| Thu 28 Mar 2002, 0:00 | | Hunt Leuchars & Hepburn Holdings Limited - The Res |
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Hunt Leuchars & Hepburn Holdings Limited
(Registration number 1924/001164/06)
(Registered in the Republic of South Africa)
Ordinary shares: Share code: HLH ISIN: ZAE000003299
Preference shares: Share code: HLHP ISIN: ZAE000011441
The restructure by Robertsons Holdings (Proprietary) Limited ("Robertsons")
of its interest in the joint venture with Bestfoods Europe (Group) Limited
("Bestfoods Europe") and the formation of a new venture with Unilever plc
("Unilever")
1. Introduction
Further to the detailed cautionary announcement released on 14 November
2001, Rand Merchant Bank is authorised to announce that on 25 March 2002,
Robertsons, a wholly-owned subsidiary of Hunt Leuchars & Hepburn Holdings
Limited ("HL&H") (a subsidiary of Remgro Limited) and Unilever have entered
into an agreement ("the transaction") in terms of which both Robertsons and
Unilever propose to restructure their interests in Bestfoods Robertsons
(Holdings) Limited LLC ("Holdings"), the existing joint venture between
Robertsons and Bestfoods Europe ("the Bestfoods Robertsons JV") resulting in
a new venture ("the Unilever Bestfoods Robertsons venture").
The transaction is subject to the fulfillment of certain conditions
precedent, the most important of which are outlined in paragraph 4 below.
2. Background, rationale and prospects
On 1 July 1998, Robertsons and Bestfoods Europe entered into a joint venture
agreement incorporating the food interests and certain resources of
Robertsons and certain African and Israeli businesses of Bestfoods Europe,
to manufacture and market a range of food products predominantly in Southern
Africa and Israel as well as other African countries.
On 4 October 2000 Unilever formally completed the acquisition of the
worldwide interests of Bestfoods, of which Bestfoods Europe was a wholly-
owned subsidiary. As a consequence of such transaction, the parties have
agreed to restructure the Bestfoods Robertsons JV and their respective food
businesses in the territory.
In South Africa the food businesses of the Bestfoods Robertsons JV are
conducted through Holding's wholly-owned subsidiaries, Robertsons Foods
(Proprietary) Limited and Robertsons Foodservice (Proprietary) Limited.
Unilever's South African food businesses are conducted through Unifoods and
Hudson & Knight which are operating divisions of Unilever South Africa
(Proprietary) Limited ("the Unifoods businesses").
The overriding objectives in reconstructing the Unilever Bestfoods
Robertsons venture are to deliver exceptional top line growth and increased
value creation by driving synergies through integrating the businesses.
Growth synergies will be obtained by combining technological resources
throughout the region driving Robertsons' and Unilever's successes through
the venture territory and exporting into the rest of Africa. Cost synergies
will materialise by combining the businesses within each country.
While the transaction results in Robertsons accounting for an exceptional
profit of R550 million and incurring its proportionate share of
implementation and structuring costs amounting to approximately R40 million,
the venture is expected to have a positive impact on future earnings. The
businesses within Israel and South Africa will be integrated and
restructured in order to achieve synergies that will reach their full
potential within three years. Integration and reorganisation expenses (of
which Robertsons proportionate share is approximately R80 million) will
mostly be incurred within the first six months after the effective date in
order to deliver these benefits.
3. Salient terms
3.1. Introduction
In terms of the transaction:
* Unilever South Africa (Proprietary) Limited, a wholly-owned subsidiary of
Unilever will transfer its Unifoods businesses to the legal entity through
which the Unilever Bestfoods Robertsons venture will be effected in South
Africa ("Unilever Bestfoods Robertsons");
* Unilever has transferred its Israeli foods business (excluding that part
of its foods business carried on in the areas under the control of the
Palestinian Authority) to Israel Edible Products Limited, a wholly-owned
subsidiary of Holdings;
* Unilever Overseas Holdings AG will transfer the shares which it owns in
Vandenbergh Foods (Namibia) (Proprietary) Limited to Holdings;
* Holdings will transfer the shares which it owns in its Kenyan, Tunisian
and Moroccan subsidiaries to Unilever;
* the transfer of the Unilever businesses in Zimbabwe, Zambia, Malawi and
Mozambique will not take place at the completion date of the transaction but
instead it is intended that these businesses will be transferred (whether
together or singly) to the Unilever Bestfoods Robertsons venture when the
parties agree that it is commercially reasonable and strategically justified
to do so, and in such manner as they may agree. However, the profits and
losses of the businesses in Zimbabwe, Zambia, Malawi and Mozambique shall,
after completion of the transaction, be taken into account, so far as may be
achieved, as profits and losses of the Unilever Bestfoods Robertsons
venture; and
* pursuant to the transaction, Robertsons and Bestfoods Europe will hold 41%
and 59% of the issued share capital of Holdings respectively.
Pursuant to the transaction, Robertsons, Bestfoods Europe and Holdings have
entered into a shareholders' agreement, which shall govern the relationship
between these parties following the transaction. The purpose of the
shareholders' agreement is to set out certain agreed matters relating to the
business, financing, conduct and management of the Unilever Bestfoods
Robertsons venture and the rights, duties and obligations with respect to
the Unilever Bestfoods Robertsons venture and each other as shareholders.
3.2. Consideration
The value attributed to Robertsons' 50% interest in the Bestfoods Robertsons
JV is R2,05 billion. After the restructuring of the existing JV, Robertsons
will retain a 41% interest in the Unilever Bestfoods Robertsons venture.
There will be no exchange of cash to effect the transaction. However the
transaction does result in an exceptional profit for Robertsons, which is
reflected in the financial effects disclosed in paragraph 6 below.
3.3. Territory
The new venture territory has been defined as Southern Africa (including
South Africa, Lesotho, Swaziland, Botswana, Angola, Namibia, Zimbabwe,
Zambia, Malawi, Mozambique and the Indian Ocean Islands of Madagascar,
Mauritius, Seychelles and Comores) and Israel. The operating profit
contribution from the territory is expected to be approximately 60% from
Southern Africa and 40% from Israel.
3.4. Effective date
The transaction will become effective once all of the conditions precedent
have been fulfilled.
3.5. Resultant structure
Before
For a graphical representation please see press announcement.
After
For a graphical representation please see press announcement
4. Conditions precedent
The transaction is subject to the following conditions precedent:
* approval of the transaction in general meeting by the shareholders of
HL&H;
* approval of the transaction, as far as it relates to Israel, by the
Israeli Controller of Restricted Trade Practices; and
* approval by the necessary regulatory authorities, including the Department
of Trade and Industry, the JSE Securities Exchange South Africa and the
South African Reserve Bank.
The South African Competition authorities have granted approval for the
transaction to be implemeBestfoods Robertsons venture of the following:
* the "Oxo" brand name;
* the "Royco" brand name, including selected brand names and ranges; and
* the "Quick Soup" and "Oodles of Noodles" sub-brands from the "Knorr"
stable.
Excluded from the aforementioned divestiture are the "Royco" sub-brands "Cup-
a-Soup", "Cup-a-Snack", "Mates" and "Pasta & Sauce".
5. Undertaking by Remgro Limited
An undertaking has been received from Remgro Limited, who controls 73.4% of
the HL&H ordinary shares, to vote in favour of the resolutions to be
proposed at the general meeting.
6. Financial effects
The table below sets out the effects of the acquisition on HL&H's earnings,
headline earnings, net asset value and tangible net asset value per share
for the six months ended 30 September 2001.
Pro forma
Before After Percentage
(cents) (cents) change (%)
Basic earnings
per ordinary share 21.5 281.7 1210.23
Diluted earnings
per ordinary share 21.4 185.2 765.42
Basic headline
earnings per
ordinary share 22.0 22.1 0.45
Diluted headline
earnings per
ordinary share 21.7 21.8 0.46
Net asset value
per ordinary share 711.9 963.9 35.40
Net tangible asset value
per ordinary share 694.3 963.9 38.83
Assumptions:
* The earnings and headline earnings per share in the Before column are
based on the published unaudited consolidated results of HL&H for the 6-
month period ended 30 September 2001.
* The basic and diluted earnings per share in the After column are based on
the published unaudited consolidated results of HL&H for the 6-month period
ended 30 September 2001, after the following adjustments to reflect the
effects of the transaction:
- the exclusion of 50% of the earnings of the Bestfoods Robertsons JV for
the 6-month period ended 30 September 2001 and the inclusion of 41% of the
earnings of the Unilever Bestfoods Robertsons venture for a 6-month period,
and for purposes of the pro forma financial effects, extrapolated from the
unaudited results of the Bestfoods Robertsons JV for the 6-month period
ended 30 September 2001 and the audited results of the Unifoods businesses
for the 12 months ended 31 December 2001; and
- the inclusion of an exceptional profit, estimated to be R550 million at
the effective date, to be recorded by Robertsons in terms of the
transaction.
* The basic and diluted headline earnings per share in the After column are
based on the published unaudited consolidated results of HL&H for the 6-
month period ended 30 September 2001, after adjusting for the exclusion of
50% of the earnings of the Bestfoods Robertsons JV for the 6-month period
ended 30 September 2001 and the inclusion of 41% of the earnings of the
Unilever Bestfoods Robertsons venture for a 6-month period, and, for
purposes of the pro forma financial effects, extrapolated from the unaudited
results of the Bestfoods Robertsons JV for the 6-month period ended 30
September 2001 and the audited results of the Unifoods businesses for the 12
months ended 31 December 2001.
* The net asset value and tangible net asset value per share in the Before
column is based on the published unaudited consolidated results of HL&H as
at 30 September 2001.
* The net asset value and tangible net asset value per share in the After
column are based on the published unaudited consolidated results of HL&H as
at 30 September 2001 after the following adjustments to reflect the effects
of the transaction:
- the exclusion of 50% of the net asset value of the Bestfoods Robertsons JV
as at 30 September 2001 and the inclusion of 41% of the net asset value of
the Unilever Bestfoods Robertsons venture as at 31 December 2001; and
- the inclusion of an exceptional profit, estimated to be R550 million at
the effective date, to be recorded by Robertsons in terms of the
transaction.
* The Before and After net asset value and tangible net asset value per
share have been based on the actual shares in issue at 30 September 2001.
7. Documentation
A circular, containing full details of the transaction and incorporating a
notice of general meeting of HL&H shareholders is in the course of being
prepared and will be posted to HL&H shareholders within 28 days of the
publication of this announcement.
Sandton
27 March 2002
Merchant bank and transactional sponsor
RAND MERCHANT BANK
A division of FirstRand Bank Limited
CORPORATE FINANCE
Sponsor
ENF SPONSORS
ENF SPONSORS (PTY) LTD
(Registration number 2000/027636/07)
