| Mon 30 Dec 2002, 10:14 | | Proposed Acquisition By PSG Investment Services (P |
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APPLETON LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/004031/06)
Share Code: ALE ISIN: ZAE000027488
("Appleton")
PSG GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1970/008484/06)
Share Code: PSG ISIN: ZAE000013017
("PSG Group")
PROPOSED ACQUISITION BY PSG INVESTMENT SERVICES (PTY) LIMITED OF THE ENTIRE
ISSUED SHARE CAPITAL OF APPLETON
1. Introduction
1.1 Shareholders of both Appleton and PSG are referred to the joint
announcement issued on 3 December 2002 in which it was announced that an
agreement ("the agreement") had been concluded between Appleton and PSG
Investment Services (Pty) Limited ("PSGIS"), a 95% held subsidiary of PSG Group,
in terms of which PSGIS would propose a scheme of arrangement ("the scheme") in
terms of section 311 of the Companies Act (Act 61 of 1973 as amended) between
Appleton and its shareholders (other than PSG Group and/or its subsidiaries and
any subsidiaries of Appleton) ("the scheme participants").
1.2 The scheme consideration to be offered by PSGIS will be an amount of 9
cents per Appleton share held by the scheme participants amounting to an
aggregate scheme consideration of R67 779 431,73.
1.3 The agreement contemplates that if the free net cash or cash equivalent
of Appleton (inclusive of various stated assets of the Appleton Group at an
agreed value) is, at 6 January 2003, less than R55 000 000,00 the aggregate
scheme consideration will be reduced by the full amount of such shortfall. As
previously stated, the Appleton board does not anticipate any such shortfall.
2. Status of conditions precedent to the scheme
Several of the suspensive conditions referred to in paragraph 4 of the joint
announcement issued on 3 December 2002 have been fulfilled or waived. The scheme
will accordingly be subject only to the following suspensive conditions:
2.1. receipt of the requisite regulatory approvals, including, to the extent
necessary, approval by the JSE Securities Exchange South Africa ("JSE"),
Securities Regulation Panel ("SRP"), Financial Services Board, the Competition
Authorities and the South African Reserve Bank ("SARB"), by no later than 15
April 2003;
2.2 approval by not less than 75% of the scheme participants present and
voting at the scheme meeting;
2.3 the sanctioning of the scheme by the High Court of South Africa by no
later than 30 April 2003; and
2.4 the registration of the Order of Court sanctioning the scheme by the
Registrar of Companies.
The aforesaid dates may be extended by agreement between PSGIS and Appleton.
3. Rationale for the scheme
PSGIS holds a 30% stake in Appleton and the implementation of the scheme will
allow for the consolidation of the two companies` asset management, private
client and stock broking businesses resulting in a group with assets under
management of approximately R12.8 billion (including R2.6 billion offshore).
The implementation of the scheme will make PSGIS the second largest private
client broker (by number of transactions) in the country and improve
profitability through rationalisation of systems and staff.
From the perspective of Appleton shareholders the scheme allows them an
opportunity to exit their investment at a premium to the market price before the
publication of the cautionary announcement relating to the scheme as well as a
premium to both the net asset value and net tangible asset value per share.
4. Pro forma financial effects of the scheme on Appleton shareholders
The pro forma financial effects of the scheme on scheme participants set out
below are based on the published, audited financial information of Appleton for
the year ended 30 June 2002.
The pro forma financial effects have been prepared for illustrative purposes
only, to provide information about how the proposals might have affected the
financial information presented and, because of its nature, may not give a true
reflection of Appleton scheme participant`s financial position.
Before After
the scheme the scheme Change
(cents) (cents) (%)
Fully diluted earnings per share(1) 0.09 0.59 551.0
Headline earnings per share(1) 0.98 0.59 (39.8)
Net asset value per share(2) 7.98 9.00 12.8
Net tangible asset value per share(2) 7.42 9.00 21.3
Calculated market value per share
(26 November 2002)(3)/scheme
consideration 8.00 9.00 12.5
Notes:
1. The "Before" column reflects the fully diluted earnings per share and net
tangible asset value per share and the headline earnings per share as reported
for the year ended 30 June 2002. The "After" column reflects the after tax
interest income that a shareholder would have earned on the scheme consideration
for the year ended 30 June 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 30 June 2002.
2. The "Before" column reflects the net asset value per share and net tangible
asset value per share as reported at 30 June 2002. The "After" reflects the
scheme consideration.
3. The "Before" column reflects the closing price of a share on the JSE on 26
November 2002, being the day immediately preceding the date of the first
cautionary announcement providing details of the scheme. The "After" column
reflects the scheme consideration.
4. The effects of Capital Gains Tax ("CGT") has not been taken into account as
each shareholder will have a different CGT profile.
5. Confirmation of sufficient resources
The SRP has been provided with proof of the availability of funding for PSGIS
to meet its full commitments in terms of the scheme.
6. The Dublin transaction
As announced on 3 December 2002, one of the conditions precedent to the
scheme was that Appleton conclude a binding agreement for the sale of the Dublin
operations upon terms and conditions approved in writing by PSGIS ("the Dublin
transaction").
Appleton`s Dublin operation comprises a 70% share in Beacon Systems Limted
("Beacon") and a 70% share in Appleton Capital Management Limited ("ACM") which
operate out of Ireland as global multi-management and trading advisor
businesses. Appleton`s shares in Beacon and ACM are held through Trinity
International Management Limited ("TIM") a wholly owned subsidiary of Appleton.
On 20 December 2003 TIM concluded:
* a restructure agreement with Beacon, ACM and the shareholders of ACM, in
terms of which, inter alia:
- the share capital of ACM was restructured so that TIM`s shares in ACM
were converted into 346 220 A class non voting redeemable cumulative preference
shares of US$0.0001 each in the issued share capital of ACM ("A shares");
- ACM allotted 58 984 B class non voting redeemable cumulative preference
shares of US$0.0001 each in the issued share capital of ACM ("B Shares") to J
Daly, a shareholder in ACM;
- ACM allotted 5 545 C class non voting redeemable cumulative preference
shares of US$0.0001 each in the issued share capital of ACM ("C Shares") to L
McKenna, a shareholder in ACM; and
- ACM agreed to pay TIM a brokerage income and management fee of US$245 742
in respect of the participation of Appleton clients in the Appleton Lee Fund
(Gaia Hedge II Fund):
* an option agreement in terms of which:
- Bradfox Holdings Limited (a company incorporated in Ireland) ("Bradfox")
acquired a call option for US$10 in terms of which it can require TIM to dispose
of its A shares to Bradford at any time after 20 December 2002 for an amount
equivalent to the greater of:
- US$1; or
- the aggregate outstanding dividend on the A shares as detailed below
(up to a maximum of US$2 900 000) at the date of exercise of the call option,
payable in cash; and
- TIM acquired a put option for US$10, in terms of which it can require
Bradfox to acquire the A shares at any time after the A shares have received the
full dividend to which they are entitled for an amount equivalent to US$1
payable in cash;
* a disposal agreement in terms of which TIM agreed to dispose of its shares
in Beacon to J O`Friel and D Walsh for a purchase consideration of US$180 000
payable in cash;
* an ACM shareholders` agreement containing terms and provisions standard for
an agreement of its kind; and
* a trade mark licence agreement in terms of which Appleton licensed ACM to
use the Appleton trade mark in consideration for a licence fee of US$10,
provided that ACM changes its name to a name that does not contain the word
"Appleton" within 30 days of the conclusion of the agreement.
In terms of the new articles of ACM and the ACM shareholders` agreement:
* the ordinary shareholders in ACM are not entitled to receive any dividends
until such time as the holders of the A, B and C shares have received an
aggregate dividend of US$8.37618 for every A, B or C share held by them,
whereafter the holders of the A, B and C shares shall not be entitled to any
dividends;
* on the winding up of ACM or any other repayment of capital, the holders of
the A, B and C shares shall be entitled to a total amount payable of US$8.37618
for every A, B or C share held by them less any dividends already paid to in
respect of the A, B or C shares, in preference to the ordinary shareholders in
ACM;
* ACM shall, in each financial year, declare a dividend, of not less than 90%
of its available distributable reserves. The dividend declared will be
distributed as follows:
- 84.29% to the holders of the A shares;
- 14.36% to the holders of the B shares; and
- 1.35% to the holders of the C shares.
The terms and conditions of the Dublin transaction have been approved in
writing by PSGIS.
7. Conditions precedent to the Dublin transaction
The restructure agreement is subject to the approval of:
* the Central Bank of Ireland;
* the SARB;
* Appleton shareholders; and
* the JSE.
8. Irrevocable undertakings
Shareholders holding in excess of 77% of the shares eligible to vote at the
scheme meeting have irrevocably undertaken to vote in favour of the scheme.
Shareholders holding in excess of 58% of the shares in Appleton have
irrevocably undertaken to vote in favour of the Dublin transaction.
9. Further announcement and documentation
9.1 The scheme documentation is in the course of preparation and will,
subject to the approval of the JSE, SRP and SARB being obtained and the Order of
Court for the convening of the scheme meeting being granted, be posted to
Appleton shareholders.
9.2 The scheme documentation will include a section relating to the Dublin
transaction and will incorporate a notice of a general meeting at which Appleton
shareholders will be asked to consider and, if deemed fit, approve the terms of
the Dublin transaction.
9.3 A further announcement, including the salient dates pertaining to the
scheme and the financial effects of the Dublin transaction, will be published in
due course.
10. Renewal of cautionary announcement
Shareholders are advised to continue to exercise caution when dealing in
Appleton shares until the further announcement, referred to above, is made.
24 December 2002
CORPORATE ADVISOR AND TRANSACTION SPONSOR TO APPLETON
Corpcapital Corporate Finance
a sponsor registered with the
JSE Securities Exchange South Africa
INDEPENDENT ADVISOR TO APPLETON MINORITIES
Ernst & Young Corporate Finance (Pty) Ltd
(Registration number 2000/031575/07)
ATTORNEYS TO APPLETON
Sonneberg Hoffmann & Galombik
CORPORATE ADVISOR TO PSGIS
PSG CAPITAL
ATTORNEYS TO PSGIS
Hofmeyr Herbstein Gihwala Cluver & Walker Inc.
(Registration number 1997/001523/21)
Date: 27/12/2002 05:28:00 PM Produced by the JSE SENS Department
