| Fri 20 Apr 2001, 0:00 | | Escher / M Cubed - Merger Of Escher And M Cubed |
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Escher Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/014568/06)
("Escher")
m Cubed Capital Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1999/010031/06)
("m Cubed")
Merger of Escher and m Cubed
1. INTRODUCTION
PSG Investment Bank and Gensec Bank are authorised to announce that agreement
has been reached between Escher and m Cubed, whereby Escher will acquire from m
Cubed the assets and liabilities as described in 3.1 below. The transaction is
subject to the fulfilment of the suspensive conditions referred to in 5 below.
2. BACKGROUND AND RATIONALE
2.1 m Cubed is the holding company of a financial services group engaged in
the business of, inter alia, retail and institutional multi-management,
specialised investments and third party administration outsourcing.
2.2 Escher is the holding company of a financial services group engaged mainly
in the business of institutional multi-management and related structured
products, both locally and abroad. Escher operates an in-house back office
function.
2.3 In the light of the complementary nature of these businesses, it has been
agreed that Escher and m Cubed pool their respective operations to form a new
enlarged financial services group, to be renamed Escher m Cubed Holdings
Limited ("Escher m Cubed"). In the process, some of these businesses will be
merged, either immediately or at a later stage, with resultant synergies and
benefits.
2.4 The parties are of the view that the South African multi-management market
is poised for a rationalisation, and economies of scale will be needed to be at
the forefront of this process.
2.5 Escher m Cubed will be the holding company of a group with the following
focus areas:
- institutional multi-management with some R28 billion funds under management;
- retail multi-management with some R3 billion funds under management;
- institutional and retail structured products;
- specialised investments; and
- third party administration outsourcing, administering some 200 000 records,
the assets of which are valued at R40 billion.
2.6 Escher, a company listed on the JSE Securities Exchange South Africa
("JSE"), will grow organically and by acquisition.
3. SALIENT TERMS OF THE TRANSACTION
3.1 Escher will acquire from m Cubed inter alia the following:
- the issued shares of all m Cubed's wholly owned subsidiaries (with the
exception of Lifeworks (Pty) Limited), namely m Cubed Capital Specialised
Investments (Pty) Ltd, m Cubed Capital Unit Trusts Management Company Limited,
Automated Outsourcing Services Limited, m Cubed Capital International (Pty)
Ltd, m Cubed Capital Management Services (Pty) Ltd, m Cubed Capital Property
Investments (Pty) Ltd, m Cubed Capital Life Limited and m Cubed Capital Asset
Management (Pty) Ltd;
- 50% of the issued shares of Corporate Money Fund Managers (Pty) Ltd;
- 40% of the issued shares of Emerging Fund Manager Products (Pty) Ltd;
- m Cubed's rights in intellectual property;
- m Cubed's rights in any pension fund;
- m Cubed's claims on loan account against the aforesaid companies and their
subsidiaries and associated companies;
- all m Cubed's liabilities in respect of its employees incurred since 1 March
2001; and
- m Cubed's liability of R9 million to m Cubed Capital Life Limited.
3.2 The purchase consideration shall be 450 million new Escher shares,
resulting in the total issued share capital of Escher m Cubed increasing to 750
million shares.
3.3 It is foreseen that m Cubed will be unbundled in the short term, giving its
shareholders a direct interest in Escher m Cubed.
3.4 The following executive directors will be appointed: John Storey (Group
Managing Director), Philip Croeser (Managing Director - Asset Management
Subsidiary), Anne Cabot-Alletzhauser (Chief Investment Officer - Asset
Management Subsidiary), Margaret Dawes (Financial Director) and Tracy van der
Heijden (Chief Operating Officer - Asset Management Subsidiary).
3.5 The non-executive directors of the board of directors of Escher m Cubed
will be Jannie Mouton, Charles Bothner, Leon de Wit, Ian Sinton, a person to be
nominated by Royal London Scottish Life and a person to be nominated by PSG
Group Limited.
4. RESULTANT STRUCTURE POST M CUBED UNBUNDLING
!!!GROUP STRUCTURE!!!
5. SUSPENSIVE CONDITIONS
The transaction is subject to the fulfilment of inter alia the following
suspensive conditions:
- board and shareholder approvals;
- a waiver by a majority of independent votes at a general meeting of Escher of
the obligation to make a mandatory offer to minorities;
- approvals by the JSE, Securities Regulation Panel, Competition Commission,
Financial Services Board and Investment Management Regulatory Organisation Ltd
of England (IMRO); and
- meeting of certain profit and net asset value warranties for the year ended
28 February 2001. For this purpose, a special audit is being performed on m
Cubed as at that date.
6. EFFECTIVE DATE
The effective date of this transaction will be the date of the fulfilment of
the last outstanding suspensive condition, but not before the last day to
register for dividends of Escher and m Cubed in respect of the year ended 28
February 2001.
7. FINANCIAL EFFECTS
The financial effects of this transaction will be disclosed in the circulars to
shareholders of Escher and m Cubed respectively after the finalisation of the
special audit of m Cubed as at 28 February 2001, and will be published in due
course. The effects on earnings per share and tangible net asset value per
share are not expected to be material.
8. UNDERTAKINGS
m Cubed shareholders who collectively hold in excess of 50% of the issued
shares of m Cubed, have undertaken to vote in favour of all the m Cubed
resolutions required to implement the proposed transaction.
9. DOCUMENTATION AND FURTHER ANNOUNCEMENTS
Circulars to Escher and m Cubed shareholders containing details of the
transaction and which will include notices convening the required meetings are
being prepared and will be posted to shareholders within 28 days or such later
date as approved by the JSE.
A further announcement giving salient dates and times of meetings will be
published in due course.
10. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement issued by Escher Group
on 5 April 2001 and are advised that, as a result of this announcement, the
said announcement is hereby withdrawn.
Johannesburg
20 April 2001
Investment bank and sponsor to Escher
PSG INVESTMENT BANK
Investment bank to m Cubed
GENSEC
Gensec Bank Limited
(Registration number 1996/004744/06)
Escher Group and m Cubed Capital Holdings merger could redefine multi
management arena
PRESS RELEASE
THURSDAY 19 APRIL 2001
The successful conclusion of merger discussions between financial services
groups Escher Group and m Cubed Capital Holdings is expected to redefine a
fast-growing segment of the local asset management sector.
The new group, which will be called Escher m Cubed Holdings Limited, will have
combined assets under management of over R30bn making it the largest
independent local multi-manager. The combination of the two asset management
operations will create the largest team of multi-manager investment
professionals in South Africa. In addition, the group will administer assets in
excess of R40 billion.
Existing m Cubed Capital shareholders will hold 60% of the total 750 million
shares in the new group while current Escher shareholders will hold the
balance. Management interests will own almost half the shares in issue, making
Escher m Cubed one of South Africa's largest staff controlled listed financial
groups.
Both organisations will benefit substantially through this merger. Escher will
gain a retail and operations business with a more diversified revenue mix while
m Cubed Capital will enjoy enhanced critical mass in its asset management
business and a listing on the Johannesburg Securities Exchange. Escher
Structured Products and m Cubed Capital's specialised investment business will
also benefit from synergies between technical skills and client bases.
The merged pool of expertise, products and experience will present the new
group with exciting prospects for continued growth within the financial
services sector. New business opportunities within the group's chosen areas of
focus - multi-manager asset management, retail investments, investment
administration and investment structuring - have been identified for
development.
According to the merged group's MD John Storey, "In an industry where the
competitive landscape is constantly being redefined, combining these
complementary businesses will increase our ability to deliver value to our
customers, particularly in the asset management arena. By leveraging our
combined skills and knowledge capital, we will be able to improve service to
our clients and increase shareholder value.
Another significant advantage for our clients is our total independence from
any consulting group or asset manager. The merger opens up a number of
opportunities in the local and international financial services industry which
might not have been as accessible to the individual companies. Both individual
businesses have seen triple digit growth in the past, and we are positive about
the group's prospects going forward."
The merged group will benefit from existing joint venture relationships with
the likes of the Mineworkers' Investment Company. "This relationship gives us
access to a large number of retirement funds in one of the most established
sectors of the market. It also affords us the opportunity to transfer asset
management and multi-management expertise, while at the same time, gaining a
deeper understanding of trustee needs and requirements. More importantly, as a
consequence of our joint venture activities, we are able to positively impact
on the lives of more than two million South Africans." says Storey.
Philip Croeser, MD of the envisaged group's integrated multi-manager asset
management operation Escher m Cubed Investments adds, "The merged asset
management team of 24 investment professionals, with Anne Cabot-Alletzhauser as
chief investment officer, will include some of the most experienced
multi-manager and asset management talent in the country. Because of the
similarity in our investment philosophy and management style, as well as our
compatible corporate cultures and focus on cultural diversity, we expect a
seamless transition into a single entity, enabling us to concentrate our
efforts on the innovation for which both groups are noted."
In addition to its institutional business, the group will continue to operate
in the individual investment and retirement markets through existing,
well-established distribution channels. Since the merger only impacts the
business at group and asset management levels, other group subsidiaries and
operations will not be affected.
Says Storey,"We believe that shareholders can expect solid growth in assets and
earnings going forward. We remain open to further deals of this nature and are
examining a number of other opportunities to grow by M&A."
Ends
For more information contact:
John Storey Philip Croeser
Group MD MD, Asset Management
Tel. 011 340 2301 Tel. 011 486 1590
