| Mon 22 Apr 2002, 0:00 | | Recommended Offer By Nedcor To Acquire Boe For R7 |
|
cautionary announcement
Nedcor
Nedcor Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/003281/06)
Share code NED ISIN ZAE 000004875
("Nedcor")
NIB
Nedcor Investment Bank Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1963/003972/06)
Share code NIB ISIN ZAE 000019030
("NIB")
BoE
BoE Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/003281/06)Share code BOE ISIN ZAE 000014890
("BoE")
Recommended offer by Nedcor to acquire BoE for R7.3 billion and joint
cautionary announcement
1. Introduction
The boards of Nedcor and BoE have agreed the terms of a recommended offer
(the "Offer"), in terms of which Nedcor will acquire the entire issued
share capital of BoE (the "Transaction") subject to the fulfilment of the
conditions as set out in paragraph 6 below.
It is proposed that the Transaction will be implemented by way of a
scheme of arrangement to be proposed between BoE and its shareholders in
terms of section 311 of the Companies Act, 1973 (as amended) (the
"Scheme").
BoE's executive directors unanimously support the Transaction and the BoE
board of directors (the "BoE Board") unconditionally recommends to
shareholders that they exercise their voting rights in favour of the
Scheme.
The Transaction will result in BoE shareholders receiving, per 100 BoE
ordinary shares:
* R280 in cash; and
* 0.4854369 Nedcor shares.
Up to an additional R10 per 100 BoE ordinary shares, may also be payable
in cash. The consideration (before such additional amount) places a value
on each BoE share of R3.43 and, based on 2.13 billion shares in issue,
amounts to a total consideration of R7.31 billion. Further details of the
consideration are set out in paragraph 3 below.
By mutual agreement between Nedcor and BoE, the ratio of equity to cash
may be revised.
2. Background to and rationale for the Transaction
2.1 Profiles
BoE
BoE is a specialist provider of innovative financial services to
businesses and, through businesses, to individuals. The company
differentiates itself from its competitors by delivering high levels of
client service and meaningfully innovative financial products, through
three main business groupings:
* business-facing divisions offering merchant banking, commercial and
industrial property finance, asset-based lending to corporates, full
service commercial banking and e-commerce facilities;
* investment management divisions offering private banking, asset
management, employee benefits, insurance and fund administration
services; and
* retail divisions offering consumer credit, secured and unsecured
lending products and savings accounts to individuals.
As at 30 September 2001, BoE had assets of R67,2 billion, including
advances of R47,5 billion and capital and reserves of R6,4 billion. BoE
generated headline earnings of R1,2 billion in its 2001 financial year.
Subsequent to BoE's 30 September 2001 year-end, BoE disposed of its NBS
home loan book of R11.9 billion for cash.
Nedcor
Nedcor is a multi-branded financial services group, which services
clients in the retail, commercial, corporate, institutional, property,
investment banking and public sectors of the market. Nedcor's Technology
and Operations Division provides centralised information technology
processing services to the Nedcor group. As at 31 December 2001, Nedcor
had R197,7 billion of assets, including R151,3 billion of advances and
capital and reserves of R14,9 billion. Nedcor generated headline earnings
of R3,8 billion in its 2001 financial year.
2.2 Rationale for Nedcor to acquire BoE
The Transaction, if implemented, would give Nedcor an aggregate asset
base in excess of R240 billion and an earnings base of approximately R5
billion.
Nedcor has actively advanced the view during the past two years that the
South African banking sector should consolidate. This view has been
formulated in anticipation of increased international banking
consolidation and competition, increased capital demands of
counterparties and regulators, the scale and efficiency requirements of
new and costly banking technology and a general shortage of banking
skills.
The Transaction could provide Nedcor with the opportunity to increase the
scale of its operations and supplement its skills and client base
throughout the group. The Transaction would also enable Nedcor to gear
its low cost infrastructure and capture benefits of operational scale.
In addition to anticipated operational gearing benefits, the Transaction
would allow Nedcor to optimise its capital structure.
2.3 Rationale for the support by the BoE Board of the Transaction
The BoE Board is firmly of the belief that growth prospects for mid-size
and smaller banks within the South African financial services sector have
deteriorated significantly, in the wake of fundamental changes and
sentiment within and towards the sector. Consolidation in the banking
and financial services industry is a global phenomenon and South Africa
is following this trend.
Recent events culminating in the joint statement by the Minister of
Finance and the Governor of the South African Reserve Bank issued on 14
March 2002, have highlighted the specific risks faced by BoE
notwithstanding the fact that BoE is a well-managed, profitable and sound
business with a strong franchise.
In the circumstances, the BoE Board is firmly of the opinion that the
interests of stakeholders are best protected by BoE entering a
transaction with an appropriate larger financial institution.
The scheme of arrangement proposed by Nedcor provides stakeholders with
certainty, security and opportunity.
3. Terms of the Transaction
3.1 Implementation of the Transaction
Nedcor will propose a scheme of arrangement in terms of section 311 of
the Companies Act.
3.2 The Transaction consideration
The Transaction consideration will be a combination of cash and Nedcor
shares. The Transaction will result in BoE shareholders receiving, for
every 100 BoE ordinary shares held, R280 in cash and 0.4854369 Nedcor
shares. Nedcor has agreed to pay up to an additional R10 per 100 BoE
ordinary shares in cash following the provision of certain satisfactory
additional information, upon receipt of which Nedcor can finalise the
price of its offer.
Under the terms of the Offer, BoE shareholders will not be entitled to
receive an interim dividend for the period ending 31 March 2002.
The Nedcor shares issued will rank, pari passu, with existing Nedcor
ordinary shares, including the right to receive Nedcor's interim dividend
to 30 June 2002.
At the closing price of Nedcor shares as quoted by the JSE Securities
Exchange South Africa (the "JSE") on Friday, 19 April 2002 of R129.00,
this consideration equates to R3.43 per BoE share, a premium of 10.3% to
the BoE closing share price of R3.11 per ordinary share at that date, and
a premium of 21.6% to the BoE 30-day weighted average traded share price,
to Friday, 19 April 2002, of R2.82.
4. Old Mutual plc ("Old Mutual")
Old Mutual, representing the majority of the Nedcor ordinary shares, has
agreed to vote in favour of all shareholder resolutions of Nedcor
required to implement the Scheme. Upon completion of the Transaction,
Nedcor will continue to be a subsidiary of Old Mutual.
5. Nedcor Investment Bank Holdings
Nedcor has informed the board of NIB that it is considering the
possibility of acquiring the minority shares of NIB so as to maximise the
integration benefits of the Transaction.
6. Conditions precedent to the Transaction
The implementation of the Offer is conditional upon:
* the obtaining of the approvals of all regulatory authorities if and to
the extent necessary, including those of the Minister of Finance, the
South African Reserve Bank (the "SARB"), the Registrar of Banks, the
Financial Services Board, the Securities Regulation Panel (the "SRP"),
the JSE and the Competition Authorities;
* the satisfactory completion of a due diligence review of BoE by Nedcor
as set out in paragraph 8 below;
* Nedcor not exercising its right to withdraw from the Transaction in the
event that Nedcor successfully contends that BoE permitted any competing
offeror to conduct a more extensive due diligence than that conducted by
Nedcor;
* Nedcor raising such cash funds, as required, to discharge the cash
consideration, within five business days of this announcement; and
* the convening by the High Court of the meeting to consider the Scheme,
the approval of the Scheme by the requisite majority of BoE shareholders,
the sanction of the Scheme by the High Court and the registration of the
Court order sanctioning the Scheme by the Registrar of Companies.
Nedcor and BoE have undertaken to use their best endeavours in fulfilling
the conditions set out above.
7. Break fee
In the event that BoE receives and recommends an alternative offer, and
such offer is accepted and becomes unconditional, then BoE has agreed to
pay Nedcor a fee equal to R72 million.
8. Due diligence
Other than the adjustment as described in paragraph 3 above, the only
purpose of the due diligence is to give Nedcor the right to withdraw the
offer, in the unlikely event that adjustments totalling in excess of R746
million are required to BoE's net asset value. Such adjustments must be
consistent with BoE's accounting policies. Nedcor has five days from the
securing of finance to complete such due diligence.
9. Opinions and recommendations
The directors of BoE unanimously recommend the Transaction to the BoE
shareholders. BoE directors who are shareholders of BoE, intend to vote
in favour of the Scheme.
The BoE Board has appointed Goldman Sachs International and UBS Warburg
as independent advisers, with respect to the Transaction. The views of
the independent advisers will be contained in the circular to be sent to
shareholders.
10. Circulars
The posting of the BoE Scheme circular will be subject to the High Court
of South Africa granting an order convening the BoE Scheme meeting, and
the circular being approved by the SRP and the JSE.
The Nedcor circular will be posted by the later of 28 days from the date
of this announcement, or the fulfilment of the conditions precedent as
set out in paragraph 6 above.
11. Shareholders to exercise caution
Shareholders of BoE, Nedcor and NIB are advised to exercise caution when
dealing in their securities until a further announcement,which will
include the financial effects, is made.
Johannesburg Cape Town
22 April 2002
Joint financial advisers to BoE Financial adviser to Nedcor
NIB
UBS Warburg
Corporate Finance
(SA) (Pty) Ltd
A financial services Goldman Sachs Nedcor Investment Bank
group of UBS AG International Holdings
(Registration number (Registration number (Registration number
1994/008363/07) 1998/86558/10) 1963/00397/06)
UBS Warburg and Goldman Sachs International
are acting for BoE Limited and no one else
in connection with this matter and will not
be responsible to any other person for
providing the protections afforded to
clients of UBS Warburg and Goldman Sachs
International for providing advice in
relation to this matter.
Lead sponsor to BoE Co-sponsor to BoE Sponsor to Nedcor
NIB
UBS Warburg BoE Securities (Pty)
Securities (SA) Ltd
(Pty) Ltd
A financial services
group of UBS AG
(Member of the JSE) (Member of the JSE) Nedcor Investment Bank
Holdings
(Registration number (Registration number (Registration number
1995/011140/07) 1995/012240/07) 1963/00397/06)
Merchant bank to BoE Legal advisers to BoE Corporate law advisers and
consultants to Nedcor
Edward Nathan Friedland
Sonnenberg Hoffmann
Galombik
BoE Merchant Bank
A division of BoE
Bank Limited
(Registration number
1951/000847/06)
