| Tue 9 Oct 2001, 0:00 | | Aflife - Announcement |
|
African Life Assurance Company Limited
(Incorporated in the Republic of South Africa)
(Registration number 1911/003818/06)
Share code: AFI ISIN: ZAE000000246
("Aflife")
Announcement relating to:
the proposed disposal by Aflife of the major portion of its properties (and
related operations) to certain related parties.
1. Introduction
Ernst & Young Sponsors (Pty) Ltd ("E&Y Sponsors") is authorised to announce
that, subject to the fulfilment of the conditions set out in paragraph 5
below, agreement has been reached between Aflife and Equity Estates (Pty)
Ltd ("Equity Estates"), a company formed by the executive directors of
African Life Properties (Pty) Ltd ("Afprop"), being Messrs D L Brown, K V
Richardson and C A Jankowitz ("the executive directors"), in terms of which
Aflife will dispose of the major portion of its properties and related
operations (with the exception of certain excluded properties) owned by its
85% held subsidiary, Afprop ("the property business") to Equity Estates for
the consideration as set out in paragraph 4.2 below.
2. Nature of Business of Aflife
Aflife was founded in 1982 and listed on the JSE Securities Exchange South
Africa ("JSE") in 1990. Aflife operates in the financial services and
healthcare markets and is currently listed in the "Insurance - Life
Assurance" sector of the JSE list.
Aflife focuses primarily on entry-level risk financial services and
healthcare products in its chosen markets. It markets a comprehensive range
of affordable life, investment policies and health cover products to the
emerging markets within Southern Africa.
3. Nature of the property business
Afprop houses the group's investment property portfolio. Afprop's focus has
been primarily on the development of decentralised office blocks in the
northern suburbs of Johannesburg. Typically sites with the potential for
development have been identified, acquired, developed and ultimately,
leased. The buoyant letting market enjoyed until the second half of last
year has resulted in above average historic returns being achieved on
completed developments.
In addition, Afprop holds certain other properties in such decentralised
areas as Soweto (one retail property), Jet Park (one industrial property)
and the United Kingdom. Collectively these other properties represent only
some 2% of the portfolio being disposed of.
4. The Disposal
4.1 Rationale for the disposal
It is Aflife's view that shareholder assets are overweight in property
investments and that the disposal of such assets is an ideal opportunity to
improve the liquidity of shareholder assets. In addition, Aflife is of the
view that the property market shows signs of slowing down given the current
oversupply of office space, thus further reducing growth opportunities. The
transaction will realise the full carrying value at 31 March 2001 of the
properties being disposed of.
The proceeds of the disposal will be applied to settle Aflife's existing
interest bearing debt within Afprop and to provide capital for other growth
opportunities.
4.2 Terms of the disposal
The effective date for the disposal of the property business is 30 September
2001. The disposal consideration is an amount of R480,4 million plus the
face value of any debts owing by the executive directors. The purchaser
shall pay R355 million on the effective date, R75,4 million plus the face
value of any debts owing by the executive directors on the closing date and
R50 million on the fifth anniversary of the effective date or the date of
cancellation by Aflife of the call option referred to below. Payment is to
be made in cash subject to the conditions set out in paragraph 5 below.
Aflife has been granted an option in terms of the call option agreement
to purchase 20% of the equity capital of Equity Estates for R30 million
within the call option period, which commences on the effective date and
expires on 28 February 2006.
4.3 Related party transaction
The disposal has been categorised by the JSE as a "related party"
transaction in terms of the Listings Requirements of the JSE, as the
shareholders of Equity Estates are family trusts set up by the executive
directors of Afprop, which is a subsidiary of Aflife. The JSE has ruled that
the Aflife shareholders who are executive directors of Afprop, and their
associates, will be precluded from voting in respect of the resolution to
approve the disposal, which will be proposed at the general meeting of
shareholders to be held during November 2001. The only executive director
who is an Aflife shareholder is Mr D L Brown, who holds some 35 000 shares
in Aflife.
4.4 Warranties and indemnities
The agreement relating to the disposal contains warranties and indemnities
that are normal in a transaction of this nature.
4.5 Financial effects
The table below sets out the financial effects of the disposal on an Aflife
ordinary share, had the disposal been effective for the 12-month period
between 1 April 2000 and 31 March 2001:
Before the disposal After the disposal Change
(cents) (cents) (%)
Earnings per ordinary share 28,5 32,4 13,7
Headline earnings per ordinary share 114,0 117,9 3,4
Net asset value per ordinary share at
31 March 2001 1 246,0 1 249,8 0,3
Net tangible asset value
per ordinary share at 31 March 2001 1 211,9 1 219,0 0,6
The financial effects are based upon the following:
The "Before the disposal" earnings per share and headline earnings per share
figures are based upon:
- the audited results of Aflife for the 12 months ended 31 March 2001; and
- 111 811 954 weighted average Aflife shares in issue.
The "Before the disposal" net asset value per share and net tangible asset
value per share figures are based upon:
- the audited group balance sheet of Aflife as at 31 March 2001; and
- 116 481 725 Aflife shares in issue at 31 March 2001.
The "After the disposal" earnings per share, headline earnings per share,
net asset value per share and net tangible asset value per share figures are
based upon:
- the inclusion of the full amount of the disposal, totalling R480,4 million
and interest earned on the net proceeds at an after-tax rate of 6,3% per
annum;
- 111 811 954 weighted average Aflife shares in issue in respect of the
various earnings based calculations; and
- 116 481 725 Aflife shares in issue in respect of the net asset and net
tangible asset value per share calculations as at 31 March 2001.
5. Conditions
The agreement is subject to both conditions precedent and resolutive
conditions. All conditions precedent have been met. The resolutive condition
outstanding is the approval of the disposal by Aflife shareholders in a
general meeting. The general meeting for the purpose of approving the
disposal will be held during November 2001 at 14:30.
6. Opinions, Recommendations and Undertakings
In terms of the JSE listing requirements, Aflife has appointed Ernst & Young
Corporate Finance (Pty) Ltd in conjunction with independent property valuers
and appraisers, The Property Partnership CC, to provide an opinion on the
fairness and reasonableness of the disposal. The board of directors of
Aflife, having considered the terms and conditions of the disposal, is of
the opinion that the terms and conditions are fair and reasonable to the
shareholders and accordingly, recommend that Aflife shareholders vote in
favour of the disposal.
7. Documentation
A circular, which is subject to the approval of the JSE, containing full
details of the disposal and convening the general meeting will be posted to
Aflife shareholders in due course.
Johannesburg
10 October 2001
Lead Sponsor
Ernst & Young Sponsors (Pty) Ltd
Joint Sponsor
Deutsche Bank Securities (SA) (Pty) Limited
Member of the Deutsche Bank Group
(Registration number 1995/011798/07)
Independent Adviser to Aflife
Ernst & Young
From thought to finish
Independent Property Valuers and Appraisers
The Property Partnership
Corporate law advisers and consultants to Aflife
Edward Nathan & Friedland (Pty) Ltd
(Registration number 1999/026464/07)
