| Thu 1 Nov 2001, 0:00 | | The Disposal By Avmin Of Its Shareholding In Iscor |
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The disposal by Avmin of its shareholding in Iscor Limited
("Iscor") to Stimela and the creation of a joint venture between
Avmin and Stimela
1. Background and rationale
On 1 February 2001, Avmin announced that it had acquired an interest of 35
293 300 ordinary shares in Iscor with the express intention of unlocking
value in Iscor. The board of Avmin believed at the time that Iscor's share
price did not reflect its full potential value and this made possible an
inexpensive investment to participate in strategic opportunities. As a
condition of the initial purchase of the Iscor shares, an option was granted
on a portion of these shares and, on 19 September 2001, 4,200 000 million of
these options were exercised. This resulted in a holding for Avmin of 31
093 300 Iscor shares, which is approximately 11.5 per cent of Iscor's issued
share capital.
The board of Avmin decided during August 2001 to explore a range of
alternatives in relation to Avmin's shareholding in Iscor, which would best
satisfy two key priorities:
- address Avmin's funding requirements; and
- maintaining a strategic interest in Kumba Resources Limited ("Kumba").
Having thoroughly reviewed all alternatives, including a firm outright
purchase offer for the Iscor shareholding, Avmin's board determined that the
most attractive route from both a financial and strategic perspective was to
enter into an agreement to sell its Iscor shares and to form a joint venture
with Stimela ("the agreement").
2. The transaction
Avmin and Stimela have concluded an agreement in terms of which Avmin will,
subject to the fulfillment of the suspensive condition set out in paragraph
8 below, sell its entire Iscor shareholding to Stimela.
Stimela will pay to Avmin an amount of R24.00 per Iscor share for its entire
shareholding of 31 093 300 shares. This represents a total consideration of
R746 239 200 for Avmin. The consideration will be paid in two equal cash
installments, the first due on 5 November 2001 and the remainder on 6 May
2002. Stimela has also granted Avmin a call option ("the Option"), details
of which are set out in paragraph 3 below, on the shares of Kumba, post the
unbundling of Iscor.
3. The Option
The Option has been granted to Avmin by Stimela, assuming and following the
unbundling of Iscor, to acquire between 10 per cent and 25 per cent of all
the Kumba shares beneficially held by Stimela at the time of exercising the
Option. The cost of the Kumba shares to Avmin will be R20.25 per Kumba
share, plus related transaction costs and interest. The Option can be
exercised any time after the listing of Kumba until 5 November 2002.
The Option enables Avmin, assuming the unbundling of Iscor, to participate
in any upside in the Kumba share price.
4. The joint venture
The agreement allows Avmin to retain both financial and strategic upside in
Kumba, while at the same time, it provides Avmin with funding for its
working capital and investment needs. Avmin, through Assmang Limited, has
significant iron ore interests in the Northern Cape and believes that
material value may potentially be unlocked over time in respect of these
reserves, in conjunction with Stimela. As such, Avmin and Stimela have
agreed to share a common objective of unlocking the potential value in the
Northern Cape iron ore fields. Avmin has the right to appoint a director to
the board of Stimela and, if Avmin exercise the full Option, it will have
the right to nominate 50% of the directors of Stimela.
Negotiations with an empowerment partner are advanced, which could result in
the empowerment partner acquiring 10 per cent of the joint venture.
5. Warranties
The agreement incorporates such warranties as are usual for a transaction of
this nature.
6. Financial effects for Avmin
Before After % change
(cents) (cents) increase
Headline EPS 259.3 297.9 14.9
Fully diluted 250.7 288.1 14.9
headline EPS
NAV 3640 3908 7.3
The "Before" column reflects the headline EPS and fully diluted headline EPS
for the year ended 30 June 2001. Headline EPS and fully diluted headline
EPS in the "After" column represents the pro-forma effect of the sale on
headline EPS and fully diluted headline EPS assuming:
- the effective date of the sale of the shares held in Iscor was on 30 June
2000;
- that the sale consideration had been invested in an interest bearing
account at 10.15% per annum for the 12 months ended 30 June 2000.
NAV in the "Before" column reflects the NAV as at 30 June 2001. NAV in the
"After" column represents the pro forma effect on the sale of the shares
held in Iscor on the NAV, assuming that the sale had been effective on 30
June 2000.
7. Opinion from the independent advisor to Avmin
Deutsche Securities (SA) (Proprietary) Limited has provided a formal opinion
to the Avmin board that this transaction is fair and reasonable from a
financial point of view to Avmin and its shareholders.
8. Suspensive condition
The implementation of the sale is subject to, inter alia, Avmin to obtain
the release of the Iscor shares from certain cessions and pledges to its
financiers.
31 October 2001
Sponsor to Avmin Merchant Bank to Stimela
Deutsche Securities (SA) (Pty) Limited Investec Corporate Finance
(Registration number 1995/011798/0721) Investec Bank Limited
(Registration number
1969/004763/06)
Attorneys to the transaction
Jowell, Glyn & Marais Inc
(Registration number 1990/000849/21)
