| Tue 13 Aug 2002, 0:00 | | Nedcor Limited/ Nedcor Investment Bank Holdings Li |
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Nedcor Limited/ Nedcor Investment Bank Holdings Limited - OFFER BY NEDCOR
Nedcor Limited
(Incorporated in the Republic of South Africa)
(Registration number 1966/010630/06)
Share Code: NED ISIN: ZAE000004875
("Nedcor")
Nedcor Investment Bank Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1963/003972/06)
Share Code: NIB ISIN: ZAE000019030
("NIB")
OFFER BY NEDCOR TO ACQUIRE THE ENTIRE ISSUED SHARE CAPITAL OF NIB
INTRODUCTION
Shareholders of Nedcor and NIB are referred to the announcement dated Wednesday,
26 June 2002 regarding the proposed scheme of arrangement ("the scheme") in
terms of section 311 of the Companies Act, (Act No 61 of 1973), as amended ("the
Act"), proposed by Nedcor between NIB and its shareholders other than Nedcor
("minority shareholders").
The scheme, if implemented, will result in the termination of the listing of NIB
on the JSE Securities Exchange South Africa ("JSE") and the Namibian Stock
Exchange ("NSX").
OFFER AND OPINIONS
The terms of an offer ("the offer") by Nedcor to acquire those NIB ordinary
shares ("NIB shares") held by minority shareholders were tabled yesterday,
Monday, 12 August 2002 at a meeting of the board of directors of NIB ("the
board"). Deutsche Securities (SA) (Proprietary) Limited ("Deutsche"), acting as
independent financial adviser to the board, advised the board that it has
considered the terms and conditions of the offer and is of the opinion that, at
the date of this announcement, they are fair and reasonable. Board members who
are also directors of Nedcor recused themselves from participating in the
board`s deliberations on the offer. The board, after considering the terms of
the offer, the advice of Deutsche and taking all circumstances into account,
concluded that the terms of the offer are fair and reasonable and resolved to
take the necessary action to convene the scheme. Members of the board who have
shareholdings in NIB have indicated that they intend to vote in favour of the
scheme.
CONSIDERATION
Subject to the implementation of the scheme, minority shareholders registered on
the record date to participate in the scheme ("scheme participants") will
receive 3.03030 Nedcor shares ("consideration shares") for every 100 NIB shares
("the swap ratio"), this equates to a ratio of 33 NIB shares per Nedcor share.
The aggregate consideration payable by Nedcor will be the issue of approximately
8 300 000 Nedcor shares to scheme participants.
The respective Nedcor and NIB share prices on the last trading day before the
publication of the original cautionary announcement on 22 April 2002 and this
announcement, together with the respective 60 day volume weighted average share
prices and the imputed NIB share price calculated at the swap ratio, are set out
below:
Date Nedcor NIB Imputed Premium/
share share NIB (Discount)
price price share %
price
at the
swap
ratio
19 April 2002 R129,00 R2,61 R3,91 49,81
(ruling share
prices)
12 August 2002 R114,98 R3,90 R3,48 (10,76)
(ruling share
prices)
8 August 2002 (60 R122,19 R3,81 R3,70 (2,89)
day volume weighted
average prices)
NIB employee share options will be converted into Nedcor share options, with the
existing vesting periods and duration, by applying the swap ratio to both the
existing numbers and strike prices of such options.
Scheme participants resident in Namibia should take note that the consideration
shares will not be listed on the NSX. As residents of the Common Monetary Area,
such shareholders will however be able to deal in their Nedcor shares on the JSE
without restriction.
As announced on 24 July 2002, notwithstanding NIB`s past practice of not paying
an interim dividend, the board deemed it appropriate, in view the anticipated
offer to minority shareholders by Nedcor and the possible delisting of NIB prior
to this year-end, to declare the interim dividend of 9 cents per ordinary share.
BACKGROUND AND RATIONALE
Background
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 acquisition of BoE Limited ("BoE") by Nedcor
("the BoE acquisition"), which was announced on Monday, 22 April 2002, has added
impetus to the consolidation of the South African banking industry.
NIB`s listing in August 1999 achieved some success in terms of the focus brought
to the Nedcor Group`s investment banking activities. The listing, however,
coincided with a large scale de-rating of the Financial Services Sector, which
decreased by some 40% from the date of listing until 30 June 2002. Furthermore,
various negative factors relating to investment banking globally, regional
concerns and third world currency volatility, resulted in NIB being unable to
attract an international investment banking partner as envisaged at the time of
its listing. As a consequence, despite a strong earnings performance, the
listing of NIB has not achieved the positive strategic advantage nor shareholder
value creation anticipated with its listing in 1999.
As a result of the BoE acquisition, Nedcor has proposed the scheme to the board
of directors of NIB so as to enable the Nedcor Group to integrate the activities
of both BoE and NIB.
Rationale
By accepting the offer, minority shareholders will:
receive Nedcor shares, which are substantially more liquid than NIB shares;
benefit from the synergies that Nedcor intends to extract from the integration
of NIB, BoE and Nedbank, a division of Nedcor Bank Limited. The BoE acquisition
together with the integration of NIB`s activities will provide Nedcor with the
opportunity to increase the scale of its operations, supplement its skills and
client base throughout the Nedcor Group, gear its low cost infrastructure and
capture benefits of operational scale;
benefit from the receipt of Nedcor shares which are underpinned by a broader
base of earnings than those of NIB, including earnings from retail and
commercial banking activities; and
receive Nedcor shares that trade in the `Banks` sector, which is a higher rated
sector than NIB`s current `Speciality and Other Finance` sector.
FINANCIAL EFFECTS OF THE SCHEME
The financial effects of the scheme on Nedcor shareholders are not material.
The pro forma financial effects of the scheme on NIB shareholders have been
prepared for illustrative purposes only, to provide information about how the
proposed transaction might have affected the financial information presented
and, because of its nature, may not give a true reflection of the financial
position to a minority shareholder. In addition it does not reflect any synergy
benefits that may arise from the scheme, if implemented, and the BoE
acquisition.
The table below sets out the pro forma effects of the transaction on headline
earnings, net asset value and tangible net asset value to a NIB shareholder:
Before After Percentage
the the change
scheme scheme %
(cents (pro
per forma
share) cents
per
share)
Headline earnings (year 46,1(2) 52,1 (3) 13,0
ended 31 December 2001)
Headline earnings (six 27,0 (4) 21,3 (5) (21,1)
months ended 30 June
2002)
Net asset value at 30 206,5 (6) 207,1 0,3
June 2002 (unaudited) (7)
Net tangible asset 206,5(8) 155,7 (24,6)
value at 30 June 2002 (9)
(unaudited)
Notes:
The impact on a NIB shareholder`s headline earnings, net asset value and net
tangible asset value per share, takes into consideration the pro forma financial
effects of the BoE acquisition (including the issue of Nedcor shares pursuant to
the BoE acquisition) as set out below, which became effective from Thursday, 11
July 2002.
Headline earnings per share was calculated on the audited headline earnings per
NIB share for the year ended 31 December 2001 and a weighted average of 1 610.1
million NIB shares in issue throughout the year.
The "after scheme" headline earnings per share was calculated by multiplying the
"after scheme" Nedcor headline earnings per share of 1 720 by the swap ratio of
3,03030 Nedcor shares for every 100 NIB shares.
The "after scheme" Nedcor headline earnings per share was calculated using a
weighted average of 266,2 million Nedcor shares in issue on the assumption that
the scheme becomes effective and headline earnings comprising of:
Nedcor`s audited headline earnings for the year ended 31 December 2001;
BOE`s audited headline earnings for the year ended 30 September 2001;
the assumed cost of funding the BoE transaction; and
the minority shareholders` interest in NIB`s audited headline earnings, as
included in the Nedcor results for the year ended 31 December 2001.
Interim headline earnings per share was calculated on the interim headline
earnings per NIB share for the six months ended 30 June 2002 and a weighted
average of 1 645,2 million NIB shares in issue throughout the period.
The "after scheme" interim headline earnings per share was calculated by
multiplying the "after scheme" Nedcor interim headline earnings per share of 704
cents by the swap ratio of 3,03030 Nedcor shares to every 100 NIB shares.
The "after scheme" Nedcor interim headline earnings per share was calculated
using a weighted average of 267,3 million Nedcor shares in issue on the
assumption that the scheme becomes effective and interim headline earnings
comprising of:
Nedcor`s interim headline earnings for the six months ended 30 June 2002;
BoE`s interim headline earnings for the six months ended 31 March 2002;
the assumed cost of funding the BoE transaction for a six month period; and
the minority shareholders` interest in NIB`s interim headline earnings, as
included in the Nedcor results for the six months ended 30 June 2002.
Net asset value per share was calculated on the net asset value per NIB share at
30 June 2002 and 1 696,5 million shares in issue at 30 June 2002.
The "after scheme" net asset value per share was calculated by multiplying the
"after scheme" Nedcor net asset value per share of 6 835 cents by the swap ratio
of 3,03030 Nedcor shares for every 100 NIB shares.
The "after scheme" Nedcor net asset value per share was calculated using 268,8
million Nedcor shares in issue on the assumption that the scheme becomes
effective and the net asset value of Nedcor at 30 June 2002, adjusted to include
the consolidation of the net asset value of BoE at 31 March 2002; the minority
shareholders` interest in the net asset value of NIB at 30 June 2002; and any
goodwill and transaction costs arising from the acquisitions.
Net tangible asset value per share was calculated on the net asset value per NIB
share at 30 June 2002 less any goodwill and 1 696,5 million shares in issue at
30 June 2002.
The "after scheme" net tangible asset value per share was calculated by
multiplying the "after acquisition" Nedcor net tangible asset value per share of
5 136 cents by the swap ratio of 3,0303 Nedcor shares for every 100 NIB shares.
The "after scheme" Nedcor net tangible asset value per share was calculated
using 268,8 million Nedcor shares in issue on the assumption that the scheme
becomes effective and the net asset value of Nedcor at 30 June 2002, adjusted to
include the consolidation of the net asset value of BoE at 31 March 2002; the
minority shareholders` interest in the net asset value of NIB at 30 June 2002;
any transaction costs; but excluding the aggregate goodwill amounts within
Nedcor and BoE and the goodwill arising as a consequence of the transactions.
IRREVOCABLE UNDERTAKINGS
Minority shareholders hold 16,10% of the total issued share capital of NIB.
Irrevocable undertakings to vote in favour of the scheme have been obtained from
minority shareholders holding 39,22% thereof.
CONDITIONS PRECEDENT TO THE SCHEME
The implementation of the scheme is conditional upon:
the approval of the SRP, the JSE and the NSX of the circular to be mailed to NIB
shareholders setting out details of the scheme;
the approval of the JSE and the NSX, conditionally upon the Order of Court
("Order of Court"), of the High Court of South Africa (Transvaal Provincial
Division) ("the High Court"), sanctioning the scheme being registered by the
Registrar of Companies ("Registrar"), of the applications for the termination of
the listing of NIB;
the approval of the JSE, conditionally upon the Order of Court being registered
by the Registrar, of the application for the listing of the consideration
shares; and
the approval of the scheme by a majority representing not less than 75% of the
votes exercised by NIB shareholders present and voting at the scheme meeting,
other than Nedcor and its concert parties, registered on the record date to vote
at the scheme meeting, either in person or by proxy at the scheme meeting in
terms of section 311 of the Act, the High Court sanctioning the scheme in terms
of the Act and a certified copy of the Order of Court being registered by the
Registrar in terms of the Act.
FURTHER ANNOUNCEMENT AND DOCUMENTATION
The scheme circular, which is subject to the prior approval of the JSE, the NSX
and the SRP, providing information on the scheme and containing, inter alia, a
notice of the scheme meeting will be mailed to shareholders of NIB once the
Order of Court for the convening of the scheme meeting is granted.
Johannesburg
13 August 2002
Investment bank and Corporate law Lead sponsor in
sponsor to Nedcor advisers and respect of this
and NIB consultants to transaction to
Nedcor and NIB Nedcor and NIB
Nedcor Investment Edward Nathan & Merrill Lynch
Bank Friedland
Financial adviser to Independent Joint reporting
Nedcor financial adviser to accountants and
NIB auditors
Deloitte & Touche
Ernst & Young Deutsche Securities KPMG
(SA) (Pty) Limited
Date: 13/08/2002 08:55:00 AM Produced by the JSE SENS Department
