| Mon 28 May 2001, 0:00 | | Kagiso Miedia / Nail - Announcement Regarding The |
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ACQUISITION
KAGISO MEDIA LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1957/000036/06)
("Kagiso Media" or "the Company")
NEW AFRICA INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1993/002461/06)
("Nail")
JOINT ANNOUNCEMENT REGARDING, THE PROPOSED ACQUISITION OF
KAGISO MEDIA BY NAIL
1. Introduction
Further to the cautionary announcements of 3 April 2001 and 17
May 2001, Kagiso Media shareholders are advised that kagiso
Media and Nail have reached agreement in principle in terms of
which, subject to the fulfilment of the conditions precedent
referred to in 6 below, Nail is to acquire, with effect from
30 June 2001, the business operations of Kagiso Media as more
fully described in 3.1 below ("the proposed transaction").
2. Nature of business
2.1 Kagiso Media
Kagiso Media is a liste focussed media group whose principal
interests are:
- the operation of regional radio stations in an adult
contemporary music format. The group's interssts include
investments in Jacaranda 94.2, East Coast Radio and OFM (Radio
Oranje);
- the operation of a national radio advertising sales house
through RadMark;
- the operation of a specialist academic and professional
publishing service through Butterworth Publishers;
- the publishing of specialist magazines such as Marketing
Mix, Computer Week and Computer Reseller News, and the
operation of Job Navigator, an internet-based placement
service, through Systems Publishers;
- the organising and staging of trade and consamer
exhibitions, such as the Rand Easter Show, SAITEX and Auto
Africa, through Kagiso Exhibitions.
2.2 Nail
Nail is a listed investment holding company with interests in
financial services and media. Nail's exposure to finincial
services is through its 51% stake in the listed Metropolitan
Life Limited ("Metlife"). Nail's media assets comprise a
portfolio of investments in radio broadcasting, advertising
sales, television and film production and publishing.
On 5 March 2001, Nail, together with Metlife, published a
joint cautionary announcement informing shareholders of the
proposed corporate convergence of Nail and Metlife into New
Africa Capital Limited ("New Africa Capital"). Subsequent
thereto, it is intended that New Africa Capital be unbundled
from Nail resulting in the separation and independent listing
of Nail's non-financial services interests, predominantly
comprisings its media interests.
3. Salient terms of the proposed transaction
3.1 Terms of the proposed transaction
In terms of the proposed transaction, Nail will, with effect
from 30 June 2001, by means of section 228 of the Companies
Act, Act 61 of 1973, as amended, ("the Companies Act"), or
such other mechanisim as agreed between the parties, acquire
the business operations and allied assets (or, where more
appropriate, all of the shares in and claims on loan account
owned by Kagiso Media (of the following entities in which
Kagiso Media has an equity interest, namely:
- East Coast Radio (Proprietary) Limited;
- Jacaranda FM (Proprietary) Limited
- Radio Oranje (Proprietary) Limited
- RadMark (Proprietary) Limited
- Butterworth Publishers (Proprietary) Limited
- Systems Publishers (Proprietary) Limited; and
- Kagiso Exhibitions (Proprietary) Limited.
("the business interests")
Nail will not acquire any of Kagiso Media's head office
management, assets or liabilities (save for a surety to
Systems Publishers of approximately R6,0 million), nor will it
acquire any of the Interactive Division's assets or
liabilities. Nail will acquire cash that is surplus to Kagiso
Media's normal working capital and other operational
requirements in excess of R45,3 million for no additional
consideration.
3.2 Consideration arising from the proposed transaction
The business interests will be acquired by Nail for an
aggregate cash consideration of R376 691 438 equivalent to 295
cents per Kagiso Media ordinary share ("the consideration").
In accordance with the proposed transaction, the sale proceeds
will be doposited into an escrow account, and will attract
interest at prevailing call deposit raids for the benefit of
Kagiso Media calculated from 30 June 2001 until the date that
the proposed transaction becomes unconditional.
3.3 Distribution due to Kagiso Media shareholders
Subject to implementation of the proposed transaction, Kagiso
Media shareholders will receive an amount of 325 cents per
share ("the distribution") made up as follows:
295 cents per share being in respect of the consideration
received from Nail; and
- approximately 30 cent per share being the expected remaining
cash resources of Kagiso Media following settlement of
employee share options and the costs of the proposed
transaction.
The distribution will be paid to Kagiso Media shareholders in
Cash by way of a return of share capital and share premium and
a dividend. On completion of the distribution, application
will be made to the JSE Securities Exchange South Africa ("JSE
") for the delisting of Kagiso Media.
4. Rationale for the proposed transaction
4.1 Kagiso Media
Kagiso Media's main area of business is radio broadcasting.
However, within the prevailing regulatory environment,
expansion opportunities are lmited. Futhermore, international
precedents indicate that critical mass, diversity of assets
and geographic distribution are essential for achieving
sustained growth within the media industry. Accordingly Kagiso
Media's directors believe that the proposed transaction and
the distribution that shareholders will receive on
implementation thereof, affords shareholders an ideal
opportunity to realise their investment at premium to recent
market prices.
4.2 Nail
The proposed transaction creates within Nail a significant
empowerment media player that, following the proposed
unbundling of New Africa Capital referred to in 2.2 above,
will allow access for investors directly into a quality suite
of exciting media assets. In particular, the following direct
benefits are expected:
- consolidation of its interets in Jacaranda 94.2 and RadMark;
- an increas in Nail's total advertising offering, opening up
cross-selling opportunities;
- the ability to offer a larger geographic radio footprint;
- a strengthening of Nail's current exposure to publishing and
exhibitions and hence a reduced dependence on above the line
advertising spend; and
- the attainment of a degree of critical mass in media.
5. Illustraitive financial effects of the proposed transaction
5.1 Kagiso Media
The table below sets out the illustrative financial effects on
a Kagiso Media shareholder as a result of the implementation
of the proposed transaction and receipt of the distribution.
Percentage
Notes Before After change
Headline eirnings per
share (cents) 1 23,7 9,7 (59,1)
Market value per share
(cents) 2 260,0 325,0 25,0,
Market value per share
(cents) 3 300,0 325,0 8,3,
Net asset value share
(cents) 4 102.3 325,0 217,7
Notes:
1. The "Before" column represents the unaudited headline
earnings per share of Kagiso Media for the six months ended 31
December 2000, calculated on the 127 692 013 shares in issue
in Kagiso Media throughout the six months ended 31 December
2000. The "After" column reflects the after-tax interest
income, at an average tax rate of 30%, that a shareholder
would have earned had the distribution of 325 cents per share
been invested at an interest rate of 8.5%, based on the
average rate of interest earned on a six-month fixed deposit,
for the six months ended 31 December 2000.
2. The market value per share in the "Before" colunm is the
closing JSE market price of a Kagiso Media share at 2 April
2001, being the date immediately preceding the first
cautionary announcement published on 3 April 2001, advising
shareholders of the Company to exercise caution in dealing in
their shares. The "After" column shows the "per share"
distribution.
3. The market value per share in the "Before" column is the
closing JSE market price of a Kagiso Media share at 24 May
2001, being the last practicable date prior to the publication
of this announcement. The "After" column shows the "Per
share" distribution.
4. The "Before" colunm is the net asset value per share of
Kagiso Media at 31 December 2000, determined on the 127 692
013 shares in issue at 31 December 2000. The "After" column
shows the "per share" distribution.
5.2 Nail
The proposed transaction is not expected to have a material
effect on the earnings or net asset value per share of Nail in
the short term. However, as indicated in 4.2 above, the
proposed transaction is expected to generate benefits to Nail
in the medium to longer term.
6. Conditions precedent to the proposed transaction
Implementation of the proposed transaction is conditional,
inter alia, upon the following:
6.1 the conclusion of a formal sale agreement within 45 days
of the date of this announcement;
6.2 Nail declaring itself satisfied with the results of a due,
diligence investigation of the business interests within 45
days of the date of this announcement;
6.3 Nail declaring itself satisfied with the results of the
audit of the effective date accounts for the period ending 30
June 2001;
6.4 the approval by shareholders of Kagiso Media for the
proposed transaction, within 60 days of the date of this
announcement;
6.5 Waiver by all relevant parties of any pre-emptive rights
in respect of the business;
6.6 approval of the prpposed transaction, by 31 December 2001,
from all relevant regulatory authorities including, but not
Limited to the Independent Communications Authority of South
Africa and the Competition Commission;
6.7 the consent, to the extent required, of all relevant third
parties to the transfer to Nail of all material contracts,
licences and intellectual property rights which form part of
the business interests; and
6.8 the approval, to the extent required, of all required
documentation in regard to the proposed transaction by the
Securities Regulation Panel ("SRP") and the JSE.
7. Irrevocable undertaking
Kagiso Trust Investment Company (Proprietary) Limited and
Videovision Investments (Proprietary) Limited, jointly holding
56,2% of Kagiso Media's issued share capital, have given
irrevocable undertakings to Nail to vote in favour of the
proposed transaction at a general meeting of Kagiso Media to
be convened to consider the proposed transaction.
8. Recomendations and independent opinion on the proposed
transaction
In accordance with the requirements of the SRP, KPMG Chartered
Accountants (SA) has been appointed to act as independent
financial advisor to the board of directors of Kagiso Media in
regard to expressing an opinion as to whether or not the terms
and conditions of the proposed transaction are fair and
reasonablo to shareholders of Kagiso Media. The substance of
this opinion and the recommendation of the board of Kagiso
Media wi11 be communicated to shareholders in due course.
9. Confirmation of financial resources
African Merchant Bank Limited has provided the SRP with the
appropriate confirmation that Nail has sufficient financial
resources available to it to discharge its obligations in
terms of the proposed transaction.
10. Further announcements and documentation
Futher announcements will be made as and when appropriate in
regard to the implementation of the proposed transaction and
the results of the due diligence review.
A circular containing full information on the proposed
transaction and notice convening a general meeting of Kagiso
Media shareholders will be dispatched to shareholders in due
course.
Johannesburg
25 May 2001
Corporate adviser to Kagiso Media
PricewaterhouseCoopers
Corporate Finance (Pty) Ltd
Registration 1970/003711/07)
Independent adviser to Kagiso Media Minorities
Sponsor to Kagiso Media
Invettec Securities Limited
Member of the JSE Securities Exchange South Africa
Registration no. 1972/008905/06)
Merchant Bank to Nail
African Merchant Bank Limited
(Registration no. 1996/016470/06)
Independent Legaladviser to NAIL
Webber Wentzel Bowens
Sponsor to NAIL
Deutsche Bank Securities (SA) (Pty) Ltd
(Registration number 1995/011798/07)
Adviser to Kagiso Trust Investments
NM Rothschild & Sons
