| Wed 12 Dec 2001, 0:00 | | Dunlop Africa Limited - Proposed Disposal Of The B |
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(Incorporated in the Republic of South Africa)
(Registration number 1939/012141/06)
ISIN ZAE000029542
Ordinary Share code DNL
Preference Share code DNLP
("Dunlop" or "the Company")
Ethos Private Equity Limited
(Incorporated in the Republic of South Africa)
(Registration number 1985/003363/06)
The proposed disposal of the business of Dunlop to a consortium led by
Ethos, followed by the proposed delisting and members' voluntary winding-up
of Dunlop
1. Introduction
Further to the cautionary announcement published on 7 September 2001, and
the further cautionary announcement published on 23 October 2001, HSBC
Investment Services (Africa) (Pty) Limited ("HSBC") is authorised to
announce that, subject to the fulfilment or waiver of the suspensive
conditions set out in paragraph 6 below:
* Agreement has been reached in principle between Dunlop and a consortium
consisting of Trillion Nominees (Pty) Limited, as nominee for the
partnerships comprising and the co-investment trusts associated with Ethos
Private Equity Fund III ("Ethos"), certain members of the management of
Dunlop (being Michael John Hankinson, Pierre Johan Dreyer, Robin Kevin
Braithwaite, Dermot Joubert, Basil Owen Smith and Richard Stephen Ewart
Whittington, and a senior management pool), Ellerine Brothers (Pty) Limited,
Frankin Investments (Pty) Limited and the Frangos Family Trust ("the
Consortium"), which will result in Dunlop and/or its subsidiaries disposing
of all of the business operations of Dunlop and/or such subsidiaries or all
the shares in and shareholders' claims against such subsidiaries held by
Dunlop to the Consortium or a company owned by the Consortium ("the
disposal"); and
* Dunlop will be liquidated by way of a members' voluntary winding-up ("the
voluntary winding-up"). An ordinary share liquidation dividend of R4,00 per
Dunlop ordinary share ("the ordinary share liquidation dividend") will be
paid to holders of ordinary shares. A preference share liquidation dividend
of R2,52 inclusive of preference dividends accrued to the day on which
payment is made assuming this occurs on Monday, 25 February 2002, will be
paid to holders of preference shares ("the preference share liquidation
dividend").The liquidation dividends (being the preference share liquidation
dividend and the ordinary share liquidation dividend) will be paid on the
Monday following the record date and the Company will be delisted
simultaneously.
2. The disposal and the voluntary winding-up
Dunlop has agreed, subject to the fulfilment or waiver of the suspensive
conditions set out in paragraph 6 below, to dispose of all of the business
operations of Dunlop and/or its subsidiaries or all of the shares in and
shareholders' claims against such subsidiaries held by Dunlop to Newco, a
special purpose company owned by the Consortium, for a net purchase
consideration of R544 million ("the purchase price"). It is likely that the
existing holding company and controlling shareholder of Dunlop, Dunlop
Africa Holdings (Pty) Limited, will act as Newco.
A general meeting of Dunlop ordinary and preference shareholders
(collectively, "shareholders") will take place on or about Friday, 8
February 2002 to approve the disposal and to pass the necessary resolutions
required for the voluntary winding-up and the payment of the liquidation
dividends.
The disposal has been categorised as a "related party" transaction in
terms of the Listings Requirements of the JSE Securities Exchange South
Africa ("JSE"), as the members of the Consortium are members of Dunlop
Africa Holdings (Pty) Limited or are Dunlop shareholders and/or directors.
Both the JSE and the Securities Regulation Panel ("SRP") have ruled that the
Dunlop shareholders who are members of the Consortium 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. The Consortium
members hold in aggregate approximately 78,3 million ordinary shares,
representing approximately 57,8% of the issued ordinary shares and 52,1% of
the total voting rights (including preference shares).
All Dunlop shareholders, including members of the Consortium, are eligible
to vote on all other resolutions to be proposed at the general meeting,
including the resolutions required for the liquidation and the payment of
the liquidation dividends. Pursuant to the voluntary winding-up, it is
proposed that Dunlop will be delisted from the JSE.
Undertakings to vote in favour of the resolutions required for the
disposal have been received from Dunlop shareholders holding shares carrying
39,2% of the total votes which may be cast in respect of that resolution at
the general meeting. The SRP has received confirmation that the Consortium
has sufficient cash resources to satisfy its full cash obligations in terms
of the disposal.
3. Rationale for the disposal and the voluntary winding-up
Dunlop has in recent years produced real growth in earnings and cash flow.
However, the Dunlop share price performance has been characterised by a
relatively low rating and low levels of liquidity, thus making it difficult
for Dunlop shareholders to trade in their Dunlop shares. In addition,
sentiment towards small and medium market capitalisation companies is not
expected to improve in the near future. Accordingly, the proposed
transactions and accompanying distributions will enable Dunlop shareholders
to realise their investment at an attractive premium to the market price.
The Company also faces substantial expansion capital expenditure and the
Consortium believes it can fund this more effectively in an unlisted
environment. Furthermore, the Company is the only locally listed tyre
manufacturer placing it at a competitive disadvantage relative to global
competitors in the local market.
4. Opinions and recommendations
An independent committee of the board of directors of Dunlop has appointed
HSBC as an external advisor to review the terms of the disposal and will
state their opinion and make recommendations to shareholders in the circular
that will be dispatched to Dunlop shareholders in due course.
5. Financial effects
The following table, which has been prepared for illustrative purposes only,
sets out the pro forma financial effects of the disposal and the
distribution on the ordinary and preference shares:
Before the After the
disposal disposal
and the and the
Percentage
distribution distribution increase/
Notes (cents) (cents)
(decrease)
Market value per Dunlop
ordinary share 1 315,0 400,0 27,0
Market value per Dunlop
preference share 1 106,0 252,0 137,7
Market value per Dunlop
ordinary share 2 365,0 400,0 9,6
Market value per Dunlop
preference share 2 107,0 252,0 135,5
Pro forma net asset value
per Dunlop ordinary share 3 372,8 414,1 11,1
Pro forma net asset value
per Dunlop preference share 4 200,0 252,0 26,0
Pro forma net tangible asset
value per Dunlop ordinary share 3 372,8 414,1 11,1
Pro forma net tangible asset value
per Dunlop preference share 4 200,0 252,0 26,0
Pro forma headline earnings per
Dunlop ordinary share 5 23,0 14,1 (38,9)
Pro forma headline earnings
per Dunlop preference share 6 6,0 6,0 -
Pro forma earnings per Dunlop
ordinary share 5 21,3 14,1 (34,0)
Pro forma earnings per Dunlop
preference share 6 6,0 6,0 -
Notes:
1. The market value per Dunlop ordinary and preference shares in the
"Before" column is based on the closing Dunlop ordinary and preference share
prices on Thursday, 6 September 2001, being the last trading date prior to
the publication of the first cautionary announcement, and the market value
per Dunlop ordinary and preference share in the "After" column is based on
the disposal consideration.
2. The market value per Dunlop ordinary and preference shares in the
"Before" column is based on the closing Dunlop ordinary and preference share
prices on Monday, 10 December 2001 and Monday, 3 December 2001 respectively,
being the last trading dates prior to the finalisation of this announcement,
and the market value per Dunlop ordinary and preference share in the "After"
column is based on the disposal consideration.
3. The pro forma net asset value per Dunlop ordinary share and the pro forma
net tangible asset value per Dunlop ordinary share in the "Before" column
are based on the published interim results of Dunlop for the six months
ended 30 June 2001. The pro forma net asset value per Dunlop ordinary share
and the pro forma net tangible asset value per Dunlop ordinary share in the
"After" column are based on the assumption that the disposal had been
implemented on 1 January 2001.
4. The pro forma net asset value per Dunlop preference share and the pro
forma net tangible asset value per Dunlop preference share in the "Before"
and "After" columns are based upon the asset entitlement of the preference
shares as per the Dunlop articles of association.
5. The pro forma headline earnings per Dunlop ordinary share and the pro
forma earnings per Dunlop ordinary share in the "Before" column are based on
the published interim results of Dunlop for the six months ended 30 June
2001. The pro forma headline earnings per Dunlop ordinary share and pro
forma earnings per Dunlop ordinary share in the "After" column are based on
the assumptions that the disposal consideration of R544 million had been
received on 1 January 2001 and invested at an after-tax rate of 7% per
annum.
6. The pro forma headline earnings per Dunlop preference share and the pro
forma earnings per Dunlop preference share in the "Before" and "After"
columns are based upon the par value of R2,00 per preference share and the
coupon rate of 6%.
6. Suspensive conditions
The disposal is subject to and conditional upon the fulfilment of, inter
alia, the following suspensive conditions:
* the passing and where applicable, registration of all ordinary and special
resolutions required to approve and implement the disposal and the Dunlop
voluntary winding-up in accordance with the requirements of the Companies
Act, 1973 (Act 61 of 1973), as amended, the SRP and the Listings
Requirements of the JSE;
* the conclusion of a shareholders' agreement between the Consortium and
Newco on terms and conditions reasonably acceptable to the Consortium
members and the fulfilment of all conditions to which that agreement is
subject, save for any condition relating to the conclusion of the disposal
agreement and it becoming unconditional;
* the consent of all relevant third parties to the transfer of all material
contracts, licences and intellectual property to the Consortium;
* the independent committee of Dunlop and HSBC, as external advisors to the
independent committee, confirming that the terms of the disposal are fair
and reasonable, and the independent committee of Dunlop recommending that
shareholders vote in favour of the disposal and the voluntary winding-up;
* if required, the issuance of an unconditional clearance certificate in
respect of the disposal by the relevant competition authorities within 90
days of the date on which notification of the merger is given to such
competition authorities; and
* the conclusion of a formal disposal agreement between Newco and Dunlop and
formal financing agreements between Newco, the Consortium and the providers
of finance to Newco.
7. Salient dates and times
The salient dates and times of the disposal and the liquidation are as
follows:
Last day for receipt of forms of proxy in respect of
the general meeting of Dunlop shareholders by not
later than 10:00 on Wednesday, 6 February
2002
General meeting of Dunlop shareholders to be held
at 10:00 on and results announcement issued through
SENS on Friday, 8 February 2002
Announcement in respect of fulfilment or waiver of the
suspensive conditions and results of general meeting
published in the press on Monday, 11 February 2002*
Last day to trade to be eligible to participate in the
distributions on Friday, 15 February 2002*
Suspension of the listing of Dunlop ordinary and
preference shares on the JSE from commencement
of business on Monday, 18 February 2002*
Record date to register as a shareholder in order to
receive the liquidation dividends at the close of
business at 16:00 on Friday, 22 February 2002*
Termination of the listing of Dunlop ordinary and
preference shares on the JSE from commencement
of business on Monday, 25 February 2002*
Cheques due in respect of the ordinary share
liquidation dividend and the preference share
liquidation dividend in respect of certificated
holders posted on Monday, 25 February 2002*
Proceeds due electronically deposited into
shareholders' accounts in respect of certificated
shareholders on Monday, 25 February 2002*
Dematerialised shareholders' accounts credited with
Central Securities Depository Participant or broker
in respect of the ordinary share liquidation
dividend and the preference share liquidation
dividend on Monday, 25 February 2002*
*The above dates and times are subject to amendment. Any amendment to the
dates and times will be released on SENS and published in the press. The
dates marked with an asterisk are dependent on the fulfilment or waiver of
the suspensive conditions set out in paragraph 6 above.
8. Documentation
A circular, which will be subject to JSE and SRP approvals, containing full
details of the disposal, the voluntary winding-up, the delisting of Dunlop
and convening the required general meeting of Dunlop, is being prepared and
will be dispatched to Dunlop shareholders in due course.
Durban
13 December 2001
Sponsor and corporate advisor
HSBC
Attorneys to the Consortium
Webber Wentzel Bowens
Merchant bank to the Consortium
Rand Merchant Bank
Corporate Finance
A Division of FirstRand Bank Limited
Attorneys to Dunlop
Deneys Reitz Attorneys Inc.
Reg. No. 1984/003385/21
Reporting accountants and auditors to Dunlop
Deloitte & Touche
