| Wed 11 Apr 2001, 0:00 | | Recommended Offer For De Beers Scheme Circular Pos |
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DB Investments
RC Luxembourg No: B 78985
Incorporated as a societe anonyme 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
10 April 2001
Not for release, publication or distribution in or into Canada, Japan or the
United States of America
RECOMMENDED OFFER FOR DE BEERS SCHEME CIRCULAR POSTED
On 29 March 2001, 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"),
announced that DBI would be proceeding with its recommended offer for De Beers
(the "Transaction").
Further to this, De Beers announces the posting today of documentation (the
"Scheme Circular") in connection with the Transaction to the holders of De
Beers Linked Units. In addition, documentation in relation to schemes of
arrangement proposed by DBCM to 40 per cent. preference shareholders and DBCM 8
per cent. preference shareholders has also been posted today.
The High Court of South Africa has ordered that the scheme meetings for each of
these schemes be convened to be held on 4 May 2001.
SCHEME CIRCULAR
The De Beers Scheme Circular contains a letter to Linked Unit holders from Tim
Capon (Chairman of the De Beers Independent Directors' Committee) setting out
the considerations which led the De Beers Independent Directors' Committee,
supported by its financial advisers, N M Rothschild and Sons Limited, to
recommend the Transaction as being fair and reasonable to independent De Beers
Linked Unit holders. In addition, the Scheme Circular contains the full terms
of the Transaction, a Technical and Financial Report relating to De Beers, and
other information for De Beers Linked Unit holders. The Scheme Circular can be
accessed from www.debeersgroup.com.
The letter from Tim Capon sets out the significant attractions of the
Transaction for independent De Beers Linked Unit holders. The key points
highlight how the Transaction:
* delivers a significant premium to the historic market value of De Beers;
* releases value for both parts of De Beers (the Diamond Business and the
shareholding interest in Anglo American);
* maximises value for the interest in Anglo American;
* unlocks the cross-shareholding;
* eliminates other inhibitors of value;
* provides a fair value for the Diamond Business by reference to the net
present value calculations in the Technical and Financial Report contained
within the De Beers Scheme Circular;
* provides cash for a substantial proportion of the Diamond Business;
* provides certainty and immediate value for the Diamond Business; and
* provides for a continued investment in Anglo American.
THE TRANSACTION
Following careful consideration of a range of proposals, the De Beers
Independent Directors' Committee came to the unequivocal view that the
Transaction is clearly the best option available to independent De Beers Linked
Unit holders.
The Transaction is strongly recommended by DBI and its shareholders, namely
CHL, Anglo American and Debswana (the 50:50 joint venture between De Beers and
the Government of Botswana), who collectively own approximately 40 per cent. of
De Beers Linked Units. In particular, Anglo American shares form a significant
component of the consideration and, having reviewed a number of options
(including a straightforward unbundling), Anglo American believes that the
Transaction is the best option for maximising the value of De Beers' holding of
Anglo American shares and, consequently, for De Beers' Linked Unit holders and
Anglo American shareholders.
Consideration was given to other alternatives and, in particular, to a pure
unbundling of De Beers' interest in Anglo American, which would leave in place
a publicly listed, stand-alone De Beers Diamond Business. It should be noted
that such an unbundling may not be feasible, and even if feasible, may be
materially less attractive for De Beers Linked Unit holders for the reasons set
out below:
(i) Any unbundling of De Beers' interest in Anglo American is subject to
South African exchange control and shareholder approvals. The Transaction has
received all necessary South African exchange control approvals and tax
clearances have been granted in principle. There is no certainty that such an
alternative proposal would be allowed to proceed if the current proposal is not
approved. In particular:
(a) the De Beers Independent Directors' Committee and DBI believe that the
potential inflow of funds of US$2.9 billion (as announced in the detailed
cautionary of 15 February) into South Africa resulting from the Transaction was
an important factor in securing exchange control approval for the offer. In
contrast, a straightforward unbundling would result in the same outflow of
assets from South Africa, but without the compensating inflow resulting from
the proposed Transaction; and
(b) in addition, the South African Minister of Finance stated in his recent
budget speech that tax legislation on unbundling is currently under review. In
the event that tax benefits provided by existing legislation cease to be
available, a possible consequence is that, on a pure unbundling, De Beers could
become liable for Secondary Taxation on Companies ("STC") of approximately US$1
billion based on the current prevailing STC rate and market value of Anglo
American shares.
(ii) De Beers believes that, as a publicly listed, single product company
with cyclical earnings and cash flows, and a requirement to have sufficient
credit facilities in place, it would be inappropriate (even if the necessary
tax, exchange control and/or shareholder approvals were obtained) to unbundle
the whole of its shareholding interest in Anglo American.
Accordingly, for the key reasons set out above, the Transaction is the only
option that met the objectives of each of the DBI shareholders and, therefore,
was the only option put forward by DBI. Given DBI's continuing belief that the
Transaction is the most attractive option, DBI's shareholders would not support
an alternative pure unbundling proposal put forward in opposition to the
Transaction.
DBI and the De Beers Independent Directors' Committee believed at the time of
announcement that the Transaction represented fair value. Since the
announcement of the Transaction, both the world economic outlook and equity
markets have declined materially, reinforcing their belief that the Transaction
is fair and reasonable.
TIMETABLE
The various De Beers and Anglo American meetings to vote on the Transaction
have been convened for 4 May 2001.
ENQUIRIES
DE BEERS
(www.debeersgroup.com)
Rory More O'Ferrall +44 20 7430 3126
Andrew Lamont (UK Media) +44 20 7430 3515
Joan Braune (International PR) +44 20 7430 3505
Richard Chetwode (International IR) +44 20 7430 3102
Tracey Peterson (SA Media) +27 11 374 7388
Mark Irvine (SA IR) +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 Limited, which is regulated in the UK by The Securities
and Futures Authority Limited, is acting for De Beers and no one else in
connection with the Transaction, and will not be responsible to anyone other
than De Beers for providing the protections afforded to customers of N M
Rothschild & Sons Limited nor for providing advice in relation to the
Transaction.
This announcement does not constitute an offer or an invitation to acquire
shares or securities.
Issued by De Beers and DBI. Approved by UBS Warburg Ltd, a subsidiary of UBS
AG, for the purposes of section 57 of the Financial Services Act 1986. UBS
Warburg Ltd. is regulated in the UK by The Securities and Futures Authority
Limited. This does not constitute a recommendation regarding the De Beers
Linked Units. The value of an investment may go up as well as down. De Beers
Linked Unit holders should seek advice from an independent financial adviser as
to the suitability for the individual concerned.
10 April 2001
