| Mon 6 Aug 2001, 0:00 | | Nail And Metropolitan Convergence And Metropolitan |
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WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
On 5 March 2001 NAIL and Metropolitan published a joint announcement which
set out their intended strategy to achieve the creation of a truly South
African diversified financial services group focused on Metropolitan and the
separate listing of NAIL's non-financial services interests. The strategy
entailed the creation of a new listed holding company for the Metropolitan
Group to be named New Africa Capital and a subsequent unbundling by NAIL of
its interest in New Africa Capital to achieve the separation of NAIL's
financial services interests from its non-financial services interests. The
implementation of this strategy was subject to the fulfilment of certain
conditions as set out in the above-mentioned announcement ("the
implementation conditions"). NAIL and Metropolitan have resolved to proceed
with implementation of the strategy on the basis set out below.
1. Implementation
1.1 Scheme of arrangement
New Africa Capital, a newly incorporated wholly-owned subsidiary of
NAIL, will propose a scheme of arrangement ("the scheme") in terms of
section 311 of the Companies Act (Act 61 of 1973 as amended) ("the Companies
Act") between Metropolitan and all of its shareholders, including New Africa
Finance Holdings Limited ("Nafhold"), the wholly-owned subsidiary of NAIL
which holds NAIL's interests in Metropolitan. The object of the scheme is to
create a new financial services group through the establishment of New
Africa Capital which, on implementation of the scheme, will become the
beneficial owner of the entire issued share capital of Metropolitan with
effect from 1 January 2001. In terms of the scheme Metropolitan shareholders
will receive shares in New Africa Capital in exchange for their shares in
Metropolitan such that their shareholding (both in number of shares and
percentage terms) in New Africa Capital after the scheme becomes operative
will be identical to their shareholding in Metropolitan before the scheme
becomes operative. On implementation of the scheme New Africa Capital will
be listed on, and Metropolitan delisted from, the JSE Securities Exchange
South Africa and the Namibian Stock Exchange.
Implementation of the scheme will be subject to the fulfilment of the
following conditions precedent ("the scheme conditions"):
* the scheme being approved by the Registrar of Long-Term Insurance to the
extent required by the Long-Term Insurance Act, 1998 ;
* the scheme being approved by the Registrars of Insurance of Namibia and
Botswana and the Commissioner of Insurance of Lesotho to the extent required
by the relevant insurance laws of those respective countries;
* the scheme being approved at the scheme meeting by a majority representing
not less than 75% of the votes exercisable by Metropolitan shareholders
present and voting, either in person or by proxy, at the scheme meeting;
* the Court approving the scheme in terms of section 37 of the Long-Term
Insurance Act, 1998;
* the Court sanctioning the scheme in terms of section 311 of the Companies
Act; and
* a certified copy of the Order of Court sanctioning the scheme being lodged
with, and registered by, the Registrar of Companies.
Nafhold has irrevocably undertaken to vote in favour of the scheme in
respect of the approximately 49% of Metropolitan which it holds.
1.2 Metropolitan's restructuring
It is proposed that, after the implementation of the scheme,
Metropolitan itself will be restructured by way of a transfer by
Metropolitan to New Africa Capital of part of Metropolitan's business. The
assets to be transferred comprise Metropolitan's interests in its life and
other operating subsidiaries, strategic investments, listed equities and
cash, valued at R1 838 million, representing the distributable reserves
attributable to Metropolitan shareholders at 31 December 2000. There will
remain in the long-term insurance business of Metropolitan substantially
greater assets than are required to cover the actuarial liabilities and
capital adequacy requirements of the business.
1.3 Rationale for the scheme and the restructuring
The scheme and the restructuring will:
* constitute New Africa Capital as a financial services holding company;
* enhance the management of the New Africa Capital Group's capital through
clear allocation of capital to the business units and measurement of return
thereon;
* permit increased focus by the business units on their identified areas of
speciality;
* create a more transparent structure with improved levels of disclosure by
separating the life insurance subsidiaries from the non-life subsidiaries
under a financial services holding company; and
* eliminate certain restrictions imposed on the non-life subsidiaries which
arise because, as subsidiaries of Metropolitan, they are governed by
insurance legislation and the statutes and regulations applicable to a life
insurer.
1.4 NAIL unbundling and share capital consolidation
Following the implementation of the scheme, NAIL will distribute to
its ordinary and "N" ordinary shareholders 319 554 246 shares in New Africa
Capital on the basis of 13.15268 New Africa Capital shares per 100 NAIL
ordinary and "N" ordinary shares, which will represent approximately 90% of
NAIL's holding in New Africa Capital ("the unbundling"). The balance of the
holding, which will represent approximately 5% of the issued share capital
of New Africa Capital, will be retained by NAIL as a source of funding for
the future expansion of NAIL's media interests and to cover certain
contingent liabilities. Subsequent to the unbundling it is proposed that the
issued and authorised ordinary and "N" ordinary share capital of NAIL will
be consolidated on the basis of 1 consolidated share for every 20 existing
shares ("the consolidation").
The unbundling will be subject to the fulfilment of the following
conditions precedent ("the unbundling conditions"):
* approval by the requisite majorities of NAIL ordinary and "N" ordinary
shareholders in general meeting;
* approval of the unbundling by the South African Revenue Service in terms
of section 60 of the Income Tax Act 1995;
* implementation of the scheme; and
* compliance by NAIL at the date of the unbundling with the requirements of
section 90 of the Companies Act.
In the event that the scheme is not implemented the NAIL board will consider
alternative proposals to effect the unbundling
2. The implementation conditions
Based on the latest available analysis of the shareholdings in Metropolitan
and NAIL, the position in respect of the fulfilment of the implementation
conditions is as follows:
2.1 Shareholders who will hold not less than 29.3% of the issued share
capital of New Africa Capital after implementation of the scheme and the
unbundling are considered as empowerment shareholders by the board of NAIL.
This significantly exceeds the 15% target set out in the implementation
conditions.
2.2 Shareholders holding not less than 20.1% of the issued share capital
of NAIL are considered as empowerment shareholders by the board of NAIL.
This compares with the 30% target set out in the implementation conditions.
2.3 Formation of a voting pool representing not less than 25% of the
shareholders' votes of New Africa Capital has not proved possible to date.
The boards of directors of NAIL and Metropolitan consider that the
objectives envisaged in the implementation conditions remain valid and
desirable in order to strengthen the empowerment characteristics of both
companies into the future, characteristics which are considered appropriate,
in addition to being necessary, for business success in the South African
environment. However, both the board of NAIL and the board of Metropolitan
believe that it is in the best interests of the shareholders of NAIL and
Metropolitan to establish certainty in respect of the future of both
companies. Both boards have therefore resolved to proceed with the scheme,
the restructuring and the unbundling. Both boards will continue to work
towards implementation of the objectives envisaged in the implementation
conditions.
3. NAIL post unbundling
Following the implementation of the unbundling, NAIL will focus on
the development of its media interests. NAIL announced on 25 May 2001 that
it had reached agreement in principle in terms of which, subject to the
fulfilment of certain conditions precedent, NAIL is to acquire certain
business interests of Kagiso Media Limited ("the Kagiso transaction"). These
interests, together with the media interests of NAIL, creates within NAIL a
significant empowerment media player demonstrating the level of critical
mass that NAIL requires in the media sector. This, together with anticipated
cash and near cash assets of not less than R382 million after allowing for
known contingent liabilities and the Kagiso transaction, will position NAIL
to take advantage of further opportunities that arise in the media sector.
After the consolidation NAIL will retain its ordinary and "N" ordinary share
structure until such stage as it is no longer justified.
4. Financial effects
4.1 Financial effects on Metropolitan
The scheme and the restructuring will have no material effect on the
headline earnings, embedded value, tangible net asset value or intangible
net asset value per share of a Metropolitan shareholder.
4.2 Financial effects on NAIL
The effects of the unbundling (before the consolidation), excluding the
effects of the Kagiso transaction, are as follows:
Audited at Pro forma at
31 December 31 December
2000 2000
pre-unbundling post-unbundling Percentage
change
Earnings (R'000) 400 626 111 728 (72.1)
Headline earnings (R'000) 403 136 65 195 (83,8)
Net asset value (R'000) 5 578 217 1 680 164 (69,9)
Net tangible asset value (R'000) 1 722 732 1 398 675 (18,8)
Earnings per share (cents) 16,5 4,6 (72,1)
Headline earnings per share (cents) 16,6 2,7 (83,8)
Net asset value per share (cents) 229,6 69,2 (69,9)
Net tangible asset value
per share (cents) 70,9 57,6 (18,8)
4.3 Financial effect on NAIL shareholders
The effect of the unbundling on the ordinary and "N" ordinary shareholders
of NAIL are as follows:
Holders of 100 ordinary or "N" ordinary shares
Pre-unbundling Pro forma
post-
unbundling
Headline earnings per 100 shares (cents) 1 660 270
Headline earnings on 13.15268 New Africa
Capital shares to be received on unbundling (cents) 1 390
1 660 1660
Holders of 100 ordinary or "N" shares
Pre-unbundling Pro forma
post-unbundling
Net asset value per 100 shares (cents) 22 960 6 920
Net asset value per 13.15268
New Africa Capital shares to be
received on unbundling (cents) 16 040
22 960 22 960
5. Dates and documentation
It is anticipated that implementation of the scheme and the unbundling
will be completed, subject to fulfilment of the scheme and unbundling
conditions, before the end of September 2001.
Further announcements regarding the salient dates and times of the scheme,
the consolidation and the unbundling will be made on Tuesday, 14 August
2001.
Documentation in respect of the scheme and the unbundling is expected to
be posted to shareholders of Metropolitan and NAIL respectively on or about
Tuesday, 14 August 2001.
6. Withdrawal of cautionary announcement
In the light of the information set out above, shareholders of NAIL and
Metropolitan are advised that they no longer need to exercise caution in
dealing in the securities of the respective companies.
Johannesburg Bellville
6 August 2001 6 August 2001
Financial adviser to NAIL Financial adviser to Metropolitan
Deutsche Securities (SA) (Pty) Ltd N M Rothschild & Sons
Joint sponsors to NAIL Sponsor to Metropolitan
Deutsche Securities (SA) (Pty) Ltd N M Rothschild & Sons
Wipcapital (Pty) Limited
Corporate law advisers Sponsoring broker to Metropolitan in
and consultants to NAIL Namibia
Edward Nathan & Friedland Colin van Zyl / Hendrik Lombard
Trading as Lexus Securities (Pty) Ltd
Legal adviser to NAIL Legal adviser to Metropolitan
Chuene Kwinana Motsatse Deneys Reitz
