| Wed 31 Oct 2001, 0:00 | | Fortune Beverages - Merger With Coca-cola |
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Fortune Beverages Limited
(Incorporated in the Republic of South Africa)
Share code FOR ISIN ZAE000017323
(Registration number 1986/002814/06)
("the company")
* Merger With Coca-Cola Sabco (S.A.) (Proprietary) Limited ("Sabco")
* Specific Pro Rata Repurchase Of Shares In The Company
* Distribution Of Share Premium
* Withdrawal Of Cautionary
* Delisting
1. FORMATION OF COCA-COLA FORTUNE
1.1 Introduction
Further to the cautionary announcement dated 23 October 2001, Nedcor
Investment Bank is authorised to announce that the company has entered into
an agreement with SABCO's holding company, Coca-Cola SABCO (Proprietary)
Limited ("CCS"), in terms of which the company's Coca-Cola bottling
operations are to be merged with the South African bottling operations of
CCS ("the merger"). The merged company will be renamed Coca-Cola Fortune
(Proprietary) Limited ("Coca-Cola Fortune"). CCS is owned by the Gutsche
family and Coca-Cola Southern and East Africa (Proprietary) Limited ("The
Coca-Cola Company").
1.2 Rationale for the merger
The merger will enable the company and CCS, collectively, to:
- enhance their logistical capability and create efficiencies through the
enlarged operational infrastructure;
- further develop the Coca-Cola franchises in the rural markets of South
Africa and allow a greater spread of ownership within the South African
bottling industry by previously disadvantaged persons;
- create a focused emerging market bottler which will benefit from the
pooling of skills, resources and best practices which currently exist in the
two organisations; and
- create a bottling group which is well positioned to participate in any
further consolidation of the Coca-Cola bottling system in South Africa and
for a future listing on the JSE Securities Exchange South Africa ("JSE").
1.3 Salient features of the merger
1.3.1 The company's wholly-owned operating subsidiaries, Coca-Cola Bottling
Mpumalanga (Proprietary) Limited ("CCBM") and Coca-Cola Bottling East London
(Proprietary) Limited ("CCBEL"), will be acquired by CCS's
wholly-owned subsidiary, SABCO, which company will be renamed Coca-Cola
Fortune.
1.3.2 The purchase consideration will be settled through the issue of shares
and loans in Coca-Cola Fortune, equivalent to 19,5% of the issued ordinary
share and shareholder loan capital, with CCS owning the balance. For the
purposes of the merger the purchase consideration is R460 million.
1.3.3 After the merger, the company will have cash resources of
approximately R45 million.
1.3.4 It is the intention of the parties to seek a listing of Coca-Cola
Fortune shares on the JSE within a period of five years. Following the
listing, the company will be wound up, resulting, inter alia, in a
distribution of its shareholding in
Coca-Cola Fortune to its own shareholders.
1.3.5 The company is entitled to appoint two directors to the board of Coca-
Cola Fortune, one of whom will be
Mr M W Z Kunene, who will be the executive chairman of Coca-Cola Fortune.
1.4 Conditions precedent
The merger is subject, inter alia, to the fulfilment of the following
conditions precedent:
- the approval of the company's shareholders in general meeting;
- the approvals of the JSE and the Securities Regulation Panel ("SRP");
- the approval of the Competition Commission or Competition Tribunal, as the
case may be; and
- the approval of The Coca-Cola Company with regard to the transferring of
bottling, selling and distribution rights of CCBM and CCBEL to Coca-Cola
Fortune.
The company's shareholders holding collectively 82% of the company's issued
ordinary share capital, have given irrevocable commitments to vote in favour
of the merger at the general meeting referred to above.
1.5 Financial effects of the merger
Based on the company's interim results for the six months ended 30 June
2001, and assuming that the merger had been effective for that period, the
merger would have had the following financial effects:
Before After
Change
(cents per share) (cents per share) (%)
Market value 150,01 400,02 167
Net tangible asset value ("NTAV") 124,9 86,83 (31)
Net asset value 124,9 571,53 358
Headline earnings 17,2 14,24 (17)
Notes:
1. Based on the last traded price on the JSE prior to this announcement.
2. Based on the value of the shares for the purposes of the specific
repurchase, equivalent to R3,50 per share plus the estimated surplus cash in
the company immediately prior to the specific repurchase and the share
premium distribution, which has been estimated to be equivalent to 50 cents
per share.
3. Based on the pro forma balance sheet of the company at 30 June 2001,
adjusted for the merger on the basis that the company's interest in Coca-
Cola Fortune is accounted for on the proportional consolidation method.
4. Based on the interim results of the company for the six months ended 30
June 2001, recalculated as if the merger had been in effect for that period.
The directors believe that the merger will have a positive effect on the
earnings per share in the future, as the benefits of the merger materialise.
1.6 Opinions and recommendation
The directors of the company are of the opinion that the merger will be
beneficial to shareholders and recommend that they vote in favour thereof at
the general meeting referred to below.
Ernst & Young, who have been appointed by the directors to advise the
company and its shareholders, believe that the merger is fair and reasonable
to shareholders. The text of their opinion will be included in the circular
to shareholders referred to below.
2. THE SPECIFIC PRO RATA SHARE REPURCHASE AND DISTRIBUTION OF SHARE PREMIUM
2.1 Introduction
2.1.1 In terms of the specific repurchase, Kilimanjaro Bottling
(Proprietary) Limited ("Kilimanjaro"), a wholly-owned subsidiary of the
company, will offer to purchase 7 140 000 of the company's shares pro rata
from shareholders at a price of R3,50 per share. Shareholders will also be
able to tender shares in excess of their pro rata entitlement ("excess
tender").
2.1.2 In terms of the share premium distribution, shareholders will receive
a pro rata cash distribution, out of the company's share premium, in terms
of section 90 of the Companies Act, 1973 (Act 61 of 1973), as amended ("the
Act"), equivalent to a maximum amount of 23 cents per share. The exact
amount of the share premium distribution will be determined in January 2002,
at which stage shareholders will be notified in the press.
2.2 Rationale
In January 2002, or immediately prior to the merger, CCBM and CCBEL will,
based on the cash resources of the company at the time, repay an estimated
R45 million of their loans owing to the company. The board considers it
appropriate that the company distributes this cash, in the form of the
specific repurchase and the share premium distribution, to the shareholders
in terms of these arrangements.
2.3 Terms of the specific repurchase
It is proposed that, subject to the fulfilment of the conditions precedent
referred to below, Kilimanjaro will make a specific offer to repurchase
ordinary shares from the company's shareholders on a pro rata basis up to a
maximum of 7 140 000 shares, which shares will be held as treasury stock.
The repurchased shares are equivalent to 8,22 shares per 100 shares held,
comprising approximately 8,2% of the current issued ordinary share capital
of the company. The repurchase consideration of R3,50 per share ("the offer
consideration") will amount to R25 million if the offer is accepted in full.
At the discretion of the directors the company's shares tendered in terms of
the excess tender may be acquired on an equitable basis mutatis mutandis on
the terms applicable to the pro rata offer, subject to Kilimanjaro
acquiring, together with the shares acquired in terms of the pro rata offer,
not more than a maximum, in aggregate, of 7 140 000 of the company's shares.
The offer consideration will be discharged by cheque or electronic transfer.
2.4 Terms of the share premium distribution
It is proposed that, subject to the fulfilment of the conditions precedent
referred to below, the company make a payment to its shareholders, amounting
to a maximum of R20 million in aggregate, equating to approximately 23 cents
per share, in the form of a payment in terms of section 90 of the Act. As
the record date for the specific repurchase and the share premium
distribution is the same day, shareholders will receive the share premium
distribution on all the shares held by them on such date, notwithstanding
the fact that they may wish to participate in the share repurchase. The
exact amount of such payment will be calculated in January 2002, at which
time shareholders will be advised in the press.
2.5 Financial effects of the specific repurchase and share premium
distribution
Due to the fact that it is not known what the cash resources of the company
are going to be in January 2002, any calculation of financial effects on the
specific repurchase and share premium distribution will be meaningless.
Subject to the final calculation of the share premium distribution, an
amount of approximately 50 cents per share will be paid back to shareholders
in terms of the specific repurchase and the share premium distribution.
Shareholders are referred to the financial effects of the merger contained
in paragraph 1.5 above and are reminded that such amount will reduce the
NTAV referred to therein.
2.6 Opinions
The directors of the company have considered the effects of the specific
repurchase and share premium distribution and are of the opinion that:
- the company and its subsidiaries ("the group") will be able to pay its
debts in the ordinary course of business for a period of 12 months after the
date of this announcement;
- the consolidated assets of the group will be in excess of the consolidated
liabilities of the group for the period of 12 months after the date of this
announcement;
- the share capital and reserves of the group will be adequate for its
requirements for a period of at least 12 months after the date of this
announcement;
- the working capital available to the group will be sufficient for its
requirements for a period of at least 12 months after the date of this
announcement.
The directors of the company are of the opinion that the specific repurchase
and the share premium distribution will be beneficial to shareholders and
recommend that they vote in favour thereof at the general meeting referred
to below.
Ernst & Young, who have been appointed by the directors to advise the
company and its shareholders, believe that the specific repurchase and the
share premium distribution are fair and reasonable to shareholders. The text
of their opinion will be included in the circular to shareholders referred
to below.
2.7 Conditions precedent
The specific repurchase and share premium distribution are subject to the
fulfilment of the following conditions precedent:
- the amendment of the Articles of Association of the company to allow the
company and its subsidiaries to purchase its shares and the company to make
payments to its shareholders in terms of sections 85, 89 and 90 of the Act,
respectively;
- the amendment of the Articles of Association of Kilimanjaro to allow it to
purchase shares in the company in terms of section 89 of the Act;
- the approval of the JSE;
- the requisite special resolutions being passed at the general meeting of
shareholders referred to below;
- a special resolution of Kilimanjaro authorising it to acquire shares in
Fortune in terms of the specific repurchase being passed; and
- the registration of such special resolutions by the Registrar of
Companies.
The company's shareholders holding collectively 82% of the company's issued
ordinary share capital, have given irrevocable commitments to vote in favour
of the specific repurchase and the share premium distribution at the general
meeting referred to above.
2.8 Salient dates and times
Set out below are the salient dates and times relating to the merger, the
specific repurchase and the share premium distribution:
2001
Circular posted to Fortune shareholders Friday, 16 November
Last date to trade to be eligible to vote
at the general meeting Wednesday, 28 November
Record date to be eligible to vote at
the general meeting Wednesday, 5 December
Last date to lodge proxies for the general meeting of
Fortune shareholders at 10:00 Friday, 7 December
General meeting of Fortune shareholders
to be held at 10:00 Monday, 10 December
Results of the general meeting published in the press Tuesday, 11 December
2002
Last date to trade to participate in the specific
repurchase and the share premium distribution Friday, 4 January
Shares trade ex-entitlement (price adjustment) Monday, 7 January
Record date to participate in the specific repurchase
and the share premium distribution Friday, 11 January
Cheques in respect of the share premium distribution
mailed at the risk of shareholders or cash
electronically transferred in respect of
certificated shareholders. Safe custody accounts
will be credited with shareholders' CSDP'S or
brokers' CSDP'S Monday, 14 January
Specific repurchase offer opens Monday, 14 January
Specific repurchase offer closes at 16:00 Friday, 1 February
Results of the specific repurchase published Monday, 4 February
Document(s) of title in respect of the excess tender
not accepted by the directors and/or balance
certificates in respect of the specific repurchase
returned to shareholders concerned, by registered
post, at the risk of such shareholders, where
applicable in respect of certificated shareholders.
Safe custody accounts will be credited with
shareholders' CSDP'S or brokers' CSDP'S Monday, 4 February
Subject to the acceptance of the directors,
cheques in respect of the excess tender will be
mailed at the risk of shareholders, or cash
electronically transferred in respect of
certificated shareholders. Safe custody accounts
will be credited with shareholders' CSDP'S or
brokers' CSDP'S Monday, 4 February
Notes:
1. Cheques in respect of the specific repurchase will be mailed at the risk
of shareholders, or cash electronically transferred, on the business day
following the duly completed form of acceptance and surrender by the
transfer secretaries in respect of certificated shareholders. Safe custody
accounts will be credited with shareholders' CSDP'S or brokers' CSDP'S.
2. The above dates and times are subject to amendment. Any such amendment
will be published in the press and on the Stock Exchange News Service.
3. There will be no dematerialisation/rematerialisation between 28 December
2001 and 11 January 2002.
3. DELISTING
As a result of the merger, the sole asset of Fortune will be its 19,5%
interest in Coca-Cola Fortune. Due to the transaction changing the nature of
the Fortune business to the extent that it will only hold a minority
shareholding in an unlisted company, Fortune will no longer qualify for a
listing in terms of the Listings Requirements of the JSE, resulting in the
JSE requesting that Fortune be delisted subsequent to the merger.
To enable Fortune shareholders the opportunity to realise their Fortune
investment, if they wish, the directors of Fortune have agreed with the JSE
that Fortune will remain listed for six months after the implementation of
the merger, whereafter its listing will be terminated. Further details of
this will be contained in the circular referred to below.
4. CIRCULAR TO FORTUNE SHAREHOLDERS AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
A circular to the company's shareholders, containing, inter alia, a notice
of general meeting of shareholders, is being prepared and will, subject to
the approvals of the JSE and SRP, be posted in due course.
Shareholders are referred to the cautionary announcement dated 23 October
2001 and are advised that caution no longer need be exercised when dealing
in the company's shares.
Johannesburg
31 October 2001
Investment Bank and Sponsor
Nedcor Investment Bank
Attorneys
Prinsloo, Tindle & Andropoulos Inc. Attorneys
Independent advisor to the shareholders of the company
Ernst & Young
Chartered Accountants (SA)
(Registered Accountants and Auditors)
Reporting accountants to the company
Deloitte & Touche
