| Fri 25 Jan 2002, 0:00 | | Lyons Financial Solutions Holdings Limited - Annou |
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Lyons Financial Solutions Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/022117/06)
Share code: LYS ISIN: ZAE000024709
("Lyons" or "the company")
ANNOUNCEMENT TO SHAREHOLDERS IN RESPECT OF:
- the subscription for shares by Lyons Asset Management (Proprietary)
Limited ("LAM"), a wholly owned subsidiary of Lyons, comprising a 45%
interest in Lyons Corporate Lease Fund Limited ("LCLF");
- the acquisition by LAM of the entire issued ordinary share capital of and
shareholders loans against Shelfigret Eighty Five (Proprietary) Limited, a
shelf company which acquired the business operations, assets and liabilities
of Thinking On The Right Track Holdings (Proprietary) Limited on 1 June 2001
("THORT");
- the acquisition by LAM of the entire issued ordinary share capital of and
shareholders loans against Donne Investments (Proprietary) Limited
("Donne"); and
- the withdrawal of cautionary announcements.
SUBSCRIPTION FOR SHARES AND ACQUISITIONS
Further to the cautionary announcements dated 12 November 2001 and 21
December 2001, shareholders are advised that subject to shareholder approval
being obtained and subject to the fulfilment of the suspensive conditions
detailed below, LAM has entered into the following transactions which are
classified as related party transactions in terms of the Listings
Requirements of the JSE Securities Exchange South Africa ("JSE"):
- the subscription for such number of shares as constitutes 45% of the total
issued ordinary shares in LCLF, effective 30 June 2001. Mr Garry Fromentin
and Mr Ian Hewett are executive directors of both Lyons and LCLF; and
- the acquisition of the entire issued ordinary share capital of and
shareholders loans against THORT from Mrs Catherine Hewett, the spouse of Mr
Ian Hewett the Chief Financial Officer of Lyons, effective 1 June 2001.
Subject to the fulfilment of the suspensive conditions detailed below, LAM
has entered into an agreement to purchase the entire issued ordinary share
capital of and shareholders loans against Donne from Mr Alwyn Christiaan
Visser, effective 10 January 2002, which is classified as a category 3
transaction in terms of the Listings Requirements of the JSE.
Background information in respect of LCLF, THORT and Donne
- LCLF
LCLF is a real estate fund established under an asset management agreement
with LAM to warehouse or incubate corporate client properties in a manner
which permits the client to:
- have certain strategic control over the properties;
- implement a buy back or roll over option strategy in respect of the
properties; and
- retain a limited equity participation in the property.
In addition to the flexibility and the benefits arising from the options
detailed above, LCLF's clients are better able to:
utilise their capital in the most efficient and profitable means;
focus their efforts on their core competencies; and
- diversify their borrowings and investments.
- THORT
THORT is a business solutions firm advising both corporate and individual
clients on various financial, taxation, commercial, structuring and planning
issues. Associated with the company is an accounting and auditing practice
delivering professional service to both individuals and small and medium
size businesses.
The business operations, assets and liabilities of Thinking On The Right
Track Holdings (Proprietary) Limited were disposed of to Shelfigret Eighty
Five (Proprietary) Limited on 1 June 2001 to facilitate the acquisition of
the business in a manner which poses the least risk to Lyons shareholders.
- Donne
Donne's core business focus centres around the development of an integrated
treasury function, incorporating structured finance, securitisation, debt
origination and asset management, applying a holistic day-to-day evaluation
of all assets and liabilities across the spectrum.
The team of individuals acquired with the Donne investment will lead a
holistic asset and liability management approach into Lyons' clientele' and
will assist in developing and fine tuning existing products. Risk management
and the related systems are key to Donne's success and the experience gained
in these areas is shared with their clients either in the form of consulting
or through the physical supply of systems and risk management.
Rationale
- LCLF
Since its incorporation, LCLF has grown at a superlative rate having taken
transfer of properties with an approximate value of R200 million in its
maiden year of operations and now stands at total assets of just under R300
million. This portfolio of properties comprises high quality investments
with arguably no exposure to under-performing historic investments. The
lease fund is a limited recourse fund that acquires corporate client real
estate assets on a true sale basis and leases them back to the clients.
This allows the corporate client to manage leasehold rather than freehold
real estate whilst still sharing in excess returns. The base returns from
the acquisitions are securitised and sold to the capital markets to
facilitate the funding. The end product is that Lyons' clients warehouse
their real estate assets off balance sheet, the assets are professionally
managed and international best practices are implemented.
See press for details
LCLF has recently concluded an agreement whereby the Cape of Good Hope Bank
Limited has subscribed for convertible preference shares in LCLF, redeemable
or convertible into ordinary shares comprising 20% of the issued ordinary
share capital at the option of the shareholder within a five year period
from November 2001. This capitalisation of LCLF, together with the enhanced
capital base arising out of the proposed capitalisation by Lyons, will
provide to LCLF the means to secure significant access to additional levels
of finance to further grow its portfolio of investments.
From a business culture and philosophy perspective, LCLF is guided by the
identical set of operating and behavioural principles and values as is
Lyons, which can be paraphrased by Lyons commitment to being business
partners to its clients.
The acquisition of the 45% interest in LCLF has therefore been proposed in
order for Lyons shareholders to benefit both from the growth in its
portfolio of assets and from the creation of a strategic link between the
fund and its asset manager. In addition, the growth of the lease fund
provides to Lyons the opportunity to grow its client base and further
strengthen its links with its existing business partners through the
provision of an additional service closely allied and complementary to that
of property investment and asset management.
The remaining 55% interest in LCLF is not being acquired as the core
business of Lyons is to provide financial solutions and investment and asset
management services to its clients and not to carry on the business of
property loan stock.
- THORT and Donne
The range of professional services offered by THORT and Donne naturally
complements those already being provided by Lyons. The acquisition of THORT
is therefore proposed in order to further enhance the ability of LAM to
deliver an extensive range of in sourced and outsourced financial and
administrative solutions to its existing client base, adopting the unique
approach Lyons has successfully developed and implemented in other niche
markets of the financial services industry. Furthermore, the acquisition
will provide the necessary impetus in order for Lyons to attain the critical
mass necessary to become a corporate services provider of choice. The Donne
acquisition will be integrated with the structured products and trading team
in LAM and will provide a greater depth of skills combined with the
expertise required to service the growing appetite for securitised products.
Consideration
- LCLF
The consideration required for the subscription for shares in LCLF amounts
to R11 000 000 and is to be discharged through the payment of cash within
seven days of the fulfilment of the suspensive conditions.
- THORT
The purchase consideration of the THORT acquisition amounts to R6 402 222
and is to be discharged as follows:
- R1 940 222 in cash on the closing date, being five working days after the
fulfilment of the suspensive conditions;
- R300 000 in cash in 12 equal monthly instalments of R25 000, commencing
1 January 2002; and
- the balance of R4 162 000 in Lyons ordinary shares at an issue price of 10
(ten) cents each per share (41 620 000 Lyons ordinary shares), payable on
the closing date.
Donne
The purchase consideration of the Donne acquisition amounts to R4 888 890
and is to be discharged as follows:
- R25 000 in cash, paid on 30 November 2001;
- R25 000 in cash, paid on 31 December 2001;
- R1 058 890 in cash, payable on fulfilment of the suspensive conditions;
- R430 000 in cash on 1 June 2002;
- R600 000 in cash in 12 equal instalments of R50 000 commencing 31 January
2002;
- R250 000 in cash, payable on or around 31 March 2003; and
- R2 500 000 in Lyons shares at an issue price of 21 (twenty one) cents each
per share (11 904 762 Lyons ordinary shares), payable on or around 31 March
2003.
The purchase price has been calculated based on certain revenue
representations made by the sellers, which, if not met, result in the
purchase price being reduced.
Suspensive conditions
- LCLF
The subscription for such number of shares as constitutes 45% of the total
issued ordinary share capital in LCLF is subject to the fulfilment by 31
March 2002, or such later date as may be agreed on by the parties, of the
following suspensive conditions:
- approval by shareholders eligible to vote, in general meeting, of the
acquisition;
- approval by the JSE insofar as may be required;
- independent advisors appointed by Lyons issuing an opinion that the
transaction is fair and reasonable in regard to the non-related shareholders
in Lyons; and
- approval by the Lyons board of directors.
- THORT
The acquisition of the entire issued ordinary share capital of and
shareholders loans against THORT is subject to the fulfilment, by 31 March
2002, or such later date as may be agreed on by the parties, of the
following suspensive conditions:
- approval by shareholders eligible to vote, in general meeting, of the
acquisition;
- service and restraint agreements in respect of key employees;
- due diligence;
- approval by the JSE insofar as may be required;
- independent advisors appointed by Lyons issuing an opinion that the
transaction is fair and reasonable in regard to the non-related shareholders
in Lyons; and
- approval by the Lyons, THORT and LAM board of directors.
Donne
The acquisition of the entire issued ordinary share capital of and
shareholders loans against Donne is subject to the fulfilment, by 31 March
2002, or such later date as may be agreed on by the parties, of the
following suspensive conditions:
- service and restraint agreements in respect of key employees;
- due diligence;
- approval by the JSE insofar as may be required; and
approval by the Lyons board of directors.
Financial effects
The table below details the pro forma effects of the subscription for shares
in LCLF and the acquisition of THORT and Donne on the audited results of
Lyons for the 17 month period ended 31 May 2001, based on the following
assumptions:
the calculation includes the impact on Lyons of interest foregone on cash
resources of R1.8 million, calculated at a rate of 9% and taxed at a rate of
30% and interest accruing on cash borrowings of R4.7 million calculated at a
rate of 13% and taxed at a rate of 30%;
the goodwill arising on the acquisitions of R0.4 million, R5.9 million and
R3.7 million in respect of LCLF, THORT and Donne respectively being
amortised over 10 years;
the net assets/(liabilities) which are the subject of the transactions are
R10.6 million (the value of the 45% interest), R0 million and (R2.0 million)
for LCLF, THORT and Donne respectively;
the net tangible assets/(liabilities) which are the subject of the
transactions are R23.6 million, (R4.5 million) and (R2.0 million) for LCLF,
THORT and Donne respectively;
the shareholders loans which are the subject of the transactions amount to
R5.0 million and R3.1 million for THORT and Donne respectively;
the net profit/(loss) after taxation attributable to the net assets detailed
above are R3.8 million, R1.5 million and (R1.3 million) for LCLF, THORT and
Donne respectively;
the net profit/(loss) after taxation attributable to the net assets of LCLF,
THORT and Donne have been included for 12 months ended 30 June 2001, 15
months ended 31 May 2001 and eight months ended 31 Ocotber 2001
respectively, being the periods reported on in their latest audited
financial statements. These amounts have not been annualised;
Per Lyons share Before Combined
(cents) After change
(cents) (%)
Earnings per share 4.22 3.97 (5.7)
Headline earnings per share 4.22 4.23 0.0
Net asset value per share 4.50 5.59 24.4
Tangible net asset value per share 4.50 3.12 (30.5)
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS
The cautionary announcements dated 12 November 2001 and 21 December 2001 are
hereby withdrawn.
CIRCULAR TO SHAREHOLDERS
A circular, including a notice of general meeting, will, subject to JSE
approval, be distributed to shareholders on or about Monday, 18 February
2002, in respect of the following:
- the subscription for shares by LAM comprising a 45% interest in LCLF;
- the acquisition by LAM of the entire issued ordinary share capital of and
shareholders loans against Shelfigret Eighty Five (Proprietary) Limited;
- amendments to The Learning Corporation Share Incentive Scheme and Share
Trust Deed; and
- amendments to Lyons' Articles of Association.
Sandton
25 January 2002
Sponsor Corporate financial and law advisors
Deloitte & Touche Lyons Corporate Services,
Sponsor Services a division of Lyons Asset Management
