| Tue 25 Jun 2002, 0:00 | | Wesco Investments Limited - The Proposed Sale By W |
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Wesco Investments Limited - The proposed sale by Wesco of a controlling
interest in Toyota South Africa
(Incorporated in the Republic of South Africa)
(Registration number 1968/005871/06)
(Share code: WES)
(ISIN Number: ZAE000007928)
("Wesco" or "the Company")
The proposed sale by Wesco of a controlling interest in Toyota South Africa
(Proprietary) Limited to Toyota Motor Corporation of Japan
1. Introduction
Further to the cautionary announcement of 16 May 2002, the board of
directors of Wesco ("the board") hereby announces that agreement in
principle has been reached with Toyota Motor Corporation of Japan ("TMC")
whereby, subject to fulfilment of the conditions precedent referred to in
paragraph 4 below, Wesco proposes to sell 12 425 997 ordinary shares
("shares") in Toyota South Africa (Proprietary) Limited ("Toyota SA"), being
61,1% of the Company`s interest in Toyota SA (and representing some 39,3% of
the total share capital of Toyota SA), to TMC ("the sale"), in consideration
for a cash payment of R994 079 760, equivalent to R80 per share ("the sale
proceeds").
2. Background to the proposed sale
Wesco is involved in the automotive industry through Toyota SA and Metair
Investments Limited ("Metair"). The expertise of Toyota SA and Metair, both
leaders in the South African automotive industry, revolves around the
manufacture and marketing of motor vehicles and in the supply of motor
vehicle components and related products to the local and international
markets.
During 2001, Toyota SA repurchased the shares of its shareholders other than
Wesco and TMC and delisted from the JSE Securities Exchange South Africa
("the JSE") ("the delisting"). As reported at the time of the delisting, the
financing of Toyota SA`s capital expenditure and operational requirements
had, in the past, been adequately sourced from a balance between retained
earnings and prudent borrowings. The continuous deterioration of the Rand to
Yen exchange rate resulted in a substantial increase in cost of sales which
could not be recovered fully by way of price increases. This situation
resulted in Toyota SA sustaining losses. Furthermore, other South African
original equipment manufacturers, being wholly-owned subsidiaries of their
overseas parent companies and, in some cases, not being exposed to the Rand
to Yen exchange rate, have a significant competitive advantage over Toyota
SA in terms of access to substantial export markets.
As a consequence of the delisting, Wesco and TMC are Toyota SA`s only
shareholders. At the time of delisting, it was announced that the delisting
was a precondition to TMC entering into discussions with Wesco regarding:
(i) increasing its interest in Toyota SA; (ii) setting the levels of funding
required by Toyota SA going forward and the preferred sources of this
funding; and (iii) determining the detailed strategy of the business. It was
also advised that, in order for Toyota SA to regain the ability to achieve
its objectives profitably and to become a true global player in the
production of quality vehicles for export, substantial additional capital
expenditure would be required. In pursuance of the agreed business strategy,
Toyota SA plans to grow its exports. This export drive will require
substantial additional investment in plant and equipment. In anticipation
thereof, the board is aware that Toyota SA will, in the foreseeable future,
proceed with the raising of capital, which will incorporate rights offers to
raise additional equity capital ("the Toyota SA rights offers"). TMC and
Wesco are continuing discussions regarding the extent of the additional
capital required. Wesco estimates that its share of these rights offers will
amount to some R300 million. Furthermore, the acquisition by TMC of control
over Toyota SA as a result of the proposed sale places TMC in a more
favourable position to leverage its global expertise and opportunities
through Toyota SA, thereby enhancing export volumes.
3. The proposed sale
Wesco presently owns 64,28% of the issued ordinary shares in Toyota SA which
stake will reduce to a strategic shareholding of 25% plus one share as a
result of the sale. The sale will thus provide TMC with a controlling
shareholding in Toyota SA which will enable Toyota SA to strengthen its
production, sales and export activities. Some of the cash generated by Wesco
from the sale will be retained to enable it to follow its pro rata rights in
terms of the impending Toyota SA rights offers. Further details of the
application of the sale proceeds will be disclosed in the circular referred
to in paragraph 6 below. Nedcor Investment Bank Limited ("NIB") has been
appointed as the independent financial adviser to advise as to whether the
terms of the sale are fair and reasonable from a financial point of view.
4.Conditions precedent
The proposed sale is subject to, inter alia, the fulfilment of the following
conditions precedent:
4.1 the conclusion to the mutual satisfaction of both Wesco and TMC of an
appropriate shareholders` agreement regulating their relationship as
shareholders in Toyota SA and such agreement becoming unconditional;
4.2 the conclusion of the required sale agreement incorporating such
warranties as may be agreed to between the parties and such agreement
becoming unconditional;
4.3 the passing of an ordinary resolution necessary in terms of section 228
of the Companies Act, 1973 (Act 61 of 1973) to approve and ratify the sale
being passed at a general meeting of shareholders of Wesco ("the general
meeting"). In this regard, and subject to agreement to the key terms of the
above agreements, the approval to the sale of more than the required 50% of
Wesco`s shareholders has been obtained;
4.4 the unqualified approval of the Competition Tribunal for the sale being
obtained; and
4.5 all other required statutory and regulatory approvals being obtained.
5. Further announcement, financial effects of the proposed sale and views of
the board and NIB
Upon conclusion of the agreements referred to in paragraphs 4.1 and 4.2, a
further announcement will be published reflecting the effect of the sale on
the earnings and net asset value of Wesco. At that time, the directors of
Wesco will express an opinion on the sale and NIB shall deliver its opinion.
6. Circular to shareholders and general meeting
A circular to shareholders of Wesco dealing in detail with the sale and the
effects thereof and incorporating a notice convening the general meeting
necessary to approve the sale is in the course of preparation and will be
dispatched to shareholders shortly after the abovementioned announcement.
Johannesburg
24 June 2002
Investment bank and independent financial adviser
Nedcor Investment Bank
Corporate adviser and sponsor
PricewaterhouseCoopers
Corporate Finance (Pty) Ltd
(Registration number 1970/003711/07)
Independent legal adviser
Webber Wentzel Bowens
Reporting accountants
PricewaterhouseCoopers Inc
Chartered Accountants (SA)
Registered Accountants and Auditors
(Registration no 1998/012055/21)
Date: 25/06/2002 07:22:00 AM Produced by the SENS Department
