| Thu 18 Jul 2002, 0:00 | | Jci/barnex/wal - Joint Announcement |
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JCI/BARNEX/WAL - Joint Announcement
JCI LIMITED BARNATO EXPLORATION LIMITED
(formerly Consolidated African (Registration number
Mines Limited) 1988/003756/06)
(Registration number Share code: BNX
1894/000854/06) ISIN: ZAE000000964
Share code: JCD ("Barnex")
ISIN: ZAE000015467
("JCI")
WESTERN AREAS LIMITED
(Registration number
1959/003209/06)
Share code: WAR
ISIN: ZAE000016549
("WAL")
JOINT ANNOUNCEMENT REGARDING FURTHER PROPOSALS ("the proposals") TO STREAMLINE
AND SIMPLIFY THE CORPORATE STRUCTURE, INCLUDING:
- THE SETTLEMENT OF THE INDEBTEDNESS OF JCI GOLD LIMITED ("JCI GOLD") TO WAL
- A SCHEME OF ARRANGEMENT TO CONSTITUTE BARNEX AS A WHOLLY-OWNED SUBSIDIARY OF
JCI
- A DISTRIBUTION TO WAL SHAREHOLDERS OF SHARES IN WAL AND JCI ORDINARY SHARES
AND DEBENTURES TO BE ISSUED BY JCI
1. INTRODUCTION
1.1 JCI Gold, a wholly owned subsidiary of JCI, is indebted to WAL in the amount
of R469 million ("the WAL loan"). The WAL loan is subject to interest at the
prime overdraft rate plus 1,5% and is secured by a reversionary cession over
24,9 million WAL shares owned by JCI Gold.
1.2 Proposals to streamline and simplify the corporate and shareholding
structure of the JCI group of companies have been made. The salient features of
the proposals are :
- JCI Gold and WAL will enter into an agreement (" the WAL loan amendment"),
which amends the terms of the WAL loan as set out in 0;
- JCI will propose a scheme of arrangement ("the Barnex Scheme") in terms of
section 311 of the Companies Act, 1973 (Act 61 of 1973) (as amended) ("the Act")
between Barnex and its shareholders ("the Barnex scheme members") in terms
whereof Barnex shall become a wholly owned subsidiary of JCI. The scheme
consideration payable by JCI to the Barnex scheme members shall be JCI shares
and JCI debentures ("the Barnex scheme consideration"); and
- WAL will distribute to its shareholders as a payment in specie ("the WAL
distributions") in terms of the Section 90 of the Act, provided for out of the
share premium account of WAL:
- its entitlement to repayment of the WAL loan ("the loan entitlement");
- the Barnex scheme consideration by virtue of WAL`s 88,5% shareholding in
Barnex; and
- the JCI shares and JCI debentures currently held by WAL.
1.3 Subject to the approval in general meeting of the shareholders of WAL,
other than JCI Gold (which for these purposes will be a related party), and
subject to the repayment of the WAL loan, WAL shall grant JCI Gold and/or its
holding company an option, exercisable at any time during a period of 12 years
from the grant of the option ("the option period"), to subscribe for such number
of additional shares in WAL as shall in the aggregate constitute 5% of the
issued share capital of WAL at the end of the option period as detailed in 6
("the JCI option").
2. RATIONALE FOR THE PROPOSALS
The proposals:
- are an integral part of JCI`s strategy to streamline and simplify its
corporate structure in becoming a resource finance company with influence over
local and international resource assets;
- will simplify investor valuations of the shares of JCI and WAL, which are
complicated by the WAL loan, and will unlock value as the shares are currently
not accorded fair value in their current market prices;
- will result in the release of 24,9 million WAL shares from the operation of
the reversionary cession to WAL;
- will result in WAL becoming a focused gold operating company, by disposing of
its holding of 88,5% of the issued shares of Barnex, an exploration company;
- will consolidate under JCI the exploration activities of Barnex with the JCI
Group`s mineral and exploration rights, thereby optimising the JCI Group`s
resource activities, particularly in anticipation of the promulgation of the
Mineral and Petroleum Resources Development Bill;
- will enhance the tradeability of the shares of JCI and WAL; and
- in respect of the JCI option, will ensure JCI Gold maintains its shareholding
in WAL pursuant to the undertakings and guarantees given by it to the consortium
of banks with which WAL has entered into gold hedging arrangements to maintain
its shareholding in WAL. The undertakings and guarantees have been given for
the benefit of WAL.
3. THE WAL LOAN AMENDMENT
3.1 Subject to the conditions set out in 3.2, JCI Gold and WAL will, in terms
of the WAL loan amendment:
- agree that the WAL loan will be repaid, subject to the terms and conditions of
the WAL loan amendment, subject to and, immediately after the loan distribution
referred to below. It is a condition of the WAL loan amendment that JCI Gold
shall procure the release of sufficient shares owned by JCI Gold in the issued
share Capital of WAL from the operation of a pledge of those shares in favour of
the Standard Bank of Southern Africa Ltd to enable JCI Gold to undertake the
repayment of the WAL loan in terms of the WAL loan amendment;
- record WAL`s intention, and JCI Gold`s consent thereto, to distribute the loan
entitlement to the shareholders of WAL, as a payment in specie in terms of
Section 90 of the Act, provided for out of the share premium account of WAL
("the loan distribution");
- record that, subject and pursuant to the loan distribution, JCI Gold`s
entitlement to receive a portion of the loan entitlement, will be set off
against and in extinction of43% of the WAL loan by virtue of JCI Gold`s 43%
shareholding in WAL;
- specify that the WAL loan will be repaid after and subject to the loan
distribution by the transfer of 2,78 WAL shares for every R100 owing by JCI Gold
in terms of the WAL loan; and
- appoint WAL as the agent for and on behalf of its shareholders to receive the
transfer of WAL shares from JCI Gold in repayment of the remaining portion of
the WAL loan. WAL will undertake the obligation to allocate and deliver the WAL
shares to its shareholders.
3.2 The entering into of the WAL loan amendment is subject, to:
- the approval of the JSE Securities Exchange South Africa ("JSE"); and
- the approval in general meeting of a majority of shareholders of JCI.
4. THE BARNEX SCHEME
4.1 JCI will propose the Barnex scheme which, on implementation, will result in
Barnex becoming a wholly-owned subsidiary of JCI and Barnex`s listing on the JSE
being terminated.
4.2 In terms of the Barnex scheme, scheme members will receive 100 JCI
redeemable convertible debentures ("the JCI debentures") and 100 JCI shares for
every 100 Barnex shares held.
4.3 The salient terms of the JCI debentures are that they will:
- be listed on the JSE;
- bear interest at prime payable semi-annually in arrears ;
- be convertible into JCI shares on a one-for-one basis, or, at the election of
the holders, be redeemable at the issue price of 125 cents, on 15 December 2005;
- be 50% secured by a pledge of listed securities.
4.4 The Barnex scheme is subject to the following conditions:
- granting of listings by the JSE of the JCI debentures, the JCI shares to be
issued on conversion of the JCI debentures and the JCI shares to be issued in
terms of the scheme;
- the obtaining of necessary regulatory approvals including the approval of the
JSE and the Securities Regulation Panel;
- the approval by not less than 75% of Barnex shareholders, present and voting
at the Barnex scheme meeting convened to consider the Barnex scheme;
- the approval of a majority of JCI shareholders to the creation of the JCI
debentures to be issued in terms of the Barnex scheme; and
- sanction of the Barnex scheme by the High Court of South Africa and
registration of the Order of Court in terms of the Act.
5. THE WAL DISTRIBUTIONS
Each of the WAL distributions described in 5.1; 5.2 and 5.3 below is subject to
the approval of the majority of WAL shareholders in general meeting.
5.1 Subject to the entering into of the WAL loan amendment, WAL will undertake
the loan distribution to its shareholders.
Pursuant to the loan distribution, a 43% portion of JCI Gold`s obligation to WAL
will be set off against that portion of the loan entitlement distributed to JCI
Gold.
Pursuant to the loan distribution and the repayment of the WAL loan, the
shareholders of WAL other than JCI Gold ("the minority WAL shareholders") will
receive 12,4 WAL shares for every 100 WAL shares held.
5.2 Subject to the approval and implementation of the Barnex scheme, WAL will
distribute ("the Barnex distribution") the portion of the Barnex scheme
consideration received by it, to its shareholders, after the loan distribution,
as a payment in specie in terms of Section 90 of the Act, provided for out of
the share premium account of WAL.
Pursuant to the Barnex distribution the shareholders of WAL will receive 99,1
JCI shares and 99,1 JCI debentures for every 100 WAL shares held.
5.3 In addition to the loan distribution and the Barnex distribution, WAL,
after the loan distribution, will distribute ("the additional distribution")
116,4 million JCI shares and 25,1 million JCI debentures held by it, to all its
shareholders as a payment in terms of Section 90 of the Act, provided for out of
the share premium account of WAL. Pursuant to the additional distribution the
shareholders of WAL will receive 110,4 JCI shares and 23,8 JCI debentures for
every 100 WAL shares currently held.
5.4 In terms of, respectively the loan distribution, the Barnex distribution
and the additional distribution (collectively "the WAL distributions"):
5.5 minority WAL shareholders will receive an aggregate of 12,4 WAL shares,
209,6 JCI shares and 122,9 JCI debentures for every 100 WAL shares held; and
5.4.2 JCI Gold will:
- repay 43% of the WAL loan by the operation of set-off of JCI Gold`s
entitlement to receive a portion of the loan distribution against JCI Gold`s
obligation to repay the WAL loan; and
- in terms of the Barnex distribution and the additional distribution,
receive 75,6 million JCI debentures and 42,6 million JCI shares.
6. THE JCI OPTION
Subject to a 75% majority of the votes of all the WAL shareholders present or
represented by proxy at the general meeting of the shareholders of WAL
excluding JCI Gold (which for these purposes will be a related party) and
subject to the repayment of the WAL loan, WAL shall grant JCI Gold and/or its
holding company a non transferable option, exercisable at any time during a
period of 12 years commencing on the grant of the option ("the option period"),
to subscribe for such number of additional shares in WAL as shall in the
aggregate constitute 5% of the issued share capital of WAL at the end of the
option period. The subscription price payable by JCI in connection with and on
the subscription for such additional shares shall be the higher of market price
or the valuation in accordance with section 5.68(f) of the JSE Listings
Requirements relating to a specific issue of shares for cash, and shall not be
less than R36,00 per share.
7. PRO FORMA FINANCIAL EFFECTS OF THE PROPOSALS
The pro forma financial effects of the proposals on JCI and WAL and Barnex have
been prepared for illustrative purposes only, to provide information about how
the proposals might have affected the financial information presented and,
because of its nature, may not give a true reflection of JCI, WAL and Barnex`s
financial position.
7.1 On JCI and WAL
The pro forma financial effects of the proposals on JCI and WAL set out below
are based on:
- the audited financial statements of JCI for the year ended 31 March 2002.
These accounts have been adjusted for the acquisition by JCI of a 40% interest
in Letseng investment Holdings (South Africa) (Proprietary) Limited, the rights
offer and the acquisition of the shares in JCI Gold Limited not already held at
that date in terms of the proposals set out in the circular to JCI shareholders
dated 4 June 2002 (shown below in the "Before" column); and
- the assumption that the proposals were effective for the year ended
31 March 2002 based on the audited financial statements of WAL and Barnex for
the year ended 31 December 2001 (shown below in the "After" column).
7.1.1 JCI
Dilutive
After the effect of
After Barnex conversion
the WAL scheme and of all
loan the WAL After the debentures
Before amendment loan proposals(2) into JCI
amendment shares(1)
(cents) (cents) (cents) (cents) (cents)
Loss per share (22,4) (11,2) (10,2) (10,1) (6,3)
Headline loss (13,5) (10,1) (8,8) (3) (8,9) (5,2)
per share
Net asset 41,1 48,6 47,8 (3) 48,3 58,2
value per
share
Net tangible 35,3 42,8 38,6 38,9 50,1
asset value
per share
Weighted
average number 1 1 699,5 1 770,9 1 728,9 1 993,6
of shares in 699,5
issue (`mil)
Number of 1 1741,2 1812,6 1770,6 2035,3
shares in 741,2
issue (`mil)
(1) Dilutive effects based on the conversion of 264,7 million JCI debentures
into 264,7 million JCI shares and interest payable on the JCI debentures of
10,5% after tax.
(2) Assumes that JCI exercises the JCI option at R36,00 per share and borrows
R200 million at 10,5% after tax to fund the subscription consideration.
(3) Goodwill of R102 million arising on the acquisition by JCI of Barnex
amortised over 5 years.
7.1.2 WAL
After After the
the WAL Barnex scheme
loan and the WAL After the
Before amendment loan amendment proposals(1)
(cents) (cents) (cents) (cents)
Earnings per share 31,3 (19,7) 18,5 28,7
Headline earnings 33,8 (17,2) (34,0) (21,1)
per share
Net asset value 2 425 1984,7 1920,3 1 954,8
per share
Net tangible asset 2 425 1984,7 1920,3 1 954,8
value per share
Number of shares 105,4 105,4 105,4 110,9
in issue (`mil)
(1) Assumes that JCI exercises the JCI option at R36,00 per share and WAL
invests the R200 million proceeds thereof to earn 10,5% after tax.
Undue reliance should not be placed on the above pro forma financial effects as
WAL`s major source of income is interest on the WAL loan. The South Deep
project in which WAL has a 50% participation interest is forecast to reach full
gold production by 2004. Consequently, in the interim, WAL`s reported earnings
should not be considered representative of its potential or value.
7.2 On WAL shareholders
The pro forma financial effects of the proposals on WAL shareholders set out
below are based on:
- the audited financial statements of WAL for the year ended 31 December 2001
(shown below in the "Before" column);
- the WAL shares, JCI shares and JCI debentures that WAL shareholders will hold
after the implementation of the proposals and the pro forma earnings and net
asset value per JCI share and WAL share after the implementation of the
proposals illustrated in 7.1 (shown below in the "After" column).
Before After Total
Holdings 1 WAL 1,12 1,23 JCI 2,1 JCI
Share WAL debenture shares
shares s
Earnings per 31,3 20,7 23,0 (21,8) 21,9
share (cents)
Headline 33,8 (38,2) 23,0 (18,8) (33,9)
earnings per
share (cents)
Net asset value 2 425 2 099 153,6 101,1 2 353,9
per share
(cents)
Net tangible 2 425 2 099 153,6 81,4 2 334,2
asset value per
share (cents)
In terms of the WAL distributions, a WAL shareholder will receive 12.4 WAL
shares, 209.6 JCI shares and 122.9 JCI debentures for every 100 WAL shares held.
7.3 Of the Barnex scheme on Barnex shareholders
The financial effects of the Barnex scheme on Barnex shareholders shown below
are based:
- on the audited financial statements of Barnex for the year ended
31 December 2001 (shown below in the "After" column) and the market price of
Barnex shares on 17 July 2002, being the last practicable date before the
finalisation of the announcement (shown below in the "Before" column); and
- the JCI shares and the JCI debentures that Barnex shareholders will hold
after the implementation of the Barnex scheme based on the pro forma earnings
and net asset value per JCI share illustrated in 6.2 and the market price of JCI
shares and JCI debentures on 17 July 2002, being the last practicable date
before the finalisation of the announcement (shown below in the "After" column).
Before After Total
Holdings 1 1 JCI 1 JCI
Barnex share debenture
share
Earnings per share 19,0 (10,1) 18,8 (1) 8,6
(cents)
Headline earnings 2,7 (8,9) 18,8 9,9
per share (cents)
Net asset value 73,2 48,2 125,0 173,2
per share (cents)
Calculated market 95,0 34,0 85,0 109,0
price (cents)
(1) Based on an interest rate of 15% payable on the JCI debentures.
A Barnex shareholder will receive 100 JCI shares and 100 JCI debentures for
every 100 Barnex shares held
8. OPINIONS AND RECOMMENDATIONS
Where required, the SRP`s Code on Take-overs and Mergers and the Listings
Requirements of the JSE, the boards of directors of JCI, WAL and Barnex will
appoint independent advisers to report on whether the terms and conditions of
the proposals are fair and reasonable.
The boards of directors of JCI, WAL and Barnex, on receipt of the reports
required of these independent advisers, will make appropriate recommendations
to the shareholders regarding the proposals.
9. DOCUMENTATION AND SALIENT DATES
Further details of the proposals will be included in a circular to JCI and WAL
shareholders, incorporating a notice of the JCI and WAL general meetings, which
will be posted to shareholders of JCI and WAL in due course.
Further details of the Barnex scheme will be included in a circular to Barnex
shareholders, incorporating a notice of the Barnex scheme meeting and a form of
surrender, which will be posted to Barnex shareholders in due course.
Salient dates in relation to the proposals will be published prior to the
issuing of any of the abovementioned documentation.
Johannesburg
18 July 2002
Corporate adviser Lead sponsor to JCI, sponsor Attorneys
to JCI to WAL and Barnex and
corporate adviser to WAL and TABACKS
PSG INVESTMENT Barnex
BANK
CORPCAPITAL
Reporting Joint sponsor to JCI
accountants
SASFIN
KPMG
Date: 18/07/2002 12:26:39 PM Produced by the JSE SENS Department
