| Mon 3 Dec 2001, 0:00 | | The Proposed Conversion Of Primedia's Debentures |
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PRIMEDIA LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1993/003355/06)
Share code: PRI ISIN: ZAE000031159
Share code: PRN ISIN: ZAE000031167
("Primedia")
The proposed conversion of Primedia's debentures
and the proposed final debenture interest payment
1. Introduction
It was announced on SENS and in the press on Friday, 28 June 2001 that, in
order to simplify Primedia's capital structure, the board of directors of
Primedia ("the board") had resolved to propose to the holders of Primedia
ordinary units and Primedia "N" units ("the Primedia unitholders") that the
debenture portion of both the Primedia ordinary units and Primedia "N" units
("the Primedia units") be redeemed ("the Primedia debenture redemption") and
that the cash proceeds of the Primedia debenture redemption be compulsorily
applied to subscribe for new Primedia "N" shares of 0,01 cent each ("the
compulsory subscription"). It is intended that immediately after the
Primedia debenture redemption and the compulsory subscription at 185,75
cents per Primedia "N" share ("the debenture conversion") the Primedia
ordinary shares and Primedia "N" shares will be consolidated ("the Primedia
consolidations").
2. Primedia debenture conversion
The debenture conversion will strengthen Primedia's balance sheet by
converting the debentures into equity, and will also conserve Primedia's
future cash flows, by eliminating the obligation to pay interest on the
debentures. Although the debenture conversion will result in an increased
taxation charge for the group, this should in the medium term due to the
group's existing taxation losses and ongoing taxation allowances, be
principally by way of deferred taxation and not current taxation.
Since debenture interest will be paid for the period to 31 December 2001,
it is intended that no dividends will be paid for the year ending 30 June
2002. Thereafter, it is intended that Primedia will pay dividends based on a
dividend cover of three times commencing in the year ending 30 June 2003.
The future dividends should yield an after-tax return to Primedia
shareholders as opposed to the potentially taxable interest income as is
currently the case.
The resulting strengthening of Primedia's balance sheet and conservation
of cash flows will enhance the group's ability to buy back shares as and
when deemed appropriate.
3. MECHANISM FOR THE DEBENTURE CONVERSION
All the Primedia debentures rank pari passu, whether linked to Primedia
ordinary shares or Primedia "N" shares. Consequently, the application of the
cash proceeds of the redemption to subscribe for new shares needs to be for
the same class of shares for all Primedia debenture holders. The
subscription for new Primedia "N" shares as opposed to new Primedia ordinary
shares will preserve the existing relative holding of Mineworkers Investment
Company (Proprietary) Limited in the Primedia ordinary units in issue. The
empowerment status of Primedia is considered to be essential to Primedia.
4. The Primedia consolidations
The board has resolved that, subsequent to the debenture conversion, every
two Primedia ordinary shares of 1 cent each will be consolidated into one
Primedia ordinary share of 2 cents ("Primedia consolidated ordinary share")
and every two Primedia "N" shares of 0,01 cent each will be consolidated
into one Primedia "N" share of 0,02 cent ("Primedia consolidated "N"
share"). The Primedia consolidations will result in Primedia unitholders
holding the same number of Primedia shares subsequent to the debenture
conversion and Primedia consolidations as they held units before the
debenture conversion and consolidations.
A Primedia ordinary unitholder holding 100 Primedia ordinary units before
the debenture conversion and the Primedia consolidations will hold 50
Primedia consolidated ordinary shares and 50 Primedia consolidated "N"
shares after the debenture conversion and Primedia consolidations.
A Primedia "N" unitholder holding 100 Primedia "N" units before the
debenture conversion and the Primedia consolidations will hold 100 Primedia
consolidated "N" shares after the debenture conversion and Primedia
consolidations.
5. The proposed final debenture interest and election relating thereto
It is proposed that interest on the Primedia debentures will continue to
accrue until 31 December 2001 and not thereafter.
In respect of the payment of the final debenture interest for the six
months ending 31 December 2001 of 17,32 cents per Primedia debenture, each
Primedia consolidated shareholder will be given the choice of electing
either to:
- retain the final debenture interest in cash ("the cash payment"); or
- re-invest the final debenture interest in the subscription of additional
Primedia consolidated "N" shares ("the re-investment election"), on the
following basis:
Entitlement = Number of Primedia consolidated shares
held on 15 February 2002 in respect of 17,32 cents X 1,05
which the re-investment election X the market price
is exercised
where the market price is the weighted average traded price in cents of the
Primedia consolidated "N" shares for the three trading-day period ending on
Wednesday, 20 February 2002.
6. Financial effects
The table below sets out the pro forma financial effects of the debenture
conversion and the Primedia consolidations on a Primedia unitholder:
Before After
30 June 30 June
2001 2001 Change
Per Primedia unitholder (cents)1 (cents)2 (%)
Number of Primedia units/Primedia
consolidated shares 1 unit 1 share
Basic headline earnings
excluding restructuring costs 18 8 3 (57)
Basic headline earnings/(loss) 9 (2) 3 (118)
Fully diluted headline earnings
excluding restructuring costs 18 8 3 (57)
Fully diluted headline earnings/(loss) 9 (2) 3 (118)
Net asset value excluding intangibles 301 301 4 -
Net asset value including intangibles 310 310 4 -
Assumptions:
1 Based on published audited results for the year ended 30 June 2001.
2 Based on the one share that each unitholder will hold after the debenture
conversion and the Primedia consolidations.
3 Based on published audited results for the year ended 30 June 2001 and
adjusted for the additional tax charge that would have resulted had the
debenture conversion taken place on 1 July 2000 and adjusted for the number
of Primedia "N" shares to be issued in terms of the debenture conversion and
the Primedia consolidations.
4 Based on published audited results for the year ended 30 June 2001 and
adjusted for the number of Primedia "N" shares to be issued in terms of the
debenture conversion and the Primedia consolidations.
7. Conditions precedent
Implementation of the transactions is conditional, inter alia, upon:
- the requisite votes being cast in favour of the ordinary and special
resolutions for the proposed restructure of Primedia's capital structure and
the proposed final debenture interest payment at the general meeting of the
Primedia debenture holders and the combined general meeting of Primedia
ordinary and "N" shareholders; and
- registration of the special resolutions with the Registrar of Companies.
8. Delisting of Primedia units and listing of Primedia shares
Application has been made to the JSE Securities Exchange South Africa
("JSE") for the suspension of the Primedia units with effect from the
commencement of business on Monday, 7 January 2002 and the subsequent
delisting of the Primedia units with effect from the close of business on
Monday, 14 January 2002. An application has also been made to the JSE for
the listing of Primedia consolidated ordinary shares and Primedia
consolidated "N" shares with effect from the commencement of business on
Monday, 7 January 2002 which are expected to be posted or made available to
Primedia shareholders on Monday, 14 January 2002.
9. General meetings
A general meeting of Primedia debenture holders and a combined general
meeting of Primedia shareholders will be held in the boardroom at Primedia
Place, 5 Gwen Lane, Sandown at 09:00 and 09:30 respectively on Monday, 24
December 2001 for the purposes of considering and, if deemed fit, passing
the necessary resolutions to approve and implement the aforegoing debenture
conversion, the Primedia consolidations and the final debenture interest
payment.
10. Undertakings
Primedia shareholders, holding in excess of 68,71% of the votes of the
Primedia ordinary shares on a poll in issue at the date of issue of this
circular, have given written undertakings (63,18% irrevocably and 5,53%
revocably) in favour of the requisite resolutions to approve and implement
the transactions. Primedia shareholders holding 64,63% of the votes of the
Primedia "N" shares on a poll at the date of issue of this circular, have
given written undertakings (25,39% irrevocably and 39,24% revocably) that
they will vote in favour of the requisite resolutions to approve and
implement the transactions.
Primedia debenture holders, holding in excess of 66,45% of the Primedia
debentures in issue at the date of issue of this circular, have given
written undertakings (42,22% irrevocably and 24,23% revocably) that they
will vote in favour of the requisite resolutions to approve and implement
the transactions.
The aforementioned revocable undertakings relate to undertakings given by
the representatives of shareholders and debenture holders to recommend to
such holders to vote in favour of the requisite resolutions.
11.Further documentation
A circular will be posted to Primedia unitholders relating to the proposed
restructure of Primedia's capital structure and the proposed final debenture
interest payment.
Sandton
30 November 2001
Merchant bank and Sponsor
Investec Bank Limited
(Registration number 1969/004763/06)
Reporting accountants and auditors
Deloitte & Touche
Corporate law advisers and consultants
Edward Nathan & Friedland (Pty) Ltd
(Registration number 1999/026464/07)
