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Limited
IOTA FINANCIAL SERVICES LIMITED
ISIN CODE : ZAE000014759
SHARE CODE : IOT
1. INTRODUCTION
Further to the cautionary announcements published on 14 June 2001, 4 July
2001 and 16 August 2001 shareholders are advised that IOTA Group Holdings
(Proprietary) Limited ("IOTA Holdings"), a wholly owned subsidiary of IOTA
has, subject to the conditions precedent referred to in paragraph 3 below,
concluded a sale of shares and claims agreement ("the agreement") in terms
of which it has disposed of its entire shareholding in IOTA Insurance ("the
disposal") to Hannover Reinsurance Africa Limited ("Hannover"). IOTA
Insurance holds as its only asset the entire issued ordinary share capital
of Compass Insurance Company Limited ("Compass") a registered short term
insurer.
2. THE DISPOSAL
2.1 RATIONALE FOR THE DISPOSAL
As part of the ongoing review of IOTA's activities referred to in the
previous announcement, it became evident that Compass was no longer part of
the ongoing core activities of IOTA. In the interest of Compass, IOTA and
its shareholders, IOTA requested Hannover, currently a preference
shareholder in IOTA Insurance, to consider acquiring the entire share
capital of IOTA Insurance.
2.2 PURCHASE CONSIDERATION AND SETTLEMENT THEREOF
In terms of the agreement the effective date of the disposal is 1 May 2001.
IOTA Holdings will dispose of its shares and claims in IOTA Insurance to
Hannover, for a cash consideration of R 26 729 772, which will be subject to
upward or downward adjustment in terms of the warranties. The consideration
will be settled as follows: 60% on the fulfillment of the conditions
precedent; and 40% on 30 April 2002. Interest will accrue on the outstanding
purchase consideration based on the R 150 bond rate.
IOTA intends to use the proceeds of the disposal to fund the working capital
requirements of its subsidiaries.
3. CONDITIONS PRECEDENT
The disposal is, inter alia, subject to the following conditions precedent:
* approval by the Competition Commission of the disposal;
* the approval of the disposal by the shareholders of IOTA in a general
meeting and thereafter the approval of the disposal by IOTA as the sole
shareholder of IOTA Holdings;
* approval of the disposal by the Registrar of Short Term Insurance; and
* the Exchange Control Department of the South African Reserve Bank
approving the terms of the agreement.
These conditions precedent must be fulfilled on or before 30 November 2001
4. THE FINANCIAL EFFECTS OF THE DISPOSAL
The table below indicates the financial effects of the disposal on the
published annual financial statements of IOTA for the year ended 30 April
2001, had the disposal been effective on 1 May 2000 for earnings and
headline earnings purposes and on 30 April 2001 for net asset value and net
tangible asset value purposes.
Before the After the %
disposal (cents) disposal (cents) Change
Earnings per share 38.3 40.3 5.2
Headline earnings per share 45.3 47.3 4.4
Net asset value per share 269.0 259.1 (3.7)
Net tangible asset value per
share 239.0 229.1 (4.1)
The financial effects are based upon the following:
The "after the disposal" earnings and headline earnings per share is based
upon:
* the exclusion of the profit after taxation of R 1 085 517 made by IOTA
Insurance consolidated;
* interest earned on the net proceeds at an after tax rate of 9.4% per
annum; and
* 69 342 691 weighted number of IOTA shares in issue.
The "after the disposal" net asset value and net tangible asset value per
share is based upon:
* 56 271 949 number of shares in issue at 30 April 2001 (net of treasury
shares held)
5. CIRCULAR TO SHAREHOLDERS
A circular, containing full details of the disposal and incorporating a
notice of general meeting of IOTA shareholders is in the course of
preparation and will be posted to IOTA shareholders within 28 days of the
publication of this announcement.
Johannesburg
10 September 2001
Corporate adviser Legal adviser
IOTA Corporate Werksmans
Finance (Pty) Limited
Sponsor
PricewaterhouseCoopers
Corporate Finance (Pty) Ltd
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