| Wed 6 Nov 2002, 16:59 | | Energy Africa Limited - Important Announcement To |
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Energy Africa Limited - Important Announcement To Shareholders
Energy Africa Limited
(Incorporated in the Republic of South Africa)
(Registration number 1995/007140/06)
JSE code: ENR ISIN:ZAE000010427
Not for release, publication or distribution in or into Canada, Australia or
Japan
This announcement is to inform Shareholders in advance of the closing date of
the Petronas Offer on 12 November 2002 of:
(i) initiatives that your Board has been undertaking on your behalf to achieve
an acceptable solution which would allow you to realise greater value for your
Shares;
(ii) developments during the Offer period; and
(iii) the Board`s view on those options which we believe are currently open to
Shareholders.
Throughout the Offer process, your Board has sought to protect your interests
and to allow you to realise maximum value for your Shares. These efforts
continue.
1. Petronas` initial announcement and offer
You may recall that Petronas announced its Offer of ZAR 43.75 per Share on 5
September 2002, without first making any approach to the Board to discuss a
price that your Board might have been able to recommend. As a consequence
Petronas made its Offer without the benefit of the most up-to-date valuation of
your Company`s assets. Your Board believes that: (i) the effect of Petronas
making the Offer price final was to exert significant pressure on minority
Shareholders, and (ii) this was compounded by a restrictive timetable which has
limited your Board`s ability to find alternative solutions in time before the
close of the Offer.
2. The Board`s responses
Your Board immediately responded to the Petronas announcement of 5 September
2002 by, inter alia, stating its firm belief that the Offer does not fully value
your Company. The Board has consistently expressed this opinion throughout the
Offer process, and continues to do so.
Your Board then published an independent valuation of the Company. The
fundamental value of Energy Africa, based on the independent PGS Reservoir
Consultants valuation, is ZAR 72.51 per share. This comprehensively demonstrates
that the Petronas Offer undervalues your Shares.
We also presented Energy Africa`s remarkably successful track record, its
current strong financial position, its excellent platform for growth and its
plans for the future. The publication of the Company`s interim results shortly
thereafter served to confirm the Company`s strong cash flow generation and
financial position, its continuing growth and its ability to finance its active
reinvestment programme without recourse to the equity markets.
As promised, we returned to you with a comprehensive update of the status of the
Offer on 24 October 2002, describing the approaches to and from potential
counter-bidders, and referring to the strong opposition to the Offer price from
institutional Shareholders holding 30.1 per cent of those shares subject to the
Offer.
Your Board explained how it had made unsuccessful efforts to explore potential
solutions with Petronas by proposing, for example, that it allow its Offer to
lapse and subsequently launch a new recommended offer, which requires the prior
consent of the SRP. Energy Africa further stated publicly that it would be
willing to enter into discussions with Petronas which could lead to a more
satisfactory solution for all Shareholders. Such a solution may require the
prior consent of the SRP.
3. The Board`s continuing efforts
Your Board has worked hard throughout the process to devise a solution that
could provide fair value for all Shareholders. Despite the inadequate price and
obvious issues arising from the dominant shareholding position of Petronas, we
have not stinted in our efforts to achieve a productive and satisfactory
solution for all parties.
Discussions with potential counter-bidders, which could ultimately benefit all
Shareholders, are continuing. Discussions have been held with a range of
industry and other potential third party counter-bidders for either all or part
of Energy Africa`s issued Share capital. However, for a variety of reasons, the
majority of the potential counter-bidders have decided not to pursue the
opportunity of making a counter-offer for your Company. A small number of third
parties remain interested and one or more of these may decide to take matters
further in due course, although your Board does not expect that any such offer
will be made prior to the Offer closing on 12 November 2002. It is possible that
an offer may emerge after 12 November 2002, but the Board is not confident that
this will occur.
Your Board has also made a further attempt to hold discussions with Petronas to
explore possible ways in which, with Petronas` co-operation, the value gap could
be bridged. Petronas has refused to engage in such discussions.
4. Status of and developments during the Offer
In acknowledgement of its efforts, your Board has received considerable support
from institutional Shareholders and market commentators. Petronas announced on 1
November 2002 that it had received acceptances representing just 0.07 per cent
of Energy Africa`s issued Share capital. Shareholders representing an aggregate
of 99.8 per cent of the Shares subject to the Offer had not accepted the Offer.
Additionally, since 6 September 2002, there have consistently been buyers in the
market at prices above the Offer price. As at close of trading on 5 November
2002, Shares representing an aggregate trading volume of some 11.2 per cent of
Energy Africa`s Shares had been purchased at prices above the Offer price.
Buyers remain active in the market. Petronas has not been able to acquire any
Shares in the market since 6 September 2002 because Energy Africa Shares have
been trading at prices higher than the Offer price and Petronas is not permitted
to buy Shares at a price higher than its Offer price until after the closing of
the Offer on 12 November 2002.
The Board does not know the identities nor the intentions, of these buyers
regarding their shareholdings in Energy Africa, but is of the view that it is
unlikely that they will be accepting the Offer in respect of the shares bought.
This, together with the fact that certain institutional Shareholders have
indicated their intention not to accept the Offer leads the Board to conclude
that it is likely that there will be minority Shareholders in the Company after
the Offer closes on 12 November 2002.
5. Petronas` reaction
On 24 September 2002, against the background of:
- a compelling and undisputed value case;
- a number of institutional Shareholders being unwilling to accept the Offer;
- Energy Africa Shares continuing to trade on the open market at levels above
the Offer price; and
- continued interest from third parties,
Petronas declared its Offer unconditional and announced a final closing date of
12 November 2002.
In your Board`s opinion, this announcement was prompted by the fact that
Petronas is unlikely to receive acceptances representing 90 per cent of the
Shares to which the Offer relates, which is also the threshold which would allow
Petronas to compulsorily acquire all outstanding minority Shares. This has also
had the negative effect of limiting the Board`s ability to find an acceptable
solution for all parties in time before the final closing of the Offer.
It is significant that Petronas has to date not sought to challenge the results
of the independent valuation. As we explained above, Petronas has refused an
invitation to engage with Energy Africa in discussions to explore possible ways
in which, with Petronas` co-operation, the value gap could be bridged, and to
find an a solution acceptable to all parties.
6. Governance of the Company after the Offer closes on 12 November 2002
As stated above, your Board believes it is likely that there will still be
minority Shareholders in the Company after the Offer closes on 12 November 2002,
and will seek to ensure, so far as it is able, that the Company remains listed
on the JSE.
In light of concerns expressed by certain minority Shareholders, the Board
believed it was necessary to reassure Shareholders about how the Company would
be governed post the closing of the Offer.
The Board therefore deemed it appropriate to include a statement in its
Cautionary Announcement of 24 October 2002 as to its expectations of Petronas in
this regard. The Board believed that the statement might provide some
reassurance to concerned Shareholders, and requested Petronas to confirm its
intentions in this regard. In response Petronas has confirmed that "When PICL
decides to exercise its rights as the majority shareholder of Energy Africa
Limited, it will do so in accordance with all relevant laws and regulations",
but has made no specific reference to the Listings Requirements of the JSE or
the King Code. Petronas has not clarified precisely how it intends more actively
to exercise its control in Energy Africa.
7. Options available to Shareholders
It is not possible for the Board to give a definitive recommendation to
Shareholders in relation to the Offer. In considering what action to take,
Shareholders should consider, in addition to their own individual investment
requirements, risk criteria and objectives, the issues set out below.
Your Board believes that Shareholders have the following options when deciding
on the appropriate course of action:
(i) Retain your Shares
(ii) Sell your Shares
(iii) Accept the Offer
(i) Retain your Shares
As explained in paragraph 2 above, the Board is firmly of the view that the
Offer fails by a significant margin to represent fair value for Shareholders.
The closing bid price for Shares on 5 November 2002 stood at ZAR 45.00 per
share, a premium to the Offer price.
In addition, Shareholders should be aware that:
(a) Petronas will be free to purchase Shares at prices above or below the
current market price from 13 November 2002 onwards;
(b) Petronas will, with the prior consent of the SRP, be free to make a new
offer for the Shares in Energy Africa which it does not own at any time from 13
November 2002 onwards; and
(c) it is possible that a third party may either before or after 12 November
2002 make an offer, either for all of the Shares still held by minority
Shareholders or for all of the Shares including those held by Petronas. As
stated before, the Board is not confident that this will occur.
Under these circumstances, the Board is unable to recommend that Shareholders
accept the Offer. However, Shareholders who intend to retain their Shares,
should be aware of the following specific risk factors:
(a) Petronas is able to exercise significant control over the Company. It has
not yet clarified its precise plans for the future, in relation to Energy
Africa;
(b) other Shareholders may accept the Offer which would reduce the number of
Shares held by minority Shareholders. The ability to trade your Shares on the
JSE may be adversely affected and the price at which Shares may be sold may be
lower than the current bid price or the Offer price;
(c) there can be no assurance given as to the future intentions of Petronas,
nor of any interested third parties regarding any future offer for, or
acquisitions of, Shares; and
(d) Petronas indicated in its Offer document that it intended to delist Energy
Africa and that this would depend, inter alia, on the number of Shareholders
remaining after the Offer closes and the size of their shareholdings.
(ii) Sell your Shares
Shareholders should note that the closing bid price for Shares on 5 November
2002 of ZAR 45.00 represents a premium to the Offer price. Although
Shareholders may wish to take advantage of this option, you should be aware of
the following specific risk factors:
(a) Petronas will be free to purchase Shares at prices above or below the
current market price from 13 November 2002 onwards;
(b) in the event that Petronas chooses, with the prior consent of the SRP, to
make a subsequent offer on or after 13 November 2002, Shareholders who have sold
(c) their shares would not be eligible to accept the subsequent offer;
in the event that there is a subsequent third party offer at a price higher than
the Offer price, Shareholders who have already sold their Shares will not be
able to benefit from such an offer; and
(d) any trading of Shares may be at prices above or below the Offer price, as
determined by the prevailing circumstances. There can be no assurance as to the
price at which Shares may be sold or the quantity of Shares for which buyers may
be available.
(iii) Accept the Offer
Shareholders can also accept the Offer of ZAR 43.75 per share.
However, Shareholders should be aware of the following specific risk factors:
(a) the closing bid price for Shares on 5 November 2002 of ZAR 45.00 per share
represents a premium to the Offer price;
(b) Shareholders who accept the Offer will not be able to sell their Shares in
the market at prices above ZAR 43.75;
(c) in the event that Petronas chooses, with the prior consent of the SRP, to
make a subsequent offer on or after 13 November 2002, Shareholders who have
accepted the current Offer would not be eligible to accept the subsequent offer;
and
(d) in the event that there is a subsequent third party offer at a price higher
than the Offer price, Shareholders who have already accepted the Offer will not
be able to benefit from such an offer.
The Board believes that retaining your Shares in the Company represents a
greater risk for Shareholders than the other two options set out above.
8. Directors` interests
The Directors do not intend to accept the Offer.
In the absence of a counter-offer on or before 12 November 2002, the executive
Directors, excluding R Gasant who will be retaining all of his Shares, intend to
sell a part of their beneficial shareholdings in the market at the highest price
available, and to retain the balance. The non-executive Directors intend to sell
their beneficial shareholdings in the market at the highest price available. In
the event that Directors are unable to sell their Shares in the market then they
will consider accepting the Offer.
Executive Directors hold Share options under the Incentive Scheme which cannot
be implemented until various dates after the Offer has closed. Petronas has
made a separate offer to pay participants in the Incentive Scheme the difference
between R43.75 and the strike price of their options, in exchange for the
cancellation of those options. There are additional uncertainties for these
directors over and above the risk factors as set out above for shareholders with
regard to the future. In particular, the rules of the Incentive Scheme may
result in executive Directors forfeiting their options if their engagement with
the Company is terminated prior to the implementation of those options.
Therefore, notwithstanding their intentions regarding the Offer for their
beneficial shareholdings, all the executive Directors intend, despite their firm
view that the Offer does not fully value the Company, to accept Petronas` offer
for the cancellation of their options.
The Directors` intentions regarding their interests in Energy Africa, as set out
above, should not be seen as an endorsement of the Offer, but reflect the
individual risk criteria and personal circumstances of the Directors involved.
9. Conclusion
In deciding whether to accept the Offer, sell your Shares or retain your Shares,
the Board believes that Shareholders need to consider carefully their own
investment requirements, risk criteria and objectives, together with the above
specific factors.
The Board, which has been advised by Rothschild, believes that retaining your
Shares in the Company represents a greater risk, than either accepting the Offer
or selling your Shares, but is unable to recommend acceptance of the Offer
because of its firm view that the Offer does not fully value Energy Africa. In
providing its advice to the Board, Rothschild has taken into account the
commercial assessments of the Directors.
6 November 2002
Cape Town
Enquiries:
Energy Africa: Rhidwaan Gasant +27 21 400 76 00
College Hill: Nicholas Williams +27 11 447 30 30 / +27 83 607 07 61
Rothschild: Stephen Gorven +27 11 797 82 00 / +27 82 330 29 11
John Deans +44 207 280 50 00 / +44 7802 957 874
Definitions:
"Board" or the Board of Directors of Energy Africa
"Directors" excluding the Engen and/or Petronas
nominated directors being Dato` M Idris
Mansor, G B D Paul and Tunku M Fawzy b.
Tunku Muhiyiddin
"Energy Africa" or Energy Africa Limited
the "Company"
"Energy Africa ordinary shares having a nominal value of
Shares" or "Shares" ZAR 0.1 in Energy Africa
"Energy Africa holders of Energy Africa Shares other than
Shareholders" or Engen, Petronas or any of their concert
"Shareholders" parties
"Engen" Engen Limited, a subsidiary of Petronas
"Incentive Scheme" The Energy Africa Limited Share Incentive
Scheme, adopted by the Shareholders of
Energy Africa on 29 January 1996, as
amended
"JSE" The JSE Securities Exchange South Africa
"King Code" King Report on Corporate Governance for
South Africa 2002, including the King Code
of Corporate Practices and Conduct.
"Offer" or the the final conditional offer by Petronas to
"Petronas Offer" acquire the entire issued share capital of
Energy Africa other than those shares
already owned by Engen, Petronas or any of
their concert parties, for the Offer price
"Offer price" the cash offer consideration of ZAR43.75
per Share
"Petronas" or Petronas International Corporation
"PICL" Limited, a wholly owned subsidiary of
Petroliam Nasional Berhad, the national
oil and gas company of Malaysia
"PGS" PGS Reservoir Consultants (UK) Limited
"Rothschild" N M Rothschild & Sons (South Africa)
(Proprietary) Limited, a private company
incorporated in South Africa and N M
Rothschild & Sons Limited, a private
company incorporated in the United Kingdom
"SRP" The Securities Regulation Panel
established in terms of section 440B of
the South African Companies Act No. 61 of
1973, as amended
Directors` responsibility: The Directors have considered all statements of fact
and opinion in this announcement. They accept, individually and collectively,
responsibility for the information contained in this announcement, and
acknowledge that to the best of their knowledge and belief (having taken all
reasonable care to ensure that such is the case) the information contained in
this announcement is in accordance with the facts and does not omit anything
likely to affect the import of such information.
The following non-executive directors, namely Dato` M Idris Mansor, Tunku M
Fawzy b. Tunku Muhiyiddin and GBD Paul, have been excluded from this
responsibility statement as they recused themselves from all Board proceedings
relating to the Offer. These directors are nominees of Petronas and/ or Engen
and as such may have conflicts of interest insofar as the Offer and the best
interests of Shareholders are concerned.
Date: 06/11/2002 04:45:00 PM Produced by the JSE SENS Department
