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Co-investment with CLEAR CHANNEL and INDEPENDENT
Introduction
Corpcapital Corporate Finance is authorised to announce that Corpgro has
reached agreement, subject to the conditions referred to below, to invest in
Clidet No 355 (Pty) Limited ("New Corpcom"), a new company established by
Clear Channel International Holdings BV ("Clear Channel") and Independent
News & Media (South Africa) (Pty) Limited ("Independent").
Corpcom Limited ("Corpcom") has sold its business to New Corpcom ("the
sale") for a cash price of R468 million ("the sale price") which, after
settlement of transaction costs and certain retained liabilities, should
represent not less than 125 cents per Corpcom share. Shareholders are
referred to the joint announcement by Corpcom, Clear Channel and Independent
published together with this announcement ("the Corpcom announcement").
Corpgro will acquire a one third equity interest in New Corpcom for a
consideration of R157 million ("the investment"). Clear Channel and
Independent hold the remaining equity interests in New Corpcom, in equal
shares of one third each.
Rationale for the investment
Corpgro's rationale for making the investment is as follows:
in the circumstances more fully described in the Corpcom announcement,
Corpcom's decision to sell its business to New Corpcom is in the best
interests of Corpcom's shareholders and the future of its business;
in light of Corpgro's instrumental role in the development of Corpcom's
business, Clear Channel and Independent require Corpgro to invest an equal
amount with each of them in New Corpcom and to participate in the board of
New Corpcom;
Corpgro values highly the opportunity to partner two of the world's leading
media groups in their significant new investment in the South African
economy;
Corpgro's investment is subject to put and call options to dispose of the
investment to Clear Channel and Independent over five years at a price
calculated on an equivalent formula to that used to determine the sale price
("the put and call options");
as Corpgro holds 67% of the shares in Corpcom, Corpgro's attributable share
of the sale price is R300 million, representing a gain of R218 million or 87
cents per Corpcom share on its cost of investment. The remaining R143
million of cash which will accrue to Corpgro after the investment will be
used to invest in core activities which provide strong annuity income and in
new proprietary investments and to repay debt; and
the sale and investment are in line with Corpgro's development into an
investment banking group.
The investment
Clear Channel and Independent require, as a pre-requisite to the sale, that:
Corpgro makes the investment in consideration for a one third equity
interest in New Corpcom, subject to the put and call options;
Corpgro stands surety for 67% of Corpcom's limited warranty and indemnity
obligations to New Corpcom; and
Corpgro provides undertakings to New Corpcom in restraint of trade, for no
additional consideration.
The conditions to the investment
The investment is subject to the condition precedent that, no later than 14
September 2001, the sale becomes unconditional.
Financial effects
The pro forma financial effects of the sale and the investment are based on
Corpgro's published consolidated interim results for the six months ended 28
February 2001 ("interim period") and on the following assumptions:
for the purposes of net tangible asset value per share, that the sale price
was received and the investment made on 28 February 2001;
for the purposes of headline earnings per share, that:
the sale price was received and the investment made at the beginning of the
interim period;
Corpgro's attributable share of the sale price less the investment amount
was used to repay group interest-bearing liabilities; and
the investment yielded a return equal to that attributable to Corpgro from
its equivalent interest in Corpcom for the interim period.
Historica Pro forma
l after the
before sale and Change
the investment (%)
sale and (cents)
investmen
t
(cents)
Net tangible asset 243 332 37
value per Corpgro share
The pro forma effect on headline earnings per Corpgro share as a result of
the sale and investment is less than 3% and is accordingly not material.
Circular
In terms of the Listings Requirements of the JSE Securities Exchange South
Africa ("Listings Requirements") the investment is a Category two
transaction for Corpgro. Accordingly, as required in terms of the Listings
Requirements, a circular in this regard will be mailed to Corpgro
shareholders within 28 days of this announcement.
Johannesburg
2 July 2001
Corporate advisor to Corpgro Sponsor to Corpgro
Corpcapital Corporate Finance BoE Securities (Pty) Limited
Legal advisor to Corpgro
Corpcapital Transaction Support
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