| Thu 18 Apr 2002, 0:00 | | Merger Of Cam And Jci Gold |
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Consolidated African Mines Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1894/000854/06)
Share code: CAM ISIN: ZAE 000013199
("CAM")
JCI Gold Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1998/005215/06)
Share code: JCG ISIN: ZAE 000015467
("JCI Gold")
MERGER OF CAM AND JCI GOLD
Announcement relating to:
* a scheme of arrangement to constitute JCI Gold a wholly-owned subsidiary
of CAM;
* a rights offer by CAM;
* the creation and listing of redeemable convertible debentures in CAM;
* an increase in the authorised share capital of CAM;
* an acquisition by CAM of a 40% interest in Letseng Investment Holdings
(South Africa) (Pty) Limited ("Letseng Holdings"); and
* a change of name from CAM to JCI Limited;
(collectively "the proposals").
1. INTRODUCTION
Further to the update cautionary announcement published in the press on 16
April 2002 regarding the proposal to restructure and simplify the CAM group
of companies which include, inter alia, investments in JCI Gold, Western
Areas Limited ("Western Areas"), Free State Development and Investment
Corporation Limited and Randgold & Exploration Company Limited (collectively
"the CAM group"), CAM proposes to acquire the interests of the minority
shareholders of JCI Gold ("JCI Gold minorities") by way of a scheme of
arrangement ("the Scheme") in terms of section 311 of the Companies Act,
1973 (Act 61 of 1973), as amended ("the Act").
The successful implementation of the proposals will lead to JCI Gold
becoming a wholly-owned subsidiary of CAM and result in the delisting of JCI
Gold on the JSE Securities Exchange South Africa ("the JSE"). At the same
time, CAM, which will be renamed JCI Limited, intends to acquire a 40%
interest in Letseng Holdings, the holding company of Letseng Diamonds (Pty)
Limited ("Letseng Diamonds"), a diamond mining company situated in the
Kingdom of Lesotho ("the Letseng acquisition").
The purpose of this announcement is to inform CAM and JCI Gold shareholders
of the terms and conditions of the proposals.
2. THE SCHEME
2.1 Terms
CAM intends to propose the Scheme between JCI Gold and its shareholders,
other than CAM and the CAM group companies, excluding JCI Gold.
In terms of the Scheme, if implemented, CAM will acquire the balance of
32,5% of the issued share capital of JCI Gold held by the JCI minorities. In
terms of the Scheme, JCI Gold minorities will be offered R4,00 in cash ("the
cash component"), seven new CAM shares issued at 45 cents each and four CAM
debentures of 125 cents each, for every one JCI Gold share held at the
record date of the Scheme ("the Scheme consideration"). JCI Gold minorities
will be entitled to elect to receive nine new CAM shares issued at 45 cents
each and credited as fully paid ("the share alternative") instead of the
cash component.
JCI Gold minorities holding 7,9% of the issued share capital of JCI Gold
have given irrevocable undertakings to elect to receive the share
alternative. Accordingly the maximum portion of the aggregate Scheme
consideration of R615,1 million which CAM will be obliged to pay in cash is
R152,9 million.
The salient terms of the CAM debentures are that they will:
* be listed on the JSE;
* bear interest at prime;
* be redeemable at par, at the election of the holders, after three years,
or be convertible into CAM shares on a one-for-one basis;
* initially be fully secured by a pledge of JCI Gold shares owned by CAM
prior to the implementation of the Scheme ("the initial pledge"). Within
four months after the implementation of the Scheme, the initial pledge will
be replaced with a pledge of listed securities, other than JCI Gold shares
("the substitute pledge"), which will provide a 50% security; and
* be redeemable or convertible at the election of the holder should the
initial pledge not be substituted by the substitute pledge by no later than
four months after the implementation of the Scheme.
2.2 Rationale
CAM proposes the Scheme in order to:
* simplify the corporate and shareholding structure;
* unlock value for CAM and JCI shareholders;
* eliminate the pyramid holding company structure;
* eliminate the duplication of listing of similar assets within the CAM
group; and
* reduce the number of entry points into the CAM group.
This will enable CAM to build on its strategy of becoming a dynamic resource
finance company with influence over local and international resource assets.
2.3 Scheme conditions
The Scheme is subject, inter alia, to the following conditions precedent:
* the increase in authorised share capital conditions being fulfilled;
* granting of listings by the JSE of the CAM debentures and new CAM shares;
* approval of the terms of the Scheme by CAM shareholders at the general
meeting of CAM shareholders ("the general meeting");
* the necessary approvals including the JSE and Securities Regulation Panel
("SRP") (this announcement notwithstanding, the SRP has not yet consented to
the Scheme);
* approval by not less than 75% of JCI Gold shareholders present and voting
at the Scheme meeting of JCI Gold shareholders ("Scheme meeting"); and
* sanction of the Scheme by the High Court of South Africa ("Court") and the
Order of Court being registered by the Registrar of Companies ("the
Registrar") in terms of the Act.
2.4 Undertakings
Shareholders representing 63% of the JCI Gold minorities have given
irrevocable undertakings to vote in favour of the Scheme at the Scheme
meeting.
CAM minority shareholders representing 32% of the CAM minority shareholders
eligible to vote at the general meeting ("CAM minority shareholders") have
given irrevocable undertakings to vote in favour of the terms of the Scheme
at the general meeting.
3. THE RIGHTS OFFER
3.1 Terms
The board of directors of CAM has resolved to raise R155 million, before
expenses, by way of the rights offer underwritten as set out in paragraph
3.2 below.
3.2 Rationale
The consideration for the Scheme will consist of a mixture of cash, new CAM
shares and listed redeemable convertible debentures in CAM ("CAM
debentures"). In order to timeously raise the cash component of the
consideration for the Scheme, CAM has entered into loan agreements with
Investage 170 (Pty) Limited ("Investage") and BNC Investments (Pty) Limited
("BNC") ("the lenders"). The lenders will advance R155 million by way of
interest free loans ("the loans") to CAM to facilitate the implementation of
the Scheme once the conditions precedent to the Scheme, set out in paragraph
2.3 above ("Scheme conditions"), have been fulfilled.
The loans will be repaid:
partly in cash with the proceeds from a renounceable rights offer of new CAM
shares to raise R155 million proposed by CAM ("the rights offer"); and
partly by the allotment and issue of new CAM shares not subscribed for by
the CAM shareholders entitled to participate in the rights offer. The loans
therefore effectively underwrite the rights offer.
3.3 Conditions precedent
The rights offer is subject, inter alia, to the following conditions
precedent:
* fulfilment of the increase in authorised share capital conditions;
* the required approvals from the JSE and the Registrar; and
* fulfilment of the Scheme conditions as set out in paragraph 2.3 above.
4. THE LETSENG ACQUISITION
4.1 Nature of business
Letseng Holdings is the holding company of Letseng Diamonds which currently
holds the mineral lease over the diamond deposit at Letseng-la-Terae in the
Kingdom of Lesotho. Letseng Diamonds is in the process of developing and re-
establishing a mining operation and associated infrastructure to extract
diamonds from the underlying deposits.
4.2 Terms
CAM intends to acquire, subject to the conditions precedent set out in
paragraph 4.4 below, 40% of the issued share capital of Letseng Holdings
("Letseng Investment shares") from Letseng Diamonds Limited, a Guernsey
registered company ("Letseng"), with effect from 1 April 2002.
The purchase consideration for the Letseng Investment shares ("purchase
consideration") is:
* the issue of 220 million new CAM shares, credited as fully paid, at 45
cents each to Letseng five days after the fulfilment of the conditions
precedent set out in paragraph 4.4 below; and
* US$ 6,5 million paid in cash on 30 June 2002 or five days after the
fulfilment of the conditions precedent set out in 4.4 below, whichever is
the later.
4.3 Rationale
The Letseng acquisition represents an investment in the Letseng Diamond mine
which will generate a positive cashflow for at least 18 years from a high
margin diamond deposit. This project has low technical risk since it is the
extension of mining activities of De Beers Lesotho Limited who closed the
mine in 1982 at a low point in the diamond market. Since that time,
strength in the gem market, together with the favourable Rand/US$ exchange
rate, has significantly changed the economics of this deposit.
CAM, together with its black economic empowerment partner, New Mining
Corporation Limited ("NMC"), is moving to complete final funding
requirements for construction of a new processing plant.
Letseng Diamonds has a history of producing some of the best gem quality
stones in the world. Historic production demonstrates that more than 15% of
stones are in excess of 10 carats. The largest stone produced from the mine
to date was 601 carats and a stone of 62 carats yielded the highest price
ever paid per carat for a gem quality stone. In the current market, average
prices received are expected to exceed US$635 per carat.
Substantial work on primary infrastructure has been completed. An upgrade
of the infrastructure including roads and power has been undertaken by the
Lesotho Government ensuring an early start.
The directors of CAM are of the opinion that the Letseng acquisition
represents a quality investment. In line with the CAM group corporate
strategy, it is intended that an appropriate Joint Venture partner will be
offered an opportunity to operate the project once the mine has reached full
production. In order to demonstrate the value of this project, the
directors of CAM have commissioned Venmyn Rand (Pty) Limited to prepare an
Independent Due Diligence, Valuation Report and Fair and Reasonable Opinion
for the shareholders, in the form of a Competent Persons Report which will
be compliant with Section 12 of the Listing Requirements of the JSE.
4.4 Conditions precedent
The Letseng acquisition is subject, inter alia, to the following conditions
precedent:
* approval by a majority of CAM shareholders in general meeting;
* the increase in authorised share capital conditions being fulfilled;
* granting of the listing by the JSE of the new CAM shares to be issued;
* the Scheme conditions set out in paragraph 2.3 above being fulfilled; and
* the necessary regulatory approvals including the JSE and the SARB.
5. INCREASE IN THE AUTHORISED SHARE CAPITAL
CAM currently has insufficient unissued authorised share capital to
undertake the rights offer, settle the share component of the consideration
for the Scheme, provide for the election of new CAM shares instead of cash
in terms of the share alternative of the Scheme, provide for the potential
conversion of the CAM debentures and settle the share component of the
purchase consideration of the Letseng acquisition. It is therefore proposed
to increase the authorised share capital of CAM by the creation of
1 500 000 000 new CAM shares of one cent each.
The increase in authorised share capital is subject to, inter alia, the
following conditions precedent:
* approval by the required majority of CAM shareholders at the general
meeting; and
* registration of the special resolution to increase the authorised share
capital with the Registrar.
(collectively, "the increase in authorised share capital conditions").
6 PRO-FORMA EFFECTS OF THE PROPOSALS
6.1 Effects of the Scheme on CAM shareholders
The pro-forma financial effects of the proposals on CAM set out below are
based on the published unaudited interim financial results of CAM for the 6
months ended 30 September 2001:
Before After the After After After the Change Dilutive
Letseng the rights proposals (%) effect of
acquisition loan offer conversion
and of
Scheme debentures
(cents) (cents) (cents) (cents) (cents) (cents)
Loss (15,74) (12,37) (3) (9,61) (10,37) (6,69) 58 (5,98)
per (1) (5) (7) (9) (11)
share
Headlin (14,44) (10,85) (3) (8,66) (9,52) (5,78) 60 (5,16)
e loss (1) (5) (7) (9) (11)
per
share
Net 62,97 58,55 (4) 55,37 56,88 51,92 (18) 46,38 (11)
asset (2) (6) (8) (10)
value
per
share
(includ
ing
intangi
bles)
Net 62,97 58,55 (4) 53,56 56,88 50,71 (19) 45,30 (11)
asset (2) (6) (8) (10)
value
per
share
(exclud
ing
intangi
bles)
Shares 665 073 885 073 1 130 1 009 1 694 514 155 1 896 814
in 070 518
issue
(`000)
The financial effects set out above have been based on the assumption that,
except for the JCI Gold shareholders who have given irrevocable undertakings
to receive the share alternative, the JCI shareholders have opted to receive
the cash component and not the share alternative.
The loss and headline loss per share calculations have been based on the
assumption that the proposals were implemented on 1 April 2001.
The net asset value (including intangibles) and net asset value (excluding
intangibles) per share calculations have been based on the assumption that
the proposals were implemented on 30 September 2001.
Notes:
1. The loss and headline loss per share as extracted
from the published, unaudited, interim income
statement of CAM for the 6 months ended 30 September
2001.
2. The net asset value (including intangibles) and the
net asset value (excluding intangibles) per share as
extracted from the published, unaudited, interim
balance sheet of CAM at 30 September 2001.
3. The purchase price being paid for the Letseng
acquisition exceeds 40% of the net asset value of
Letseng Holdings being acquired by R172 million. The
excess can be attributed in full to mineral
interests that Letseng Holdings owns but has not
been capitalised. Mineral interests are being
amortised over the estimated life of the mine, being
18 years. The loss per share has been increased by
the amortisation of the mineral interests arising on
the Letseng acquisition amounting to R4,8 million.
Letseng Holdings results for the six months from
1 April 2001 to 30 September 2001 were capitalised
and therefore have not impacted on the loss per
share. The headline loss per share excludes the
amortisation of mineral interests.
4. The net asset value (including intangibles) and the
net asset value (excluding intangibles) per share of
CAM at 30 September 2001 have been adjusted to
include the effect of the Letseng acquisition. The
purchase consideration consists of 220 million CAM
shares at 45 cents per share and the payment of
US$6,5 million in cash at an exchange rate of
R11,22/US$ prevailing at 16 April 2002.
5. The loss and headline loss per share have been
calculated after the raising of the loan of R155
million, the issue of 354 million new CAM shares in
terms of the Scheme and the issue of a further 111
million new CAM shares to JCI Gold shareholders who
have given irrevocable undertakings to receive the
share alternative.
The loss and headline loss per share have been
adjusted for the following:
* facility fee on the loans of R3,1 million (or 2%
of the loans);
* listing costs of R0,5 million;
* interest on CAM debentures amounting to R16,4
million;
* amortisation of goodwill (R20,5 million) arising
on the acquisition of the JCI Gold minorities of
R2,0 million. Included in goodwill are transaction
costs of R4,8 million which are being written-off
over 5 years;
* reversal of the portion of earnings for the six
month period previously attributable to JCI Gold
minorities of R12,3 million effectively resulting in
JCI Gold becoming a wholly-owned subsidiary of CAM;
* the taxation effect of the facility fee on the
loans and interest paid on the CAM debentures; and
* the headline loss per share excludes the
amortisation of goodwill of R2 million.
6. The net asset value (including intangibles) per
share at 30 September 2001 includes the acquired JCI
Gold minorities' interest in the net asset value of
JCI Gold, the goodwill arising on the acquisition of
the JCI Gold minorities and the increase in the
share capital resulting from the issue of 465
million shares less the facility fee on the loans
and listing costs net of the taxation benefit.
7. The loss and headline loss per share have been
adjusted to include the effects of the rights offer
with effect from 1 April 2001. Interest has not
been accrued on the cash proceeds from the rights
offer, as the cash proceeds will be used to repay
the loans and effectively implement the Scheme.
8. The net asset value (including intangibles) and the
net asset value (excluding intangibles) per share at
30 September 2001 have been adjusted for the
increase in the share capital. The cash received has
been utilised to settle the loans.
9. The loss and headline loss per share illustrate the
total effect of the proposals.
10. The net asset value (including intangibles) and the
net asset value (excluding intangibles) per share
illustrate the total effect of the proposals.
11. The redeemable, convertible CAM debentures have a
potentially dilutive effect on CAM's loss per share,
headline loss per share, net asset value (including
intangibles) and the net asset value (excluding
intangibles) per share. The calculation of diluted
loss, headline loss, net asset value (including
intangibles) and net asset value (excluding
intangibles) per share is based on an increase of
202,3 million shares upon conversion of the CAM
debentures.
6.2 Effects of the Scheme on JCI Gold minorities
The pro forma financial effects of the proposals on JCI Gold minorities set
out below are based on the published, unaudited financial information of JCI
Gold for the six months ended 30 September 2001.
Before After the Change
the Scheme
proposal
(cents) (cents) (%)
Earnings / (loss) per 24,40 (3,82) (116)
share (2)
Headline earnings / 13,30 2,57 (3) (81)
(loss) per share
Net asset value per 1 240,00 1 263,43 2
share (4)
Calculated market 860,00 1 194,00 39
value per share (1) (5)
NOTES
1. The closing price of JCI Gold shares on the JSE on 16
April 2002.
2. The pro forma loss attributable to a JCI Gold
shareholder in terms of the proposal is based on the
following:
interest on the cash component, assuming that the
cash had been invested for the six month period ended
30 September 2001 at an after tax daily compounded
return of 8.05%;
interest on the nominal value of the four CAM
debentures of R1,25 each at an after tax interest
rate of 10,50% for the six month period ended 30
September 2001; and
a JCI shareholder's share of the attributable loss of
CAM based on the receipt of seven new CAM shares.
3. The headline loss per share excludes certain
extraordinary items.
4. The Scheme consideration comprises the following:
cash paid amounting to R4,00 per JCI Gold share;
4 CAM debentures issued to JCI Gold minorities with a
nominal value of R1,25 each; and
7 new CAM shares issued to JCI Gold minorities with a
total net asset value of R3,63.
5. The calculated market value comprises the following:
cash paid amounting to R4,00 per JCI Gold share;
4 CAM debentures issued to JCI Gold minorities with a
nominal value of R1,25 each; and
7 new CAM shares issued to JCI Gold minorities with a
total market value on 16 April 2002 of R2,94.
7. LISTINGS
Application will be made to the JSE for the listing of:
* the renounceable (nil paid) letters of allocation;
* the CAM shares to be issued in terms of the rights offer;
* the CAM shares to be issued in terms of the Letseng acquisition;
* the maximum number of CAM shares that could be issued in terms of the
Scheme; and
* the CAM debentures to be issued in terms of the Scheme.
On the implementation of the Scheme, the listing of JCI Gold shares on the
JSE will be terminated.
Subject to the sanction of the Court and implementation of the Scheme, CAM
will change its name to JCI Limited and all existing and new CAM shares to
be issued as part of the rights offer, the Scheme, the Letseng acquisition
and the CAM debentures will trade under "JCI Limited" on the JSE.
8. RELATED PARTY TRANSACTION
Prior to the implementation of the proposals BNC, a Kebble family controlled
company, and NMC owned 12% and 13% respectively, of the issued share capital
in CAM. BNC and NMC have entered into a voting pool agreement in respect of
their CAM shares. Brett and Roger Kebble are directors of both CAM and JCI
Gold. BNC is a lender and has lent CAM R85 million of the loans on the same
terms as Investage. BNC is not acting in concert with Investage.
In terms of the Listings Requirements of the JSE, Brett and Roger Kebble are
related parties to CAM, and BNC is an associate of the Kebbles. Accordingly,
a majority of votes of CAM shareholders, other than Roger Kebble, Brett
Kebble, NMC and BNC will be required to approve the terms of the Scheme at
the general meeting.
9. CHANGE OF NAME AND NEW MEMORANDUM AND ARTICLES OF ASSOCIATION
It is proposed that, upon the implementation of the Scheme and subject to
the passing and registration of the required resolutions, CAM be renamed
"JCI Limited" and a new Memorandum and Articles of Association be adopted to
reflect CAM's proposed name, main business and object as well as the revised
capital structure of CAM.
10. FUNDING CONFIRMATION
Corpcapital Bank Limited has confirmed to the SRP that CAM has access, via
the loans, to sufficient resources to fulfil its maximum cash obligations of
R152,9 million in terms of the Scheme as referred to in paragraph 2.1 above.
11. OPINIONS AND RECOMMENDATIONS
In terms of the SRP's Code on Take-overs and Mergers and the Listing
Requirements of the JSE, both the board of directors of JCI Gold and the
board of directors of CAM have appointed independent professional advisors
to advise whether the terms and conditions of the Scheme are fair and
reasonable to JCI Gold minorities and CAM minority shareholders. The
substance of the advisers' reports, which are not complete at the date of
this announcement, will be communicated to shareholders in the requisite
circulars.
The boards of directors of CAM and JCI Gold respectively, on receipt of the
reports and opinions of the independent professional advisors, will make
appropriate recommendations to the shareholders of CAM and JCI Gold,
respectively, in connection with the Scheme.
12. DOCUMENTATION AND SALIENT DATES
Further details of the proposals will be included in a circular,
incorporating a notice of the general meeting and a form of surrender and
revised listing particulars, which will be posted to CAM shareholders in due
course.
Further details of the Scheme will be included in a circular, incorporating
a notice of the Scheme meeting and a form of surrender, which will be posted
to JCI Gold shareholders in due course. The Scheme meeting will be held
after the general meeting.
A rights offer circular will be posted to CAM shareholders once the Scheme
conditions have been fulfilled.
Salient dates in relation to the proposals will be published prior to the
issuing of any of the abovementioned documentation.
Johannesburg
19 April 2002
Corporate advisor & lead sponsor Attorneys
Corpcapital Corporate Finance Tabacks
Independent advisor to CAM minorities
PSG
Reporting accountants and independent advisor to JCI Gold minorities
KPMG
Joint sponsor
Sasfin
Reporting accountants on Letseng
PWC
Independent technical and economic advisors
Venmyn Rand (Pty) Ltd
