| Tue 18 Dec 2001, 0:00 | | Announcement in respect of the disposal of all the |
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1. Introduction
Shareholders are referred to the press announcements dated 5 October 2001
and 15 November 2001, which included, inter alia:
- a description of the agreement that had been reached in terms of which,
subject to the fulfillment of certain conditions, Furnex will dispose of its
shares in and claims on loan account against Furnex Consumer Credit (Pty)
Limited ("Furnex CC"), to Credcor Limited, a wholly owned subsidiary of BoE
Bank Limited, with effect from 1 April 2001 for a consideration of R38
million (plus interest) ("the Furnex CC disposal"); and
- a further cautionary announcement.
Further to these announcements, Investec Bank Limited is authorised to
announce that Massmart Holdings Limited ("Massmart") and Furnex have reached
agreement in terms of which, subject to the conditions set out in paragraph
2.3 below, Furnex will dispose of the business of Furnex Stores (Pty)
Limited and the shares in and shareholders' claims on loan account against
Furnex Dealers Indemnity (Pty) Limited (collectively, "the Furnex Stores
business"), to a new company controlled by Massmart ("the new Furnex Stores
company"), in exchange for a consideration of R44,5 million, with effect
from 1 January 2002 ("the Furnex Stores disposal").
In addition to the above and subject to the conditions precedent set out in
paragraph 3.3 below, agreement has been reached in terms of which Furnex
Financial Services (Pty) Limited, a wholly owned subsidiary of Furnex, will
dispose of the businesses of Eland Finance and Brixton Finance to Unitrade
488 (Pty) Limited ("Unitrade 488") for a consideration of R9,75 million,
with effect from 1 October 2001 ("the book disposals").
The board of directors of Furnex has resolved to recommend to Furnex
shareholders that subject to implementation of the Furnex CC disposal, the
Furnex Stores disposal and the book disposals (collectively "the
disposals"), they pass the necessary resolutions to place Furnex in
liquidation in terms of a members' voluntary winding-up in accordance with
Sections 349 and 350 of the Companies Act, 61 of 1973, as amended ("the
Act") ("the voluntary winding-up").
An application will be made to the committee of the JSE Securities Exchange
South Africa ("JSE") to terminate the listing of Furnex shares on the JSE
following implementation of the disposals and pending the voluntary winding-
up.
2. The Furnex Stores disposal
2.1 Information on Furnex Stores business
The Furnex Stores business is a value-added hub that facilitates the supply
of goods at negotiated bulk discounts and guaranteed payments to suppliers,
and has built up a loyal membership base over the last 40 years, enabling
independent retailers to achieve pricing models in line with major retail
chains.
The transformation of the business from a passive membership club into an
interactive, internet-based trading exchange, which generates brokerage from
transactions and financing, has been very successful.
2.2 Rationale for the Furnex Stores disposal
The success of Furnex Stores and any other buying group is dependent upon
the strength of its systems and volume of goods financed. This disposal to
Massmart will allow the Furnex Stores business to take advantage of critical
mass in systems development and processing, as well as combined centralised
procurement.
2.3 Conditions to the Furnex Stores disposal
The Furnex Stores disposal is conditional upon, inter alia, the following
conditions being fulfilled:
- the passing of the requisite resolutions by Furnex shareholders in general
meeting to approve and implement the Furnex Stores disposal; and
- the approval of the competition authorities in terms of the Competition
Act, 89 of 1998, as amended, of the Furnex Stores disposal, which is
expected in or before March 2002.
2.4 Involvement of current Furnex Stores management
Certain members of the current Furnex Stores management will participate in
the new Furnex Stores company and in terms of rule 29 (d) of the Securities
Regulation Code on Take-overs and Mergers, these members of the current
Furnex management are not independent and will therefore abstain from voting
on the resolutions regarding the Furnex Stores disposal.
3. The book disposals
3.1 Information on the books
The retail credit books of Eland Finance and Brixton Finance were acquired
on 1 October 1999. The intention at the time was to develop a larger
exposure to the provision of retail consumer finance. However, it was
decided to develop this exposure through Furnex CC and the books have been
running down over a period of time.
3.2 Rationale for the book disposals
Following the Furnex CC disposal and Furnex Stores disposal, and given that
the books are in the process of being collected, the book disposals are
deemed appropriate to assist in the acceleration of the voluntary winding-up
and the efficient distribution of assets to the Furnex shareholders.
3.3 Condition precedent to the book disposals
The book disposals are conditional upon, inter alia, the passing of the
requisite resolutions by Furnex shareholders in general meeting to approve
and implement the book disposals.
3.4 Related party transaction
Due to the fact that Mr D Brouze is associated with parties who have a
material interest in Unitrade 488, this disposal is a related party disposal
in terms of the JSE Listings Requirements and as such, these parties and Mr
D Brouze are precluded from voting on the resolutions regarding the book
disposals.
4.Financial effects of the disposals
The table below sets out the pro forma financial effects of the disposals on
a Furnex shareholder, based on the following:
- the fully diluted earnings and fully diluted headline earnings per Furnex
share in the "Before" column are based on the published audited results of
Furnex for the year ended 30 September 2001;
- the fully diluted earnings and fully diluted headline earnings per Furnex
share in the "After the Furnex CC disposal" column are based on the
published audited results of Furnex for the year ended 30 September 2001,
excluding the audited results of Furnex CC for the year ended 30 September
2001;
- the fully diluted earnings and fully diluted headline earnings per Furnex
share in the "After the Furnex Stores disposal" column are based on the
published audited results of Furnex for the year ended 30 September 2001,
excluding the audited results of the Furnex Stores business for the year
ended 30 September 2001;
- the fully diluted earnings and fully diluted headline earnings per Furnex
share in the "After the book disposals" column are based on the published
audited results of Furnex for the year ended 30 September 2001, excluding
the audited results of Eland Finance and Brixton Finance for the year ended
30 September 2001;
- in addition, the fully diluted earnings and fully diluted headline
earnings per Furnex share in the "After the Furnex CC disposal", "After the
Furnex Stores disposal" and in the "After the book disposals" columns
include the after tax interest which would have been earned had an amount
equivalent to the purchase considerations been invested for a 12 month
period at an after tax interest rate of 7% per annum;
- the net tangible asset value per Furnex share in the "Before" column is
based on the published audited position of Furnex at 30 September 2001;
- the net tangible asset value per Furnex share in the "After the Furnex CC
disposal" column is based on the assumption that the Furnex CC disposal had
been implemented on 30 September 2001;
- the net tangible asset value per Furnex share in the "After the Furnex
Stores disposal" column is based on the assumption that the Furnex Stores
disposal had been implemented on 30 September 2001; and
- the net tangible asset value per Furnex share in the "After the book
disposals" column is based on the assumption that the book disposals had
been implemented on 30 September 2001.
Financial Effects
12 Months ended 30 September 2001
Actual Pro-forma Pro-forma Pro-forma
"Before" "After" "After" "After"
Furnex CC Furnex Book
Stores Disposal %
Per Furnex share (cents) (cents) (cents) (cents) Change
Earnings per
share 33,72 35,17 31,28 32,46 (7,24)
Headline
earnings per
share 9,85 11,30 7,40 8,59 (24,80)
Net asset
value (excl
intangibles) 79,66 79,66 128,39 127,22 61,18
5. The change of name
Following implementation of the disposals, it will be proposed that Furnex's
name be changed to one acceptable to Massmart, as the right to use the name
Furnex has been sold as part of the Furnex Stores disposal.
6. The Furnex voluntary winding-up
The board of directors has resolved to recommend that, subject to the
implementation of the disposals the voluntary winding-up be implemented.
Following the disposals, Furnex will hold minor residual assets and
liabilities. Subsequent to the liquidation and settlement of these assets
and liabilities, respectively, the directors believe that no purpose would
be served by the company's continued existence, particularly taking into
consideration the annual costs of being listed on the JSE, of administration
and of the share transfer secretaries and, therefore, believe that it is in
the best interests of Furnex shareholders to wind up the company.
7. The distributions
Subject to the implementation of the disposals and the passing of the
resolutions required for the voluntary winding-up, Furnex will distribute to
the shareholders of Furnex an initial liquidation dividend, which is
expected to be an amount of approximately 115 cents per Furnex share.
At a later date, Furnex will pay, as a final liquidation dividend, the
balance, of the cash held by it after all the remaining assets and other
liabilities, including liquidation costs and taxation, have been settled.
The amount of this final liquidation dividend will be published on
finalisation of the Furnex voluntary winding-up.
8. The delisting
Subject to the implementation of the disposals, application will be made to
the JSE for the termination of the listing of Furnex on the JSE in
accordance with paragraph 1.11 of the JSE Listings Requirements.
9. Opinions and recommendations
The board of directors of Furnex has appointed Richard Farber, an
independent practicing chartered accountant, to provide it with independent
advice as to the fairness of the terms and conditions of the Furnex Stores
disposal and the book disposals.
10. Documentation
A circular containing full details of the disposals, the change of name, the
delisting of Furnex, the voluntary winding-up, the opinion of the
independent advisor to Furnex and the minorities and a notice convening a
general meeting of shareholders of Furnex will, subject to the approval of
the JSE and Securities Regulation Panel, be posted to Furnex shareholders on
or about 10 January 2002.
11. Withdrawal of cautionary announcement
Shareholders are referred to the cautionary announcement and the renewal of
the cautionary announcement dated 5 October 2001 and 15 November 2001,
respectively, and are advised that as the terms of the disposals have been
finalised, caution is no longer required.
Johannesburg
18 December 2001
Sponsor
Investec
