| Thu 4 Aug 2011, 9:00 | | CDZ - Cadiz Holdings Limited - BNP Paribas acquisition of 60% interest in Cadiz |
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CDZ
CDZ
CDZ - Cadiz Holdings Limited - BNP Paribas acquisition of 60% interest in Cadiz
Securities Business and further cautionary announcement
CADIZ HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 1997/007258/06)
JSE Share Code: CDZ
ISIN: ZAE000017661
("Cadiz" or "the Company")
BNP PARIBAS ACQUISITION OF 60% INTEREST IN CADIZ SECURITIES BUSINESS AND FURTHER
CAUTIONARY ANNOUNCEMENT
1.INTRODUCTION
1.1 Shareholders are referred to the cautionary announcement dated Thursday, 30
June 2011, and are advised that Cadiz has entered into agreements with BNP
Paribas SA ("BNPP") in terms whereof BNPP will acquire a 60% interest in the
issued share capital of Cadiz Securities (Proprietary) Limited ("CS") and Cadiz
Stock Broking (Proprietary) Limited ("CSB") (CS and CSB each a "Securities
Company" and collectively the "Securities Companies") for an effective total
consideration of R150,000,000 (the "Transaction") on the basis that the net
asset value ("NAV") of the Securities Companies will only include the nominal
share capital of R200.
1.2 BNPP is one of the world`s strongest banking and financial services groups.
Headquartered in Paris, the BNP Paribas group has operations in more than 80
countries and over 200 000 employees across Europe, North America and Asia.
2. NATURE OF THE CADIZ SECURITIES BUSINESS
Cadiz operates its securities and stockbroking business (the "Cadiz Securities
Business") through CS and CSB. CS and CSB are authorised financial services
providers and are registered members of the JSE Limited ("JSE"). Both CS and CSB
are wholly-owned subsidiaries of Cadiz. CS was established in 1993 as a
specialist equity derivative broking company and has been repositioned as a
premium institutional broking house.
3. RATIONALE OF TRANSACTION
3.1 The market in which the Cadiz Securities Business operates has been under
pressure in recent years owing to lower local trading volumes on the JSE,
tighter margins due to increased competition and foreign participation in the
domestic market and the shift in the industry to electronic trading. Management
identified the need to reposition the Cadiz Securities Business to gain access
to a balance sheet, offshore distribution to capture foreign flows into the JSE
and an offshore research base.
3.2 Following the completion of the Transaction both parties will combine their
respective strengths to market and sell South African equity products to
institutional investors in South Africa and abroad.
3.3 It is also the intention to change the names of CS and CSB to reflect the
identity of both BNPP and Cadiz. Dan Ahern, the current managing director of CS,
will after completion of the Transaction, be appointed as the chief executive
officer ("CEO") of the Securities Companies, while Ram Barkai, the CEO of Cadiz,
will be the chairman.
4. SALIENT TERMS OF THE TRANSACTION
4.1 The Transaction structure and purchase consideration
4.1.1 The Transaction will take the form of a combination of BNPP subscribing
(the "Subscription") for shares in, and acquiring from Cadiz (the "Sale")
existing shares in, each of CS and CSB. The Transaction has been structured as
follows -
4.1.1.1 immediately prior to completion of the Transaction, each Securities
Company will distribute its NAV to Cadiz, and the Securities Companies will
therefore have a nominal NAV of R200 on completion of the Transaction;
4.1.1.2 on the date of completion (the "Completion Date") of the Transaction,
the Subscription will take place and BNPP will subscribe for shares in the
Securities Companies for an aggregate amount of R80,000,000 (eighty million
Rand), which amount represents the estimated regulatory capital and future
working capital requirements of the Securities Companies for the foreseeable
future. The Securities Companies will thus have a NAV of R80,000,000 (eighty
million Rand) following completion of the Transaction;
4.1.1.3 simultaneously with the Subscription BNPP will, pursuant to the Sale,
also acquire existing shares in the Securities Companies from Cadiz for a
consideration of R118,000,000 (one hundred and eighteen million Rand).
4.1.2 The total number of shares in the Securities Companies acquired by BNPP
pursuant to the Subscription and the Sale will represent 60% of their total
number of shares in issue following completion of the Transaction.
4.2 Conditions Precedent
The Transaction is subject to the following material conditions precedent -
4.2.1 to the extent applicable, the approval of the change in the shareholding
of the Securities Companies by the JSE and the Financial Services Board;
4.2.2 Cadiz or its affiliate and the Securities Companies entering into the
service level agreement referred to below, which shall be based upon an already
agreed set of principles, regulating the provision of certain ongoing support
services to the Securities Companies;
4.2.3 approval of the Transaction by the Competition Commission;
4.2.4 approval of the Transaction by the shareholders of Cadiz in terms of the
JSE`s Listings Requirement (the "Listings Requirements");
4.2.5 there being no change in law or regulation prior to the Completion Date
which may prohibit BNPP from acquiring and/or holding shares in the Securities
Companies;
4.2.6 to the extent applicable, BNPP obtaining the approval of the South African
Reserve Bank for the Transaction under applicable exchange control regulations;
and
4.2.7 that the Securities Companies have been constituted to hold the Securities
Business only and to hold the necessary licences and other resources required to
carry on such business.
4.3 The effective date
The Acquisition shall be effective from and be implemented on the Completion
Date, which shall be two business days after all Conditions Precedent have been
fulfilled.
4.4 Shareholders` Agreement
4.4.1 Cadiz and BNPP have entered into comprehensive shareholders` agreements
which regulate their relationship as shareholders of the Securities Companies,
including an initial lock-in period, various exit mechanisms and the right for
BNPP to acquire additional shares from Cadiz in the longer term.
4.4.2 The Securities Companies will make use of Cadiz` existing infrastructure
(such as Human Resources, Information Technology, Finance, Risk, Marketing and
Management) as detailed in a service level agreement for five years from
Completion Date. This arrangement may be extended by a further 2 years.
4.5 Use of proceeds
The Cadiz Board of Directors is currently giving consideration to the
appropriate utilisation of the net proceeds of the Transaction.
5. BOARD RECOMMENDATION
The Transaction has been considered by the Cadiz Board of Directors, who
recommend that Cadiz shareholders vote in favour of the sale at the shareholder
meeting to be convened for purposes of considering and approving the
Transaction. The directors intend voting their shares in favour of the
Transaction.
6. UNAUDTIED PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTION
The pro forma financial effects of the Transaction have not been provided as
Cadiz has instructed an external party to identify and attribute fair values to
the associates` identifible assets and liabilities and fair value the retained
investments in the former subsidiaries as at the estimated Completion Date. In
terms of IAS 28 "Investments in Associates" and IAS 27 "Consolidated and
Separate Financial Statements", Cadiz needs to calculate its share in the net
fair values of the associates` identifiable assets and liabilities and fair
value of the retained investments. Cadiz is therefore currently unable to make a
reliable reasonable estimate of the pro forma financial effects of the
Transaction and will release this information as soon as it becomes available,
which is expected to be on or about 18 August 2011.
7. CATEGORISATION OF THE TRANSACTION AND CIRCULAR TO SHAREHOLDERS
The Transaction is categorized as category 1 transaction in terms of section
9.5 (c) of the Listings Requirements. A circular containing the details of the
Transaction, and the details of the general meeting of shareholders convened to
consider and approve the Transaction, will be posted to shareholders in due
course.
8. FURTHER CAUTIONARY ANNOUNCEMENT
As the pro forma financial effects of the Transaction will only be communicated
to the shareholders at a later stage, shareholders are advised to continue
exercising caution in trading shares until such time as the Company releases
such information.
Cape Town
4 August 2011
Sponsor: (INVESTEC BANK LIMITED)
Attorneys: (CLIFFE DEKKER HOFMEYR) - legal advisor to Cadiz
Advisor: (CADIZ CORPORATE SOLUTIONS) - corporate advisor to Cadiz
Date: 04/08/2011 09:00:34 Produced by the JSE SENS Department.
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