approved, provided that such change has an adverse
impact in determining the capital adequacy requirements and/or prudential
standards applicable to the Discovery Group.
The Regulatory Capital Requirements are defined in Discovery`s MOI as all
requirements, guidelines and policies from time to time of any regulatory
authority having supervision over the Discovery Group, relating to such
capital adequacy requirements and ratios and/or prudential standards,
whether or not such requirements, guidelines or policies have the force
of law (but if not having the force of law, which insurers in South
Africa comply with customarily) and whether they are applied generally or
specifically to the Discovery Group.
Notice and payment under the Regulatory Option
The Regulatory Option is subject to a notice period of not less than 15
days (or an extended notice period of up to 30 days). The notice is
revocable. Any redemption in terms of the Regulatory Option is subject to
the receipt of all applicable regulatory approvals if required.
If Discovery exercises the Regulatory Option, each B Preference Share may
be redeemed at the higher of:
- the Deemed Issue Price (being R100); and
- the market price (determined with reference to the "clean" 15 day VWAP
of the B Preference Shares prior to the delivery by the Company of a
notice exercising the Regulatory Option,
plus:
i. a premium in an amount equal to 2,5% (two comma five per cent) of
the higher of the
Deemed Issue Price and the market price; and
ii. any applicable dividends,
as determined in article 53.22 of Discovery`s MOI.
7. Copies of the Pre-listing Statement
Copies of the Pre-listing Statement may be obtained during normal
business hours from 12:00 on 2 August 2011 until the closing date of the
offer for subscription from the Company, the Joint Book Runners and the
Transfer Secretaries as detailed below:
Discovery registered office: 155 West Street, Sandton, 2146
Investec Bank Limited: Andrew Middleton +27 11 291 6144
Rand Merchant Bank (A division of FirstRand Bank Limited): Daniella Keet
+27 11 282 1272
Computershare Investor Services Proprietary Limited: 70 Marshall Street,
Johannesburg, 2001
Sandton
2 August 2011
Lead Arranger, Joint Advisor, Joint Sponsor and Joint Book Runner
Investec Bank Limited
Joint Advisor, Joint Sponsor and Joint Book Runner
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Corporate law advisors
Edward Nathan Sonnenbergs Inc.
Date: 02/08/2011 12:00:01 Produced by the JSE SENS Department.
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