| Wed 6 Mar 2002, 0:00 | | Absa - Announcement Re. The Financial Effects Of T |
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ABSA GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1986/003934/06)
JSE Share code: ASA ISIN: ZAE000013389
("Absa")
Announcement regarding:
- the financial effects of the UniFer Holdings Limited ("UniFer") net asset
value adjustment on Absa;
- a proposal by Absa to acquire all the issued shares in UniFer; and
- the findings of the Absa investigation.
1. INTRODUCTION
Shareholders are referred to the previous announcements wherein shareholders
were advised that:
- the provisions raised in respect of UniFer's advances book at 30
September 2001 were materially insufficient;
- the board of directors of UniFer ("the UniFer Board") were in the process
of determining the net asset value of UniFer at 31 December 2001;
- the net asset value as determined by the UniFer Board was in the process
of being reviewed by UniFer's external (Ernst & Young) and independent
reporting accountants (Deloitte & Touche);
- Absa had undertaken to support UniFer by, inter alia, providing, to the
extent required, support to depositors and the necessary liquidity to
UniFer;
- the board of directors of Absa ("the Absa Board") had agreed to the
recapitalisation of UniFer by way of a rights offer on the basis that if the
net asset value per UniFer share was negative, the rights offer would have
been undertaken at 1 cent per share; and
- the Absa Board mandated an independent committee to investigate the
conduct of Absa representatives on the UniFer Board.
2. FINANCIAL EFFECTS OF THE UNIFER NET ASSET ADJUSTMENT ON ABSA
The UniFer Board has determined the net asset value of UniFer at 31 December
2001 to be negative R1 144 million after accounting for R1 780 million as a
result of insufficient provisions for bad and doubtful debts and other asset
impairments totalling R165 million, as well as a trading loss for the three
months to 31 December 2001 of R230 million. The external auditors, Ernst &
Young, and the independent reporting accountants, Deloitte & Touche, have
reviewed the UniFer Board's determination of the net asset value of UniFer
and their reports support the UniFer Board's figure.
The effect of the restatement of the UniFer figures on Absa's current
results translates to a headline earnings reduction of 151,5 cents per
share; earnings per share reduction of 176,5 cents per share and net asset
value reduction of 176,5 cents per share. Absa's capital adequacy at 30
September 2001 will reduce from 12,1% to 11,0%.
Further costs estimated at R32 million are to be incurred by UniFer in
respect of restructuring its business in order to build a sustainable
business model.
The following key financial ratios have been extracted from the Absa
published audited financial results for the year ended 31 March 2001 and the
published unaudited interim financial results for the six months ended 30
September 2001 and are given purely as a frame of reference:
For the For the
six months year
ended ended
30 September 2001 31 March 2001
Per share (cents) (cents)
Headline earnings 201,8 378,7
Attributable earnings 200,1 378,1
Net asset value 2 268 2 106
3. ABSA PERFORMANCE
The growth in Absa earnings, excluding the impact of UniFer, are in line
with market expectations.
4. THE ABSA PROPOSAL
4.1 The proposal
On 5 March 2002 Absa, subject to the consent of the Minister of Finance in
terms of section 54(11) of the Banks Act, 1990 (Act 94 of 1990), as amended
("the Banks Act"), proposed to the UniFer Board a scheme of arrangement in
terms of section 311 of the Companies Act, 1973 (Act 61 of 1973), as amended
("the Act"), between UniFer and its shareholders, other than Absa and Wilsun
Investments (Proprietary) Limited ("Wilsun") ("UniFer minority
shareholders"), which, if implemented, will result in all of the shares of
UniFer being effectively owned by Absa ("the scheme"). Wilsun is a wholly-
owned subsidiary of UniFer which was utilised by UniFer to effect the
repurchase of UniFer ordinary shares.
Should the scheme for any reason not become operative, an offer in terms
of section 440K of the Act will be deemed to be made to UniFer minority
shareholders at the same consideration as specified in terms of the scheme
("the offer"). The offer will be conditional on acceptance thereof by
offerees holding not less than 90% of the offer shares.
The scheme and the offer are, collectively, referred to as the ("proposal").
UniFer's minority shareholders' holdings in UniFer have been determined as
follows:
Ordinary shares ('000)
Total issued ordinary share capital 1 305 171
Less: Ordinary shares held by (813 536)
Absa (797 416)
Wilsun (16 120)
Ordinary shares held by UniFer minority shareholders 491 635
In terms of the proposal Absa will offer UniFer minority shareholders who,
collectively, hold 491,635 million UniFer shares, 6,25 cents per UniFer
share payable in cash on implementation of the proposal. The total
consideration to be received by UniFer minority shareholders will
approximate R30,73 million.
4.2 The rationale for the proposal
As initial investigations revealed that the provisions for bad and doubtful
advances were materially insufficient, the UniFer Board resolved that a
recapitalisation of UniFer was necessary to ensure its on-going viability
and to meet the capital adequacy requirements prescribed in terms of the
Banks Act.
The UniFer Board has now determined the extent of the underprovision for
bad and doubtful debts and other asset impairments. The situation is
materially different from what was originally anticipated. The Absa Board
and the UniFer Board are of the opinion that the most appropriate way to
rationalise UniFer's business is for Absa to integrate UniFer's operations
with Absa's banking operations. The Absa Board and UniFer Board believe the
most commercially effective method of achieving this integration would be
for Absa to acquire the entire issued share capital of UniFer.
4.3 Effect of the proposal
The effect of acquiring the additional UniFer shares on Absa's earnings and
net asset value per share will not be material.
4.4 Conditions precedent
The proposal is subject to the fulfilment of various conditions precedent,
including:
4.4.1 receipt of the requisite approvals from the Minister of Finance in
terms of the Banks Act, the Financial Services Board, the JSE Securities
Exchange South Africa and the Securities Regulation Panel ("SRP");
4.4.2 the approval of the scheme by the requisite majority of UniFer
shareholders at the scheme meeting;
4.4.3 the High Court sanctioning the scheme and the Order of Court
sanctioning the scheme being registered by the Registrar of Companies; and
4.4.4 in the event that the offer is made, acceptance thereof by offerees
holding not less than 90% of the offer shares.
4.5 Undertakings
UniFer minority shareholders holding 25,33% of the total issued share
capital of UniFer have given irrevocable undertakings to vote in favour of
the scheme or accept the offer, as the case may be. These undertakings
represent 70,44% of the 491,635 million votes exercisable at the scheme
meeting or 70,44% of the shares being the subject of the offer.
4.6 Confirmation to the SRP
The SRP has received confirmation from Absa that it has sufficient resources
to satisfy the proposal consideration.
4.7 Opinions
Messrs E R Bosman and F J du Toit are directors of Absa and UniFer. An
independent committee of Absa directors have considered the terms of the
proposal, and are of the unanimous opinion that the proposal is in the best
interest of Absa.
5. FINDINGS OF THE ABSA INVESTIGATION
The independent Absa Board Committee mandated to investigate the conduct of
the Absa representatives on the UniFer Board concluded after thorough
investigation, that no evidence indicated that any of the Absa
representatives on the UniFer Board and committees acted in bad faith or
with gross negligence. However, errors of judgment were committed.
In view of these findings Mr A M Griesel is relinquishing his current
position as a member of the Absa Executive Committee, to take up a role as
executive deputy chairman of UniFer with the brief to turn UniFer around.
Mr E W Tomlinson is leaving Absa Bank in terms of a mutually agreed
contract.
Johannesburg
6 March 2002
Merchant Bank
ABSA CORPORATE AND MERCHANT BANK
Corporate Finance
(Registration number 1986/004794/06)
Attorneys to Absa
Webber Wentzel Bowens
Sponsor to Absa
Merrill Lynch South Africa (Pty) Ltd
Registered sponsor and
Member of the JSE Securities Exchange South Africa
Registration number 1995/001805/07
