| Thu 31 Jan 2002, 0:00 | | Marlin - Schemes Of Arrangement |
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Marlin Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/000717/06)
Share code: MLN ISIN: ZAE 000004511
("Marcorp")
Marlin Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1984/000634/06)
Share code: MNH ISIN: ZAE 000012340
("Marhold")
Announcement regarding schemes of arrangement in terms of section 311 of the
Companies Act, 1973 (Act 61 of 1973), as amended ("Companies Act") to be
proposed:
* by Finstone S RL ("Finstone"), Marhold's offshore parent company, and
Marcorp between Marcorp and its shareholders other than Finstone and
Marhold; and
* by Finstone between Marhold and its shareholders other than Finstone.
1. Introduction
Further to the joint cautionary announcements of Marcorp and Marhold
published on 7 January 2002 and 12 November 2001, shareholders of Marcorp
and Marhold are advised that schemes of arrangement in terms of section 311
of the Companies Act are to be proposed:
* by Finstone and Marcorp between Marcorp and its shareholders other than
Finstone and Marhold ("Marcorp Scheme Members"); and
* by Finstone between Marhold and its shareholders other than Finstone
("Marhold Scheme Members"),
(hereafter referred to as the "Marcorp Scheme" and "Marhold Scheme"
respectively, and collectively as the "Schemes").
Upon fulfilment of the conditions precedent referred to in 4 below, Marcorp
shareholders registered as such on the record date other than Finstone and
Marhold ("Marcorp Scheme Participants") will receive 45 cents in cash for
each ordinary share held in the share capital of Marcorp ("Marcorp Share")
and Marhold shareholders registered as such on the record date other than
Finstone ("Marhold Scheme Participants") will receive 23,5 cents in cash for
each ordinary share held in the share capital of Marhold ("Marhold Share").
As a result of the Schemes, Marcorp will be jointly owned by Marhold and
Finstone, Marhold will become a wholly-owned subsidiary of Finstone, and the
JSE Securities Exchange South Africa ("JSE") will, upon application,
terminate the listings of Marcorp and Marhold.
2. Rationale for the schemes
The present group structure of Marhold/Marcorp is as follows:
SEE NEWSPAPER FOR GRAPHICS
A restructuring of Marhold and its subsidiaries (the "Group") is required to
remove the current listed pyramid structure and to ensure that the Group is
optimally structured so as to be internationally competitive. In addition,
the relatively low market capitalisation of Marcorp and Marhold has a number
of significant drawbacks including:
* lack of significant institutional investor interest and analyst coverage
in the counter;
* an inability to raise equity at what is considered a fair value and,
accordingly, to fund future expansion; and
* management time being spent and expense being incurred on listing related
matters being out of proportion to the benefits of the listings.
Finstone and Marcorp have accordingly proposed the Schemes in order to:
* effect the delistings of both Marcorp and Marhold;
* enable a restructuring of the Group; and
* to allow the minority shareholders in the Group to dispose of their shares
at a significant premium to the respective market prices prior to the first
joint cautionary announcement published on 12 November 2001.
3. The Schemes
3.1 Scheme considerations
In terms of the Marcorp Scheme:
* Marcorp will acquire one out of every two Marcorp Shares held by Marcorp
Scheme Participants by means of a specific share repurchase in terms of
section 85 of the Companies Act for a cash consideration of 45 cents per
Marcorp Share ("Specific Share Repurchase"); and
* Finstone will simultaneously and as part of one interconditional scheme
acquire the remaining one out of every two Marcorp Shares held by Marcorp
Scheme Participants for a cash consideration of 45 cents per Marcorp Share.
In terms of the Marhold Scheme:
* Finstone will acquire all the Marhold Shares held by Marhold Scheme
Participants for a cash consideration of 23,5 cents per Marhold Share, being
the see-through value of the 45 cents per Marcorp Share based on the number
of Marcorp Shares held by Marhold and the total number of Marhold Shares in
issue,
(hereafter referred to as the "Marcorp Scheme Consideration" and "Marhold
Scheme Considerations" respectively, and collectively as the "Scheme
Consideration").
3.2 Scheme members
Marhold and Finstone hold, in aggregate, 231 498 733 (68,5%) Marcorp shares,
and Finstone holds 289 282 500 (78,0%) Marhold shares. Marhold and Finstone
will not vote any of these shares at the scheme meetings to be convened for
this purpose ("Scheme Meetings") or the general meeting of Marcorp ("Marcorp
General Meeting") referred to in 8 below necessary to authorise the Specific
Share Repurchase as part of the Marcorp Scheme. Accordingly, the number of
shares held by Marcorp and Marhold Scheme Members amounts to 106 356 512 and
81 592 949 Marcorp and Marhold Shares respectively, and the aggregate
purchase consideration payable to Marcorp and Marhold Scheme Participants
thus amounts to R47 860 430,40 and R19 174 343,02 respectively.
3.3 Financial effects of the Schemes
The table below sets out the financial effects of the Marcorp Scheme on
Marcorp Scheme Participants:
Before the After the
Marcorp Scheme Marcorp Scheme Change
Per share (cents) (cents) (%)
Market price
- Friday, 9 November 2001 (Note 1) 28,0 45,0 60,7
- 30 day weighted average (Note 2) 22,4 45,0 100,5
- Tuesday, 29 January 2002 (Note 3) 40,0 45,0 12,5
Net asset value (Note 4) 90,2 45,0
(50,1)
Earnings (Notes 5 and 6) 3,4 1,3
(63,3)
Headline earnings (Notes 5 and 6) 4,3 1,3
(70,8)
Notes:
1. The closing price of the Marcorp Shares on the last trading day prior to
the publication of the first joint cautionary announcement on 12 November
2001.
2. The volume weighted average traded price of Marcorp Shares over the 30
trading days up to the publication of the first joint cautionary
announcement on 12 November 2001.
3. The closing price of the Marcorp Shares on the last practicable trading
day prior to the publication of this announcement.
4. At 30 June 2001 as per the published unaudited interim results of
Marcorp.
5. Under the column headed "Before", the earnings and headline earnings per
share for the six months ended 30 June 2001 as per the published unaudited
interim results of Marcorp.
6. Under the column headed "After", the pro forma earnings a Marcorp Scheme
Participant would have earned assuming that the consideration received was
invested at an after-tax rate of 5,6% per annum for the six months ended 30
June 2001.
The table below sets out the financial effects of the Marhold Scheme on
Marhold Scheme Participants:
Before the After the
Marhold Scheme Marhold Scheme Change
Per share (cents) (cents) (%)
Market price
- Friday, 9 November 2001 (Note 1) 15,0 23,5 56,7
- 30 day weighted average (Note 2) 11,9 23,5 96,7
- Tuesday, 29 January 2002 (Note 3) 20,0 23,5 17,5
Net asset value (Note 4) 45,7 23,5 (48,6)
Earnings (Notes 5 and 6) 1,8 0,7 (63,2)
Headline earnings (Notes 5 and 6) 2,3 0,7 (70,8)
Notes:
1. The closing price of the Marhold Shares on the last trading day prior to
the publication of the first joint cautionary announcement on 12 November
2001.
2. The volume weighted average traded price of Marhold Shares over the 30
trading days up to the publication of the first joint cautionary
announcement on 12 November 2001.
3. The closing price of the Marhold Shares on the last practicable trading
day prior to the publication of this announcement.
4. At 30 June 2001 as per the published unaudited interim results of
Marhold.
5. Under the column headed "Before", the earnings and headline earnings per
share for the six months ended 30 June 2001 as per the published unaudited
interim results of Marhold.
6. Under the column headed "After", the pro forma earnings a Marhold Scheme
Participant would have earned assuming that the consideration received was
invested at an after-tax rate of 5,6% per annum for the six months ended 30
June 2001.
4. Conditions precedent
Each of the Schemes is subject to the fulfilment of the following conditions
precedent:
* approval at the relevant Scheme Meeting by a majority representing not
less than 75% (three-fourths) of the votes exercised by Scheme Members
present and voting either in person or by proxy at the relevant Scheme
Meeting;
* the High Court of South Africa (Witwatersrand Local Division) sanctioning
the Scheme;
* the Order of Court sanctioning the Scheme being registered by the
Registrar of Companies in terms of the Companies Act; and
* any other regulatory approvals or consents necessary to implement the
Scheme being obtained, including, but not limited to, the approvals of the
JSE, the Securities Regulation Panel ("SRP") and the Exchange Control
department of the South African Reserve Bank.
In addition, the Marcorp Scheme is conditional upon:
* the Marhold Scheme becoming unconditional, which condition can be waived
at the election of Finstone; and
* the Specific Share Repurchase being approved at the Marcorp General
Meeting referred to in 8 below by a majority representing not less than 75%
(three-fourths) of the votes exercised by Marcorp shareholders (other than
Marhold and Finstone) present and voting either in person or by proxy at the
Marcorp General Meeting.
As there will be no change in control of Marhold or Marcorp no notification
to the Competition Commission is required.
5. Opinions, recommendations and undertakings
On 22 November 2001 Finstone indicated that it would propose the Schemes to
the boards of directors of Marcorp and Marhold ("Boards"), subject to
certain pre-conditions being met. KPMG Services (Pty) Limited ("KPMG") was
appointed as independent financial adviser to the Boards tasked with
considering the terms and conditions of the Schemes. As regards expressing
an opinion on the Schemes, directors of Marcorp and Marhold who are also
directors in, or associates of, Finstone, have recused themselves from
expressing such opinion. All of the remaining members of the Boards
("Independent Board Members") have considered the terms and conditions of
the Schemes and KPMG's recommendation set out below.
Had the pre-conditions been met, and the Schemes proposed, on 22 November
2001, KPMG and the Independent Board Members would have regarded the Schemes
as being fair and reasonable as at that date. However, the pre-conditions
were only met in January 2002, by which time there had been a deterioration
in the Rand/US Dollar exchange rate from approximately R9,99 to the US
Dollar on 22 November 2001 to R11,40 to the US Dollar on 29 January 2002. As
a result of this deterioration in the exchange rate, and assuming that the
Rand remains at the current exchange rate and on the basis that all other
assumptions made at the time of the original assessment remain the same,
KPMG and the Independent Board Members are of the opinion that the Scheme
Considerations do not reflect the fundamental value of Marcorp and Marhold.
However, KPMG and the Independent Board Members have noted the following:
* that the Marcorp Scheme Consideration represents a premium of 60,7% over
the market price of Marcorp Shares at 9 November 2001, the last trading day
prior to the publication of the first joint cautionary and a premium of
100,5% over the volume weighted price for the 30 trading days up to that
date;
* that the Marhold Scheme Consideration represents a premium of 56,7% over
the market price of Marhold Shares at 9 November 2001, the last trading day
prior to the publication of the first joint cautionary and a premium of
96,7% over the volume weighted price for the 30 trading days up to that
date;
* that an independent shareholder holding 28 043 627 Marcorp Shares (then
equal to 20,9% of the total shares held by minority shareholders) elected,
in January 2002, to sell those shares to Finstone at a price of 41 cents per
share despite being made aware of the Schemes;
* that independent minority shareholders holding, in aggregate, 31 487 400
Marcorp and 9 199 300 Marhold Shares (equal to 29,6% and 11,3% of the shares
now held by the respective companies' minority shareholders) have given
irrevocable commitments to vote in favour of the Schemes and the Specific
Share Repurchase and, should the Schemes and Specific Share Repurchase fail,
have irrevocably committed to sell to Finstone (who has irrevocably
committed to purchase) all of their shares at a price equal to the Scheme
Considerations;
* that, pursuant to the purchases referred to above, Finstone will directly
and indirectly hold 77,8% and 80,5% of Marcorp and Marhold's respective
issued share capital. In terms of the JSE Listings Requirements 20% of each
class of shares of a listed company is required to be held by public
shareholders as defined. Should Marcorp and Marhold not comply with this
requirement, the status of their continued listings is likely to come into
consideration;
* that conditions on the JSE continue to be extremely difficult for small
listed companies and furthermore that Marhold is a pure pyramid company,
which structure is out of favour with investors;
* that the market in Marcorp and Marhold Shares may now become more limited
and shareholders may find it more difficult to trade in their shares; and
* that Finstone has stated that its offer is final and will not be
increased, and that it will not make any higher offer within the next 12
months without the prior consent of the SRP.
In addition, the Independent Board Members anticipate that;
* given their respective share price histories, the price of Marcorp and
Marhold Shares may fall significantly if the Schemes are not effected; and
* no competitive bidder for the Marcorp and Marhold Shares will emerge.
The Independent Board Members have considered the terms and conditions of
the Schemes and, taking into account the factors mentioned above,
unanimously advise Marcorp and Marhold Scheme Members to vote in favour of
the Schemes and the Specific Share Repurchase. The Independent Board Members
who beneficially own Marcorp or Marhold Shares intend to vote those shares
in favour of the Schemes and the Specific Share Repurchase.
6. Confirmation of financial resources
Nedcor Investment Bank Limited has provided the SRP with the appropriate
confirmation that Finstone has sufficient financial resources available to
meet its obligations in terms of the Schemes and guarantee Marcorp's
obligations in terms of the Marcorp Scheme.
7. Expected important dates and times
Set out below are the expected important dates and times. These dates and
times are subject to change and any such changes will be advised in the
press.
2002
Last day to lodge form of proxy for the
Marcorp General Meeting, by 10:00 on Monday, 25 March
Last day to lodge form of proxy for the Scheme Meetings,
by 10:00 on (proxy forms may be handed to the chairman
of the Scheme Meetings up to 10 minutes
before they commence) Monday, 25 March
Last day to register as a shareholder of Marcorp and
Marhold in order to vote at the Scheme Meetings,
by close of business on Monday, 25 March
Marcorp General Meeting held at 10:00 on Tuesday, 26 March
Marcorp Scheme Meeting held at 10:15 (or so soon
thereafter as the Marcorp General Meeting
shall have been concluded) on Tuesday, 26 March
Marhold Scheme Meeting held at 10:30 (or so soon
thereafter as the Marcorp Scheme Meeting shall
have been concluded) on Tuesday, 26 March
Finalisation announcement made on Wednesday, 27 March
Application to Court to sanction the Schemes on Tuesday, 2 April
Expected last date to trade in Marcorp and Marhold
Shares in order to be registered on the expected
record date on Wednesday, 3 April
Expected date for listings of Marcorp and Marhold
to be suspended from the commencement of business
on the JSE on Thursday, 4 April
Expected record date to participate in the Schemes at
close of business on Wednesday, 10 April
Expected date for listings of Marcorp and Marhold to
terminate from the commencement of business on Thursday, 11 April
Operative date of the Schemes on Thursday, 11 April
Expected date from which the Scheme Considerations will
be made available or posted to Scheme Participants
(subject to documents of title to Marcorp and Marhold
Shares having been received on or prior to the
record date or, failing that, within five business days
of receipt thereof by the transfer secretaries) Thursday, 11 April
8. Circulars to Marcorp and Marhold shareholders
Circulars, which are subject to the prior approval of the SRP, the JSE and
the South African Reserve Bank, providing full information on the Schemes
and containing, inter alia, notices of the Scheme Meetings as well as the
Marcorp General Meeting required to approve the Specific Share Repurchase,
will be mailed to Marcorp and Marhold shareholders in due course.
Johannesburg
31 January 2002
Investment bank
Nedcor Investment Bank
Legal advisers
Webber Wentzel Bowens
Independent adviser to Marcorp and Marhold
KPMG
Registered Chartered Accountants (SA)
(Registration number 1999/021543/21)
Sponsor
LPC Manhattan Sponsors (Pty) Ltd
(Registration number 1999/024792/07)
