| Wed 29 Jan 2003, 17:58 | | Kolosus - Cautionary Update |
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Kolosus Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1978/000181/06)
Share code: KOS ISIN: ZAE000008504
("Kolosus" or "the Company")
1. Introduction
Further to the cautionary announcement of 13 December 2002, shareholders are
advised that Daun & Cie. Aktiengesellschaft, a private investment company
incorporated under the laws of Germany, and represented by Mr Claas Daun
("Daun") has entered into an agreement to acquire Senwes Limited`s ("Senwes")
entire shareholding in Kolosus, with effect from 1 February 2003, being 352 833
739 shares and representing 62,94% of the Company`s issued share capital, for a
total cash consideration of 100 cents per share ("the Kolosus acquisition").
Simultaneous with the above transaction, Daun has also entered into an agreement
with ABSA Bank Limited, trading as ABSA Corporate and Merchant Bank ("ABSA"), to
acquire its shareholding in Kolosus, being 155 808 946 shares, for a total cash
consideration of 31 cents per share ("the ABSA acquisition").
Implementation of the Kolosus acquisition and the ABSA acquisition (jointly
referred to as "the transaction") will result in Daun owning 90,76% of the
issued share capital of Kolosus.
There are no arrangements, understandings, or agreements between Daun and any
party acting in concert with Daun, and either Senwes or ABSA in their capacity
as shareholders, or any party acting in concert with either of them, regarding
any further consideration payable for their shares in any manner whatsoever in
relation to the above transactions.
2. Rationale for the transaction
The Board of Kolosus believes that the key to the sustainability of the business
of Kolosus and its subsidiaries lies with the introduction of a new controlling
shareholder, with both the strategic and operational attributes that Mr Claas
Daun is likely to contribute. Mr Claas Daun is a large private investor in
South Africa who is both knowledgeable on and committed to business
opportunities in South Africa.
The non core nature of both Senwes`s and ABSA`s shareholding in Kolosus combined
with the responsible exit that the transaction will afford these shareholders is
compelling for all stakeholders in Kolosus, especially for business continuity,
job and skills retention as well as successfully overcoming the challenges faced
by the Company, including the Seton Company litigation referred to in paragraph
3 below.
For these reasons the directors of Kolosus unanimously support the transaction.
3. Update on the Seton Company litigation
Regarding the litigation, shareholders are advised that the case brought by the
liquidator of Silveroak Industries against the Company was heard in November
2002 with the outcome thereof only expected during the early part of 2003. The
case of Seton Company against the Company is currently pending with no court
date yet set.
Such litigation continues to have an increasingly detrimental effect on the
business of Kolosus and that of its subsidiary companies, which state of affairs
poses a threat to the viability and continued existence of these businesses and,
ultimately, the viability of the Kolosus group of companies as a whole.
As regards the litigation, existing shareholders as well as prospective
shareholders in Kolosus should be caveated that should Kolosus be unsuccessful
in defence of the litigation and should there be a viable business case, a
rights offer could be undertaken to secure cash resources necessary to discharge
its obligations in such regard. This should not be construed as a certainty,
but as an indication of an avenue that would be evaluated at that time.
4. Conditions precedent
Other than conditions precedent inherent in transactions of the nature of the
Kolosus acquisition, the Kolosus acquisition is subject to inter alia, ABSA
entering into the ABSA acquisition, which in turn is subject to the condition
that the commercial bankers of Kolosus consent in writing to the acquisition by
Daun of ABSA`s shareholding in Kolosus, by not later than 28 February 2003.
5. Competition Authorities approval as regards the Kolosus acquisition
In compliance with the Competition Act, 89 of 1998, it is a condition precedent
to the Kolosus acquisition that the approval of the Competition Authority be
obtained, which condition precedent will be satisfied even if the Competition
Authorities impose a condition requiring that Kolosus, or its subsidiaries,
cease or dispose of a particular business or activity.
6. Implications of the Kolosus acquisition for minority shareholders of
Kolosus
Shareholders should appreciate that the entry of Mr Claas Daun as a shareholder
in Kolosus, should not be construed as an immediate solution to the significant
challenges that lie ahead. The decision of the Competition Authorities and, in
particular, the outcome of the Seton Company litigation, whether this arises by
due legal process or via a commercially justifiable arrangement, remains as
significant risks to the business.
The consideration paid for the Senwes and ABSA shares is reflective of the risks
currently inherent in the business.
Subject to fulfilment of the matters referred to in paragraphs 4 and 5 above and
completion of the transaction, the Kolosus acquisition will give rise to an
"affected transaction" as envisaged by the Securities Regulation Code of the
Securities Regulation Panel ("the SRP"). An affected transaction would inter
alia require that an offer be extended by Daun to the minority shareholders of
Kolosus to acquire their shares in Kolosus on the same basis as that received by
Senwes and ABSA, viz, less than 1 cent per share.
On Monday, 27 January 2003, being the last practicable date prior the
finalisation of this announcement, the ruling market price per share of the
shares of Kolosus on the JSE Securities Exchange South Africa was 14 cents per
share. Taking the uncertainties of the transaction into account as well as the
prevailing market price of the shares of Kolosus, the SRP has reserved its
rights regarding the granting of a ruling and action as regards the treatment of
minority shareholders, pending fulfilment of the matters dealt with in this
announcement.
7. Cautionary announcement
Due to the various unresolved matters referred to in this announcement,
shareholders are advised to continue to exercise caution in the trading of their
shares pending publication of a further announcement.
Pretoria
29 January 2003
Transaction adviser and sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Legal Advisor
Hofmeyr Herbstein & Gihwala Inc
Date: 29/01/2003 05:52:00 PM Produced by the JSE SENS Department
