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Retail Apparel Group Limited
(Registration number 1946/021937/06)
("RAG" or "the company")
Announcement to shareholders regarding:
- an increase in authorised share capital;
- changes to the share option scheme;
- amendments to the Articles of Association; and
- amendments to the terms of the disposal of Arthur Kaplan Jewellers
("AKJ").
1. Introduction
It was announced in RAG's interim report published on 10 April 2001 that RAG
intended implementing a rights offer to shareholders to raise R210 million.
In order to implement the rights offer, the company needs to increase its
authorised share capital. The directors of RAG are also proposing changes to
the share option scheme and amendments to the Articles of Association.
Further to the announcement dated 2 February 2001, shareholders are advised
of the amended terms of the disposal of RAG's interest in Arthur Kaplan
Jewellers ("AKJ"), a division of the RAG group, to Eyal Diamonds
(Proprietary) Limited ("Eyal") ("the disposal").
2. Increase in authorised share capital
To enable RAG to proceed with the proposed rights offer, the directors of
RAG propose increasing the authorised share capital of RAG from R2 000 000,
consisting of 2 000 000 000 ordinary shares of 0.1 cent each to R4 700 000,
consisting of 4 700 000 000 ordinary shares of 0.1 cent each.
The new ordinary shares to be created will rank pari passu in all respects
with the existing ordinary shares.
3. Changes to the share option scheme
The directors of RAG are proposing a number of changes to the share option
scheme. RAG shareholders will be required to consider and, if deemed fit,
approve the changes to the share option scheme.
4. Amendments to the articles of association
In order to allow RAG more flexibility in the management of its capital, the
directors are proposing certain amendments to the company's Articles of
Association. The amendments will enable the company to utilise funds that
are surplus to its requirements to repurchase its own shares and to make
payments to its shareholders. The articles of association will also be
amended to make provision for share transactions on the JSE Securities
Exchange South Africa ("JSE") to be settled electronically.
5. Amended terms of the disposal
5.1. Assets to be disposed of
It was previously announced that RAG would dispose of a 50% interest in the
assets constituting AKJ. Further to the due diligence investigation and
negotiations with Eyal, the directors of RAG have now agreed to dispose of
100% of RAG's interest in AKJ.
5.2. Effective date
The effective date for the disposal will be the first day of the new month
after all conditions precedent have been fulfilled ("the effective date").
5.3. Consideration
The amended purchase consideration of R31 million will be settled as
follows:
- R20 million on the effective date;
- R4 million on or before the first anniversary of the effective date; and
- R7 million on or before the second anniversary of the effective date.
Furthermore, Eyal will take over the RAG overdraft facility (currently R5
million) relating to AKJ. AKJ will repay the RAG divisional loan of R12.7
million by the first anniversary of the effective date. This loan will bear
interest at prime.
5.4. Conditions precedent
The disposal is subject to the fulfilment of the following conditions
precedent:
- approval by the Competition Commission;
- sub-letting or cession agreements in respect of the lease agreements of
the AKJ stores being concluded; and
- shareholders of RAG voting in favour of the resolutions necessary to
implement the disposal.
5.5. Financial effects of the disposal
The financial effects of the disposal on the headline loss and tangible net
asset value ("NAV") attributable to a RAG shareholder are set out in the
table below, based on the following assumptions:
- the Before and After positions are based on the results for the six months
ended 31 December 2000 and on the balance sheet as at that date;
- the After position in respect of headline losses assumes that the disposal
was effective from 1 July 2000, and that the proceeds resulted in a decrease
in interest bearing debt at a rate of 14.5% per annum; and
- the After position in respect of tangible NAV assumes that the disposal
was effective as at 31 December 2000.
Per RAG share Before After Change
(cents) (cents) (%)
Headline earnings (20.4) (19.6) 3.9
Tangible NAV 85.1 83.7 (1.6)
6. Further documentation
A circular setting out details of the increase in authorised share capital,
changes to the share option scheme, amendments to the Articles of
Association and convening a general meeting of shareholders to be held on
Friday 31 August 2001 will be posted to shareholders today, 8 August 2001.
If shareholders would like to receive an electronic version of the circular,
they may contact the Company Secretary or alternatively e-mail a request to
sponsor@rmb.co.za
A further circular, which is subject to the approval of the JSE, setting out
details of the disposal and convening a general meeting of shareholders will
be posted to shareholders in due course.
Durban
8 August 2001
Merchant bank and sponsor
RAND MERCHANT BANK
CORPORATE FINANCE
A Division of FirstRand Bank Limited
Attorneys
DENEYS REITZ
ATTORNEYS
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