| Tue 19 Nov 2002, 11:28 | | Commercial Finance Company Limited - Announcement |
|
ANNOUNCEMENT TO CFC ORDINARY SHAREHOLDERS AND CFC PREFERENCE SHAREHOLDERS
regarding:
* a cash distribution by CFC to its ordinary shareholders;
* the distribution by CFC of its shareholding in Mr Price Limited ("Mr
Price") to CFC ordinary shareholders;
* the return of capital and payment of arrear dividends to CFC preference
shareholders;
* a second distribution by CFC to its ordinary shareholders;
* the proposed suspension and delisting of CFC from the JSE Securities
Exchange SA ("JSE"); and
* the proposed members` voluntary winding-up of CFC in terms of sections 349
and 350 of the Companies Act, 1973 (Act 61 of 1973), ("the Act") as amended,
(collectively, "the Transaction").
1. INTRODUCTION
Further to the cautionary announcements dated, Monday, 9 September 2002,
Tuesday, 17 September 2002 and Wednesday, 30 October 2002, CFC ordinary
shareholders and CFC preference shareholders ("CFC shareholders") are informed
that the Board of Directors of CFC has resolved to:
* realise certain of the assets of CFC;
* do a first distribution to CFC ordinary shareholders comprising of
approximately 2 000 cents per CFC ordinary share (approximately R203,41 million
in cash) and 1,67843 Mr Price shares for every CFC ordinary share held (17 070
342 Mr Price shares), (collectively, "the first distribution");
* return capital and pay arrear dividends to CFC preference shareholders;
* proceed with the realisation of the assets of CFC that were not distributed
as part of the first distribution ("the remaining assets") in an orderly manner
following the first distribution and to distribute such assets and/or cash to
CFC ordinary shareholders ("the second distribution");
* make application to the JSE for the suspension and delisting of the
Company; and
* propose a members` voluntary winding-up of CFC in terms of section 349 and
350 of the Act.
2. RATIONALE
The Board of Directors of CFC have over the past 12 months considered various
alternatives for the future strategy of CFC, its subsidiaries and associates
("the CFC Group").
With the introduction of Capital Gains Tax legislation and after assessing
its impact on the CFC Group and its shareholders, it was decided to continue
with the Group`s stated policy, of continuing to acquire strategic and/or
controlling interests in operating companies as opposed to pure portfolio
investments, which would result in the CFC Group becoming more involved in
operating entities. Several opportunities were identified and steps were taken
to transform the CFC Group from an investment trust company to that of an
investment holding company with operating companies providing business to
business outsourcing and related services, as a sector which the Directors of
CFC considered would generate long-term growth for CFC shareholders.
Notwithstanding the superior investment performance by the CFC Group over the
past 10 years and a detailed revised strategy to convert CFC from an investment
trust company to that of an investment holding company, it remains the wishes of
Nedcor Limited ("Nedcor") and IC Thomas, F Thomas, JG Thomson and RE Thomson
("the Byrd Family"), who collectively represent 52% of the shares in Really
Noble Investments Limited ("RNI") and through RNI and their direct holdings in
CFC, hold 56% of the CFC ordinary shares, to realise the assets and distribute
the proceeds to shareholders in anticipation of a members` voluntary winding-up
of both RNI and CFC.
The wishes of Nedcor and the Byrd Family to divest from RNI and the CFC Group
resulted in the Board of Directors of CFC having no option but to recommend to
its major shareholder, RNI, that CFC consider realising its assets, followed by
a first distribution, second distribution and final liquidation distribution (if
any) to CFC ordinary shareholders and a return of capital and payment of arrear
dividends to CFC preference shareholders in anticipation of a members` voluntary
winding-up of CFC.
3. SUMMARY OF THE TRANSACTION
3.1 Background
The assets of CFC comprise a combination of listed investments with an
approximate market value of R181,1 million on Friday, 8 November 2002 ("the last
practicable date"), which include Nedcor, RMB Holdings Limited ("RMB"), Anglo
American plc ("Anglo American"), Laser Group Limited ("Laser"), Mr Price,
HomeChoice Holdings Limited ("HomeChoice"), Tongaat-Hulett Group Limited
("Tongaat-Hulett") and Paramount Property Fund Limited ("Paramount"). CFC also
holds direct property holdings with a book value of R12,8 million, 76,5% of the
shares in Congella Federation Limited ("ConFed"), with an approximate market
value of R53,7 million at the last practicable date and approximately R80
million in cash.
The investments in Nedcor, RMB, Anglo American, Tongaat-Hulett and Paramount
are relatively small and/or liquid and as such these assets are being disposed
of in the open market. The investments in Idion Technologies Limited ("Idion")
and Enterprise Outsourcing Holdings Limited ("EOH") have been successfully
placed by CFC.
The realisation of the balance of the assets of CFC is, however, more
complex, inter alia, for the reasons as set out below:
* CFC holds a large percentage of the issued shares in Laser, Homechoice and
ConFed. These shares are thinly traded and the sale of CFC`s shareholding in
these companies would create an overhang in the stock market which will unduly
depress their share prices;
* CFC has entered into an agreement with a consortium comprising Laser
Management and certain non-executive directors of Laser, dated 30 April 2001,
governing their future relationships as Laser shareholders which contain pre-
emptive arrangements;
* the nature of certain assets, such as the direct property holdings of
ConFed and CFC; and
* the strategic nature of certain investments and the involvement of CFC in
such companies.
Given the complexities associated with the realisation of certain of CFC`s
assets, set out above, and the diversified composition of CFC`s assets, the
directors of CFC have resolved to adopt a phased approach.
3.2 Phased approach for the Transaction
3.2.1 PHASE 1 - Realisation of assets
Phase 1 will comprise the realisation of all the listed investments that
are liquid and/or small which include Nedcor, RMB, Anglo American, Tongaat
Hulett and Paramount in the open market and the placing of larger/illiquid
holdings such as Idion, EOH and HomeChoice, which the Board of Directors of CFC
believe should not be distributed in specie. This process has already commenced.
3.2.2 PHASE 2 - The first distribution and the return of capital and payment of
arrear dividends to CFC preference shareholders
Phase 2 will comprise, subject to the approval of CFC shareholders in
general meeting and in accordance with the provisions of the Act, the
distribution of approximately 2 000 cents per CFC ordinary share (approximately
R203,41 million in cash) to CFC ordinary shareholders and the distribution of
1,67843 Mr Price shares for every CFC ordinary share held (17 070 342 Mr Price
shares) in specie, in anticipation of the members` voluntary winding-up of CFC.
The terms of the CFC preference shares currently provide that on a winding-up of
the Company, the holders of preference shares shall be entitled to the return of
capital paid up and any arrear dividends, up to the commencement of the winding-
up but shall not be entitled to any further right to participate in the profits
or assets of the Company. Accordingly, the CFC preference shareholders will,
simultaneously with the first distribution, receive their total paid up capital
and any arrear dividends.
CFC preference shareholders will receive an amount of 200 cents per CFC
preference share held, which represents capital paid up, and 4,60 cents per 7%
CFC preference share in arrear dividends and 3,95 cents per 6% CFC preference
share in arrear dividends. The arrear preference dividends are payable for the
period from 1 September 2002 to 29 December 2002.
3.2.3 PHASE 3 - The second distribution
Phase 3 will comprise the realisation of the balance of the assets of CFC,
which includes CFC`s investments in ConFed, Laser, and the direct property
holdings held by CFC. The second distribution will therefore comprise of cash
and any listed investments that could not be disposed of. The second
distribution is expected to be made during the second quarter of 2003.
3.3 Suspension and termination of listing
Pursuant to the first distribution, CFC will still hold substantial net
assets with a market value of approximately R120,0 million at the last
practicable date. Accordingly, the JSE has ruled that the listing of CFC on the
JSE will only be suspended at the time of the second distribution, which is
expected to take place in the second quarter of 2003.
3.4 Members` voluntary winding-up of CFC
Subject to the fulfilment of the conditions precedent, as set out in
paragraph 4 below and pursuant to the first distribution, return of capital and
payment of arrear dividends to CFC preference shareholders, second distribution
and final liquidation distribution (if any), CFC will be wound up in terms of
Section 349 and 350 of the Act by way of a members` voluntary winding-up.
After the settlement of the costs associated with the members` voluntary winding
up and after confirmation of the final liquidation and distribution account to
the satisfaction of the Master of the High Court of South Africa, the remaining
cash, if any, will be distributed to CFC ordinary shareholders registered as
such by way of a final liquidation distribution. The final liquidation
distribution will be made in addition to the first distribution and second
distribution.
4. CONDITIONS PRECEDENT
The Transaction is subject to the fulfilment of the following conditions:
* the passing by the requisite majority of CFC shareholders, of the necessary
ordinary and special resolutions required to effect the Transaction; and
* the registration by the Registrar of Companies of the special resolutions.
5. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AND UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL EFFECTS ON CFC
5.1 Unaudited pro forma consolidated balance sheet
The unaudited pro forma consolidated balance sheet of CFC at 30 June 2002,
before and after the first distribution and return of capital and payment of
arrear dividends to CFC preference shareholders, on the assumption that it was
implemented on 30 June 2002, is set out in the table below:
Return of
capital and
payment of
arrear
dividends to
Before CFC
at book value preference
30 June 2002 Expenses Realisation shareholders
R R R R
ASSETS
Non-current assets
R R R R
Property, plant
and equipment 60 446 208 - - -
Investments 162 270 509 - (137 517 123) -
Loans 5 573 323 - - -
Deferred taxation asset 1 156 990 - - -
229 447 030 - (137 517 123) -
Current Assets
Inventories 1 432 244 - - -
Taxation 37 033 - - -
Trade and other receivables 4 660 685 - - -
Cash and cash equivalents 1 707 026 (505 931) 300 754 768 (153 744)
Cash equivalents in specie - - - -
7 836 988 (505 931) 300 754 768 (153 744)
TOTAL ASSETS 237 284 018 (505 931) 163 237 645 (153 744)
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital (254 260) - - -
Preference share capital (153 744) - - 153 744
Share premium (1 681 250) - - -
Non distributable reserves (39 516 697) - - -
Capital redemption
reserve fund (133) - - -
Capital profits (105 651 440) 505 931 (178 493 245) -
General reserve (300 000) - - -
Accumulated profit (61 858 510) - 15 255 600 -
(209 416 034) 505 931 (163 237 645) 153 744
Outside shareholders`
interest (11 726 908) - - -
Non-current liabilities
Deferred taxation (374 652) - - -
Current liabilities
Trade and other payables (1 973 272) - - -
Taxation (587 152) - - -
Short term loans (13 206 000) - - -
(15 766 424) - - -
TOTAL EQUITY AND
LIABILITIES (237 284 018) 505 931 (163 237 645) 153 744
Pro forma
after first
Pro forma distribution
after to CFC
expenses, ordinary
realisation shareholders
and return of and return of
capital and capital and
payment of payment of
arrear First arrear
dividends to distribution dividends to
CFC to CFC CFC
Preference ordinary preference
shareholders shareholders shareholders
R R R
ASSETS
Non-current assets
Property, plant and equipment 60 446 208 - 60 446 208
Investments 24 753 386 - 24 753 386
5 573 323 - 5 573 323
Deferred taxation asset 1 156 990 - 1 156 990
91 929 907 - 91 929 907
Current Assets
Inventories 1 432 244 - 1 432 244
Taxation 37 033 - 37 033
Trade and other receivables 4 660 685 - 4 660 685
Cash and cash equivalents 301 802 119 (203 408 000) 98 394 119
Cash equivalents in specie - (89 619 296) (89 619 296)
307 932 081 (293 027 296) 14 904 785
TOTAL ASSETS 399 861 988 (293 027 296) 106 834 692
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital (254 260) - (254 260)
Preference share capital - - -
Share premium (1 681 250) - (1 681 250)
Non distributable reserves (39 516 697) - (39 516 697)
Capital redemption reserve fund (133) - (133)
Capital profits (283 638 754) 283 638 754 -
General reserve (300 000) - (300 000)
Accumulated profit (46 602 910) 9 388 542 (37 214 368)
(371 994 004) 293 027 296 (78 966 708)
Outside shareholders` interest (11 726 908) - (11 726 908)
Non-current liabilities
Deferred taxation (374 652) - (374 652)
Current liabilities
Trade and other payables (1 973 272) - (1 973 272)
Taxation (587 152) - (587 152)
Short term loans (13 206 000) - (13 206 000)
(15 766 424) - (15 766 424)
TOTAL EQUITY AND LIABILITIES (399 861 988) 293 027 296 (106 834 692)
The following notes are relevant to the unaudited pro forma consolidated balance
sheet:
* the "Expenses" column reflects the accounting entries required to record
the incurrence of the costs on the realisation of the assets for the first
distribution;
* the "Realisation" column reflects the accounting entries required to record
the cash received on the disposal of the listed investments (where investments
have not yet been sold the estimated realisation is based on the market value on
Friday, 8 November 2002). The realisation amounts are shown net of a special
dividend of R1,50 per share (amounting in total to R15 255 600) which was paid
to CFC ordinary shareholders on Monday, 7 October 2002;
* the "Return of capital and payment of arrear dividends to CFC preference
shareholders" column reflects the accounting entries required to reflect the
proceeds from the return of capital and arrear dividends to CFC preference
shareholders;
* the "First distribution to CFC ordinary shareholders" column reflects the
accounting entries required to reflect the quantum of cash and distribution of
listed investments to CFC ordinary shareholders in terms of the first
distribution. The distribution of listed investments reflects the quantum of the
distribution of listed investments at their market value on Friday, 8 November
2002; and
* in recording this Transaction the assumption has been made that there will
be no Secondary Tax on Companies ("STC") on the distribution of capital profits
and that the distribution of cash and the distribution of listed investments
will only incur STC on the portion of the distributions made from retained
income earned in CFC`s financial years ending after 31 March 1993.
5.2 Unaudited pro forma consolidated financial effects
The table below sets out the unaudited pro forma consolidated financial
effects of the first distribution to CFC ordinary shareholders and the return of
capital and payment of arrear dividends to CFC preference shareholders based on
the following:
* the effective date of the first distribution, return of capital and payment
of arrear dividends to CFC preference shareholders, is 1 January 2002;
* the calculation of the headline earnings, earnings, net asset value, and
net tangible asset value per CFC ordinary share in the "Before" column is based
on the unaudited published interim results of CFC for the half-year ended 30
June 2002;
* the calculation of the headline earnings, earnings, net asset value and net
tangible asset value per CFC ordinary share in the "After" column is based on
the unaudited published interim results of CFC for the half-year ended 30 June
2002 adjusted for the first distribution and return of capital and payment of
arrear dividends to CFC preference shareholders; and
* the calculation of the market value per CFC ordinary share in the "Before"
and "After" columns has been based on the closing share prices of CFC`s listed
investments and the Directors` value of CFC`s unlisted investments, on Monday, 9
September 2002, being the day of the publication of the first cautionary
announcement by CFC, based on the investments and other net assets (adjusted for
dividends of R19 527 168 paid after 30 June 2002) held at 30 June 2002.
(Decrease)/
Before After Increase
(cents) (cents) (%)
Headline earnings per CFC ordinary share 93,5 56,6 (39,5)
Earnings per CFC ordinary share (53,1) 1 846,3 3 577,0
Net asset value per CFC ordinary share 2 059 776 (62,3)
Net tangible asset value per
CFC ordinary share* 2 059 776 (62,3)
Market value per CFC ordinary share 4 025 1 169 (71,0)
*Tangible assets exclude goodwill.
6. DIRECTORS` OPINION, RECOMMENDATIONS AND UNDERTAKINGS
The Board of Directors of CFC have considered the terms and conditions of the
Transaction and are of the opinion that the Transaction will be in the best
interest of CFC shareholders and recommend that CFC shareholders vote in favour
of the requisite resolutions required to implement the Transaction.
7. SALIENT DATES AND TIMES
December 2002
Final day for receipt of proxies for the
general meeting of CFC shareholders by 10:00 on Monday, 9
General meeting of CFC shareholders held at 10:00 on Wednesday, 11
Announcement of results of general meeting of CFC
shareholders published on SENS on Wednesday, 11
and in the press on Thursday, 12
Last day to trade in CFC ordinary shares on the JSE
in order to be recorded in the register by the first record
date to receive the first distribution Wednesday, 18
Shares will trade ex the first distribution from Thursday, 19
First record date on which CFC ordinary shareholders
must be recorded in the register to receive the
first distribution Friday, 27
Record date on which CFC preference shareholders
must be recorded in the register to receive the
return of capital and arrear dividends Friday, 27
First distribution transferred to the
Central Securities Depository Participants
or broker, as the case may be, for CFC
ordinary shareholders who have dematerialised
their CFC ordinary shares, on Monday, 30
Cheques in respect of the first cash distribution
and share certificates in respect of the Mr Price
shares posted to CFC ordinary shareholders who have
not dematerialised their CFC ordinary shares, from Monday, 30
Cheques in respect of the return of capital and arrear
dividends posted to CFC preference shareholders from Monday, 30
NOTES:
1. The above dates and times may be changed. Any such changes will be published
in the press and announced on SENS.
2. Share certificates may not be dematerialised or rematerialised between
Thursday, 19 December 2002 and Friday, 27 December 2002, both days
inclusive.
3. The preference shares are unlisted.
8. DOCUMENTATION
A circular containing full details of the Transaction and a notice convening
a general meeting of the Company was posted to CFC shareholders today.
9. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
CFC shareholders are advised that as a result of the announcement of the
Transaction, caution is no longer required when dealing in CFC ordinary shares
and CFC preference shares.
Durban
19 November 2002
Corporate advisor to CFC
BOE Merchant Bank
A Division of BOE Bank Limited
Co. Reg. No. 1951/000847/06
Reporting accountants and auditors to CFC
Ernst & Young
Chartered Accountants (SA)
(Registered Accountants and Auditors)
Sponsor to CFC
BoE Securities (Pty) Ltd
Member of the JSE Securities Exchange South Africa
Co. Reg. No. 1995/012240/07
Legal advisor to CFC
Cox Yeats
Attorneys
Transfer secretaries to CFC
Computershare
Date: 19/11/2002 07:13:40 AM Produced by the JSE SENS Department
