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Chester - Proposed Delisting And Offer To Repurchase Shares
CHESTER INVESTMENT HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1983/005300/06)
(Share code: CES ISIN: ZAE000013348)
("Chester" or "the company")
PROPOSED DELISTING AND OFFER TO REPURCHASE SHARES
1. INTRODUCTION
PSG Investment Bank Limited is authorised to announce that, following on the
cautionary announcement published on SENS on 12 July 2002 and in the press on 15
July 2002 ("the cautionary announcement"), and subject to the fulfilment of the
conditions precedent referred to in paragraph 5 below, the directors of Chester
("the directors") propose that Chester`s listing on the JSE Securities Exchange
South Africa ("the JSE") be terminated and that Chester repurchases Chester
shares from those Chester shareholders who do not wish to hold shares in an
unlisted entity ("the proposals").
2. THE PROPOSALS
2.1 The directors propose that they be authorised to apply to the JSE for the
voluntary termination of Chester`s listing on the JSE.
2.2 It is proposed further that the company makes an offer to Chester
shareholders to repurchase all their Chester shares at a price of 85 cents per
share ("the repurchase offer").
2.3 Chester shareholders collectively holding or controlling 50 000 000 Chester
shares, constituting approximately 34% of Chester`s issued share capital, have
irrevocably and in writing undertaken to decline the share repurchase offer
("the remaining shareholders") and to vote in favour of all shareholder
resolutions required to implement the proposals.
2.4 Chester shareholders who wish to remain as such in the company after its
listing has been terminated, will be able to do so. However, shareholders should
note that they will be holding shares in an unlisted company and as there will
not be any ready market for their shares, tradeability in their shares will be
limited.
3. RATIONALE
3.1 Chester`s small market capitalisation status has resulted in limited
tradeability and low liquidity in Chester shares. The directors are of the
opinion that, given the illiquidity of the share, the negative sentiment towards
both small capitalisation shares listed on the JSE and the high costs associated
with maintaining a listing on the JSE, there is little justification for the
continued listing of Chester.
3.2 The directors are of the opinion that it is unlikely that market sentiment
towards small capitalisation companies will improve in the short to medium term.
3.3 The proposals will enable shareholders to realise value for their shares.
The 85 cents repurchase offer price represents a premium of 21% to the weighted
average share price of 70 cents for the 30 days ended on Thursday, 11 July 2002,
being the day prior to the publication of the cautionary announcement.
4. FINANCIAL EFFECTS
4.1 On Chester
Set out below are the unaudited pro forma financial effects of the repurchase
offer, based on the unaudited consolidated interim results of Chester for the
six months ended 30 June 2002 and on the assumption that shareholders, other
than the remaining shareholders ("potential accepting shareholders"), accept the
repurchase offer in respect of, respectively:
- 50% of the shares held by potential accepting shareholders, ie. assuming the
repurchase offer is accepted in respect of 48 652 161 Chester shares,
constituting approximately 33% of Chester`s entire issued share capital; and
- 100% of the shares held by potential accepting shareholders, ie. assuming the
repurchase offer is accepted in respect of 97 304 321 Chester shares,
constituting approximately 66% of Chester`s entire issued share capital.
Unaudited Pro forma Pro
forma
before after after
the the the
repur- repur- Per- repur- Per-
chase chase centage chase centage
offer(1) offer change offer change
(cents) (cents) (%) (cents) (%)
Earnings
per share 7,6 9,6(2) 26,3 15,7(2) 106,6
Headline
earnings
per share 6,8 8,5(2) 25,0 13,5(2) 98,5
Net asset
value per
share 118,9 135,7(3) 14,1 184,9(3) 55,5
Net
tangible
asset value
per share 121,6 139,6(3) 14,8 192,7(3) 58,5
(1) The earnings, headline earnings and net asset value figures in the
"Unaudited before the repurchase offer" column have been extracted from the
unaudited interim financial results of Chester for the six months ended 30 June
2002.
(2) The earnings and headline earnings per share figures in the "Pro forma
after the repurchase offer" columns have been calculated:
- on the basis that the repurchase offer was effected on 1 January 2002; and
- assuming that Chester would have earned an after-tax interest return of 8% per
annum, being the average after- tax interest rate earned by Chester on its
treasury operations during the six months ended 30 June 2002, on the cash
resources required to implement the repurchase offer.
(3) The net asset value and net tangible asset value per share figures in the
"Pro forma after the repurchase offer" have been calculated on the basis that
the repurchase offer columns have been calculated on the basis that the
repurchase offer was effected on 30 June 2002.
The financial effects contained in the table above have been prepared to
illustrate how the repurchase offer would have affected the relevant financial
ratios of Chester for the financial period indicated and are pro forma only.
4.2 On Chester shareholders
The financial effects for shareholders accepting the repurchase offer are
illustrated in the following table:
Before the After the
repurchase repurchase Percentage
offer offer change
(cents) (cents) (%)
Market value
per share 70(1) 85 21,4
Earnings per share 7,6(2) 3,4(4) (55,3)
Headline earnings
per share 6,8(2) 3,4(4) (50,0)
Net tangible asset
value per share 121,6(3) 85 (30,1)
(1) Being the weighted average share price of Chester for the 30-day period
ended on Thursday, 11 July 2002, the last trading day prior to publication of
the cautionary announcement.
(2) Being Chester`s earnings and headline earnings per share for the six-month
period ended 30 June 2002.
(3) Being Chester`s net tangible asset value per share at 30 June 2002.
(4) Based on the assumption that the repurchase consideration of 85 cents per
share had been invested to earn an after-tax return of 8% per annum during the
six-month period ended 30 June 2002.
5. CONDITIONS PRECEDENT
The proposals are subject to the fulfilment of the following conditions
precedent:
Chester shareholders in general meeting passing such special and ordinary
resolutions as are necessary to implement the proposals and all special
resolutions being registered by the Registrar of Companies; and
the JSE and the Securities Regulation Panel ("the SRP") approving the proposals,
to the extent required.
6. INDEPENDENT OPINION
Fisher Hoffman PKF (Jhb) Inc ("Fisher Hoffman") have been appointed to advise
those directors of Chester who are not associated with the remaining
shareholders on whether or not the terms of the repurchase offer are fair and
reasonable to Chester shareholders. Fisher Hoffman have advised such
independent directors that in their opinion the terms of the repurchase offer
are fair and reasonable to Chester shareholders. Such opinion will be included
in the circular to Chester shareholders as contemplated in paragraph 8 below.
7. CASH CONFIRMATION TO THE SRP
It has been confirmed to the SRP that Chester has sufficient cash resources
available to meet its obligations in terms of the repurchase offer.
8. CIRCULAR TO SHAREHOLDERS
A circular to Chester shareholders, containing details of the proposed delisting
and the repurchase offer and notice of a general meeting of Chester
shareholders, is being prepared and will, subject to the approvals of the JSE
and the SRP, be sent to Chester shareholders within 28 days.
9. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The cautionary announcement is hereby withdrawn.
Johannesburg
29 August 2002
Investment bank and sponsor
PSG Investment Bank
Independent adviser to Chester shareholders
Fisher Hoffman PKF
Date: 30/08/2002 07:24:59 AM Produced by the JSE SENS Department
