| Fri 25 Oct 2002, 17:39 | | Forza Group Limited - Announcement |
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Forza Group Limited - Announcement
Forza Group Limited
(Registration No. 1987/004218/06)
Share Code: FOZ
ISIN Code: ZAE000018446
("the company")
Announcement relating to proposals by the company to -
* dispose of Lyndhurst Auto Hyde Park
* dispose of its remaining businesses
* distribute cash of 20 cents per share to minority shareholders, and
* de-list preparatory to winding up
1. Introduction
1.1 Shareholders are referred to the cautionary announcement published on
26 September 2002.
1.2 This announcement sets out proposals to dispose of one of the
company`s businesses to a third party and to dispose of the remaining operations
to a consortium including management, with the result that the company
distributes cash to minority shareholders of 20 cents per share, in anticipation
of it being wound-up.
1.3 The company listed on the JSE Securities Exchange South Africa ("JSE")
in 1999. Since then, market conditions and aversion to micro-cap stocks have
seen the company`s share price settle at depressed levels. Negative sentiment
and the lack of liquidity in the company`s share are not expected to improve and
there does not appear to be any ready prospect of a re-rating of the company`s
shares. This is despite the sustained profitability of the company`s
businesses.
1.4 The poor rating of the company`s shares exacerbates difficulties in
raising capital and incentivising staff and is perceived negatively by customers
and suppliers. The board of the company is of the view that the disadvantages
of being listed outweigh the advantages, if any.
1.5 The Hyde Park disposal referred to below is a catalyst for the
transactions being proposed, as the proceeds it generates facilitates the
realisation of all the company`s businesses on a basis which delivers value to
minority shareholders, who otherwise will continue to hold a poorly rated
illiquid share.
2. Overview of the proposed transactions
2.1 The company`s wholly owned operating subsidiary, Forza (Pty) Limited
("Forza"), owns two prominent BMW dealerships. BMW South Africa, as part of its
revised strategy to limit the influence of retail groups to a maximum market
share of 10% and its objective to transform its dealer network in favour of
black economic empowerment has requested that Forza dispose of one of its BMW
dealerships, the Lyndhurst Auto Hyde Park BMW dealership ("the Hyde Park
disposal"), to an unrelated third party. The terms and conditions of the Hyde
Park disposal are described in paragraph 4 below.
2.2 The board of the company is of the view that the Hyde Park disposal,
in isolation, would exacerbate the negative factors associated with a listing,
in that it results in the discontinuance for the company of a successful, cash-
generative business, which has been a significant contributor to the company`s
earnings.
2.3 It is also proposed that the company dispose of its remaining
operations to Coolmoss Investments (Pty) Limited ("the consortium"), a company
controlled by Forza management and Corpcapital Investments (Pty) Limited ("the
MBO disposal"), on terms and conditions described in paragraph 3 below. In
terms of the JSE Listings Requirements, the consortium is a related party to the
company and accordingly the members of the consortium will not vote at the
general meeting regarding the MBO disposal.
2.4 Implementation of both the Hyde Park disposal and the MBO disposal
would offer minority shareholders the opportunity to exit from their
shareholding and to participate in a cash distribution which is substantially
higher than the historical market value of their shares, while the other
shareholders who comprise the consortium will acquire the remaining businesses
without participating in the cash distribution.
3. The MBO disposal
3.1 The consortium shareholders collectively hold 363 075 420 shares
constituting 65% of the issued shares of the company.
3.2 Subject to the fulfilment of conditions precedent referred to in
paragraph 3.3 below, the consortium proposes to acquire from the company all the
issued shares of and all shareholder claims on loan account against Forza for a
consideration of R72,6 million, which leaves the company with cash in an amount
which equates to 20 cents per share for all shareholders excluding the
consortium shareholders ("the cash distribution").
3.3 The MBO disposal is subject to the following conditions precedent:
3.3.1 fulfilment of the conditions to and implementation of the Hyde
Park disposal;
3.3.2 transfer to Forza of the company`s shareholdings in and claims
on loan account against its other operating subsidiaries;
3.3.3 approval by ordinary resolution of the company`s shareholders
(other than consortium shareholders, who are related parties) in general
meeting;
3.3.4 approval of the JSE, the Securities Regulation Panel ("SRP") and
the Competition Commission.
3.4 Shareholders representing 47,7% of shareholders eligible to vote have given
irrevocable undertakings to vote in favour of the MBO disposal.
The pro forma financial effects of the MBO disposal for minority shareholders
set out in the table below are based on the company`s published audited
financial results for the year ended 31 August 2002:
notes before after change
(cents) (cents) (%)
Market value 1 10.44 20.00 91.6
Market value 2 14.00 20.00 42.9
EPS 3 4.79 1.35 (71.9)
HEPS 3 5.12 1.35 (73.7)
NAV (incl. intangible assets) 4 21.22 20.00 (5.8)
NTAV (excl. intangible assets) 4 14.29 20.00 40.0
1 The "before" column is the volume weighted closing price
of a Forza share on the JSE for the 120 days preceding
the date of the cautionary announcement published on
26 September 2002. The "after" column is the cash
distribution to be made to minority shareholders..
2 The "before" column is the closing price of a Forza share
on the JSE on 25 September 2002, being the day
immediately preceding the date of the cautionary
announcement. The "after" column is the cash
distribution to be made to minority shareholders.
3 The "before" column is the earnings per share ("EPS") and
the fully diluted headline earnings per share ("HEPS") as
reported for the year ended 31 August 2002, which should
be considered against the company`s policy historically
of not declaring dividends. The "after" column reflects
the after tax interest income that a shareholder would
have earned on the cash distribution for the year ended
31 August 2002 assuming a tax rate of 30% and a before
tax interest rate of 9.3% being the average rate of
interest earned on a 12 month fixed deposit for the year
ended 31 August 2002.
4 The "before" column is the net asset value per share
("NAV") and the net tangible asset value per share
("NTAV") as reported at 31 August 2002. The "after"
column is the cash distribution. The net asset value of
the remaining businesses to be acquired by the consortium
as at 31 August 2002 was R102,2 million (including
intangible assets of R38,7 million).
5 The effect of Capital Gains Tax ("CGT") has not been
taken into account as each shareholder will have a
different CGT profile.
4. The Hyde Park disposal
4.1 An unrelated third party, Fulloutput 166 (Pty) Limited ("the Hyde Park
purchaser") has agreed to acquire from Forza the Lyndhurst Auto Hyde Park BMW
dealership, as a going concern and with effect from 1 September 2002, for
R44,3 million payable in cash on and subject to fulfilment of conditions
precedent referred to in paragraph 0 below.
4.2 The Hyde Park purchaser has provided security for payment of the
price, in the form of a deposit of cash in an attorney`s trust account of R7
million and personal suretyships of shareholders. In addition, the Hyde Park
purchaser has undertaken to deliver bank guarantees for the balance of the price
in a form reasonably acceptable to Forza and has agreed that, if the price is
not paid in full when due and the disposal is cancelled, the R7 million held in
trust shall be forfeited and retained by Forza as a break fee.
4.3 BMW South Africa has approved the Hyde Park disposal, which is subject
to the following conditions precedent:
4.3.1 approval by ordinary resolution of the company`s shareholders in
general meeting;
4.3.2 approval of the JSE, SRP and the Competition Commission.
4.4 Shareholders representing 81,7% of the company`s issued shares have given
irrevocable undertakings to vote in favour of the Hyde Park disposal.
4.5 The pro forma financial effects of the Hyde Park disposal set out in the
table below are based on the company`s published audited financial results for
the year ended 31 August 2002:
not before after change
es
(cents) (cents) (%)
EPS 1 4.79 3.80 (20.8)
HEPS 1 5.12 4. 13 (19.4)
NAV (incl. intangible assets) 2 21.22 25.31 19.3
NTAV (excl. intangible 2 14.29 18.38 28.6
assets)
1 The "before" column is the earnings per share ("EPS") and the fully
diluted headline earnings per share ("HEPS") respectively as reported for
the year ended 31 August 2002. The "after" column is the EPS and the HEPS
respectively after excluding the earnings from Lyndhurst Auto Hyde Park
for the year ended 31 August 2002 and including interest earned on the net
proceeds of R42,3 million (gross proceeds of R44,3 million less costs
estimated at R2 million) at a pre tax interest rate of 14.6% being the
weighted prime overdraft rate for the year ended 31 August 2002.
2 The "before" column is the net asset value per share ("NAV") and the net
tangible asset value per share ("NTAV") at 31 August 2002. The "after"
column is the NAV and NTAV respectively after excluding the NAV and NTAV
of Lyndhurst Auto Hyde Park at 31 August 2002 and including the net
proceeds of R42,3 million. The net asset value of Hyde Park as at
31 August 2002 was R19,1 million
5. The delisting and voluntary winding-up of Forza
It is proposed that, subject to and after implementation of the Hyde Park
disposal and the MBO disposal, the company will apply to the JSE for the
termination of its listing and, after the cash distribution, in anticipation of
being wound up, of 20 cents per share to minority shareholders, will be wound-up
in terms of a members` voluntary winding up. The requisite resolutions shall be
put to shareholders in general meeting.
6. Salient dates
The salient dates and times are as set out in the table below:
General meeting to be held at 10:00 on Wednesday, 15
January 2003
Results of the general meeting published Wednesday, 15
on SENS January 2003
Results of the general meeting published Thursday, 16
in the press January 2003
Last day to trade in order to be entitled Friday, 24
to receive the distribution January 2003
Suspension of listing of Forza shares on Monday, 27
the JSE at the commencement of trade on January 2003
Record date to be recorded on the Friday, 31
register to receive the distribution January 2003
Expected date of payment of the Monday, 03
distribution February 2003
Termination of listing at commencement of Tuesday, 04
trade on February 2003
Notes:
1 These dates and times are subject to change. Any change
will be published on SENS and in the press.
2 Share certificates may not be dematerialised or
rematerialised after Friday, 17 January.
7. Opinions and recommendations
7.1 The board of the company has considered the terms and conditions of
the Hyde Park disposal and recommends that shareholders vote in favour of the
resolutions required to effect the Hyde Park disposal.
7.2 The board of the company has appointed PricewaterhouseCoopers
Corporate Finance (Pty) Limited ("PwC") as independent external advisor
regarding the MBO disposal and whether the cash distribution is fair and
reasonable to minority shareholders. The substance of PwC`s advice, in the form
of a fair and reasonable report, will be communicated to shareholders in the
circular.
7.3 The Board has considered the terms and conditions of the MBO disposal
and, subject to receipt from PwC of confirmation that the MBO disposal and cash
distribution are fair and reasonable to minority shareholders, recommends that
shareholders vote in favour of the resolutions required to effect the MBO
disposal, the de-listing, the cash distribution and the winding-up.
8. Documentation
A circular containing details of the Hyde Park disposal, the MBO disposal, the
cash distribution, and the delisting and winding up of the company shall be
posted to the company`s shareholders in due course.
Rosebank
25 October 2002
Corporate Advisor and joint Legal advisor
sponsor
Corpcapital Corporate Finance Corpcapital Transaction
(a sponsor registered with the Support
JSE Securities Exchange South
Africa)
Independent advisor to Forza Reporting accountants
shareholders
PricewaterhouseCoopers Moores Rowland
Corporate Finance
Joint sponsor
Appleton Corporate Finance
Member of the JSE Securities
Exchange South Africa
Date: 25/10/2002 05:07:00 PM Produced by the JSE SENS Department
