| Tue 1 Apr 2003, 9:02 | | Gencor Limited - Distribution by Gencor of its sha |
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Gencor Limited
(Incorporated in the Republic of South Africa)
Registration number 1895/001232/06
ISIN: ZAE000013066
Share code: GMF
("Gencor" or "the Company")
Distribution by Gencor of its shareholding in Impala Platinum Holdings Limited
("Implats") and general share repurchase
1. Introduction
Gencor shareholders are referred to the announcement published on the Stock
Exchange News Service ("SENS") on Thursday, 13 March 2003, wherein it was stated
that Gencor had concluded two agreements which settle, subject to the unbundling
of all Implats shares held by Gencor, without any admission of liability, all
asbestos-related claims against the Company for a total amount of R460,5
million, ("the settlement agreements"). As indicated in the announcement on 13
March 2003, the settlement agreements paved the way for the unhindered
distribution of the ordinary shares held by Gencor in Implats ("the proposed
unbundling").
The Gencor board of directors ("the Gencor board") has therefore resolved,
subject to the fulfilment of certain conditions precedent, to reconvene the
meeting of shareholders of Gencor to consider the proposed unbundling and if the
proposed unbundling is approved, to distribute to shareholders recorded in the
register on the record date, Friday, 23 May 2003 ("the record date"), all of the
Implats shares held by Gencor on the date of distribution ("Implats distribution
shares"), by way of an unbundling, effected by way of a dividend in specie and a
reduction of the Company"s share premium account.
2. Rationale for the unbundling
Following the disposal by Gencor of its non-precious metal assets to Billiton
Plc in July 1997 and the unbundling during April 2000 of its investments in Gold
Fields Limited, Gold Fields of South Africa Limited and Standard Bank Investment
Corporation Limited, Gencor became a focused investment holding company with its
main asset being a strategic stake in Implats. Gencor"s listing was subsequently
transferred to the "Resources - Platinum" sector of the JSE Securities Exchange
South Africa ("JSE") lists.
Gencor had provided certain limited warranties and an indemnity to Billiton Plc
in relation to the businesses that were transferred to Billiton Plc on 1 July
1997. The indemnity was for five years and has at the date of this announcement
expired. Gencor has now reached the situation where there is no longer a
rationale for it to exist in its current form.
The proposed unbundling of the Implats shares will result in Gencor shareholders
obtaining a direct interest and concomitant benefit in that underlying
investment and, in line with the stated intention of the Gencor board, this
should unlock shareholder wealth by means of the elimination of the discount at
which Gencor shares trade relative to the value of its underlying investment in
Implats.
3. Litigation and settlement thereof
During 2002 Gencor received 37 summonses, claiming approximately R37 million in
aggregate, from persons purporting to be former employees of Griqualand
Exploration and Finance Company Limited ("Gefco") and/or Msauli Asbes Beperk
("Msauli"), or other companies alleged to have been controlled by Gefco and/or
Msauli. The litigants sought damages from a variety of parties including Gencor,
on the basis of alleged asbestos-related diseases contracted as a result of
employment on mines operated by Gefco and/or Msauli and/or their subsidiaries
during the period 1950 to 2001. Having considered each of the summonses
individually and taken advice (including the advice of senior counsel) the
Gencor board was then (and still remains) of the view that Gencor is not liable
in South African law for any of the amounts claimed. Gencor instructed its
attorneys to defend the claims which had not been progressed in any meaningful
manner.
Against the backdrop of this litigation, on 16 September 2002 the Gencor board
announced publicly that it would convene a shareholders" meeting on 2 October
2002 to consider and, if deemed fit, to authorise the proposed unbundling.
At midnight on Friday, 27 September 2002, Gencor received an unissued
application from attorneys representing not only the 37 claimants referred to
above, but thousands of other alleged potential claimants. The application
(which was brought on an urgent basis) sought an order prohibiting Gencor from
taking any steps towards effecting the proposed unbundling unless and until it
had made provision (by way of adequate security) to secure the alleged claims of
all persons (whether actual or contingent) who have contracted or might in the
future contract an asbestos-related disease, notwithstanding that after the
proposed unbundling, Gencor would in any event have retained cash reserves in
the amount of some R409 million (less liabilities of approximately R41 million).
The Gencor board believed it was prudent to postpone the general meeting and, in
order to afford itself an opportunity to deal with the application meaningfully,
agreed a timetable with the claimants" legal representatives. Some 7 500 South
Africans who constitute a group in the United Kingdom where they have instituted
proceedings against Cape Plc and to which proceedings Gencor has been joined as
a defendant, sought to intervene in the application, seeking similar relief.
Gencor filed detailed evidence of a factual and expert nature in strenuous
opposition to the relief sought in the applications. Arguments were advanced to
the High Court during five days of hearing in November and December 2002, after
which judgement in the applications was reserved.
Although confident that judgement would ultimately be granted in favour of
Gencor, the Gencor board nevertheless considered it prudent, given the
commercial exigencies, to engage the claimants" lawyers in settlement
discussions. The Gencor board is pleased to announce that two agreements have
been concluded which pave the way for the proposed unbundling to proceed
unhindered and, subject to the proposed unbundling being completed in every
respect and payment of the settlement amounts being made, will result in all
litigation against Gencor being resolved fully and finally in every respect.
The settlement removes any objection to Gencor"s proposed unbundling by any of
the claimants or their legal representatives and, on the completion of the
proposed unbundling, will involve Gencor paying, without any admission of
liability of any nature whatsoever and in full and final settlement of all
claims and potential claims, a total amount of R460,5 million (inclusive of
costs). This sum includes an amount of R40 million for any potential
rehabilitation claims which may be made over the next three years.
It is an express condition of the settlement (and the payment of the settlement
amount) that the proposed unbundling be completed (free from interference) in
every respect. If therefore, at any time before its completion, the Gencor board
becomes aware of any other claims, threats or demands concerning any other
alleged potential liability, the Gencor board has reserved to itself the right,
in its sole and absolute discretion, to suspend, postpone or terminate the
proposed unbundling.
4. The proposed unbundling
Subject to the approval of shareholders of Gencor in general meeting to be held
on Friday, 25 April 2003, Gencor will unbundle all the shares which it holds in
Implats on the date of the proposed unbundling. Gencor currently holds 30 605
722 shares in Implats and will, subject to the next paragraph, distribute this
number of shares to its shareholders in the proposed unbundling.
To the extent that there are any non-resident shareholders individually holding
more than 5% of the issued share capital of Gencor on the record date, Gencor
will not qualify for the various unbundling exemptions in respect of that
portion of the Implats distribution shares to be distributed to such non-
resident shareholder(s). If there is one or more such non-resident
shareholder(s) on the record date, Gencor intends prior to the date of
distribution to retain sufficient cash and/or sell so many of the Implats shares
which it currently holds as is necessary to pay the related tax liabilities
(including Secondary Tax on Companies ("STC"), Capital Gains Tax ("CGT") and
Marketable Securities Tax ("MST")/Uncertificated Securities Tax ("UST")) and to
unbundle all of the remaining Implats shares (which will constitute all of the
shares it holds in Implats as at the date of the proposed unbundling) to its
shareholders. As a result of this, the final unbundling ratio to be announced on
Tuesday, 10 June 2003 may be reduced from that shown in the table of entitlement
below.
Subject to the fulfilment of the conditions precedent, Gencor shareholders
recorded in the register on the record date will receive a distribution of the
Implats distribution shares by way of an unbundling, effected by way of a
dividend in specie and a reduction of the share premium account. On the
assumption that Gencor owns 30 605 722 shares in Implats on the date of the
distribution, Gencor shareholders will receive the Implats distribution shares
in accordance with the table of entitlement set out below. To the extent that
Gencor is required to sell some of its Implats shares to settle any tax
liabilities referred to above prior to the unbundling, the entitlements will be
reduced pro rata.
Number of Implats
shares to be unbundled
Number of shares per 100 Gencor
to be unbundled shares held
Implats 30 605 722 8,77986
The proposed unbundling ratio disclosed in the above table will be applied to
the holding of Gencor shareholders on the record date and the resultant number
of securities will be rounded down to the nearest whole number if they are less
than 0,5 and will be rounded up to the nearest whole number if they are equal to
or greater than 0,5.
The proposed unbundling ratio set out above is based on the assumption that
Gencor will distribute 30 605 722 shares in Implats by way of the proposed
unbundling.
5. Conditions precedent
The proposed unbundling is subject to the fulfilment of the following conditions
precedent:
- the passing, at the general meeting, of the ordinary resolutions necessary to
implement the proposed unbundling; and
- the approval, insofar as may be necessary, of the proposed unbundling by the
relevant regulatory authorities.
6. Pro forma financial effects of the proposed unbundling
Pursuant to the proposed unbundling, Gencor shareholders will directly hold the
Implats distribution shares.
The proposed unbundling will result in Gencor shareholders holding their
proportionate share of Gencor"s investment in Implats directly rather than
indirectly and will therefore have no material effect on the dividends received
by or earnings or the collective underlying net asset value attributable to
Gencor shareholders.
The table below sets out the pro forma financial effects of the proposed
unbundling per Gencor share, based on the assumptions set out below the table.
The pro forma financial effects are provided for illustrative purposes only, to
show the effect of the proposed unbundling and, because of their nature may, not
give a fair reflection of the financial position of Gencor after the proposed
unbundling.
Pro forma
"After
Actual Pro forma settlement
"Before "After Percentage and Percentage
unbundling" unbundling" decrease unbundling" decrease
Earnings
per
share
(cents)
(Note 1)
- basic 265,9 (1,5) 100,0 (141,1) -
and
diluted
- 268,2 3,1 98,8 (1,5) 100,0
headline
earnings
Tangible 1 315,6 149,7 88,6 14,8 98,9
and net
asset
value
per
share
(cents)
(Note 2)
Notes:
1. The effect on the earnings per share is based on the 348,6 million weighted
average number of Gencor shares in issue during the six months ended 31 December
2002.
In calculating the earning per share, Gencor"s unaudited earnings for the six
months ended 31 December 2002 were adjusted to show the pro forma earnings for
the six months on the assumption that the settlement of the asbestos claims and
the implementation of the proposed unbundling occurred on 1 July 2002.
The following pro forma adjustments were made to Gencor"s unaudited earnings for
the six months ended 31 December 2002 in order to show the effect of the
proposed unbundling:
- the elimination of R795,8 million dividends received from Implats;
- the elimination of R128,4 million share of associates income after tax; and
- an additional estimated R8,0 million for expenses associated with the proposed
unbundling (added back for headline earnings purposes).
The following additional pro forma adjustments were made to Gencor"s pro forma
earnings "After Unbundling" for the six months ended 31 December 2002 in order
to show the effect of the settlement of the asbestos claims:
- the settlement of asbestosis claims and associated costs totalling R470,5
million (added back for headline earnings purposes);
- a decrease in interest income of R23.0 million; and
- a decrease in taxation of R6,9 million as a result of the lower interest
received.
No provision has been made for any tax liabilities on the proposed unbundling
due to the uncertainty as to whether there will be any non-resident
shareholder(s) individually holding more than 5% of the issued share capital of
Gencor on the record date. However, to the extent that there are any non-
resident shareholder(s) individually holding more than 5% of the issued share
capital of Gencor on the record date, STC, CGT and MST/UST will be payable on
that portion of the Implats distribution shares accruing to such non-resident
shareholder(s).
2. The effect on the net asset value per share in the "Before Unbundling",
"After Unbundling" and "After Unbundling and Settlement" columns is based on the
348,6 million shares in issue as at 31 December 2002.
7. Transfer of listing
Subsequent to the proposed unbundling, Gencor"s listing will be transferred from
the "Resources - Platinum" sector of the JSE lists to the "Financials -
Speciality & Other Finance" sector. In terms of the JSE Listings Requirements,
Gencor"s listing may be suspended 6 months after the proposed unbundling. The
Gencor board will take a decision on any final distribution when appropriate.
8. Opinions and recommendations
The Gencor board, based on advice from experts, including that of senior
counsel, has considered the terms and conditions of the proposed unbundling and
is of the opinion that the proposed unbundling will be advantageous to Gencor
shareholders and recommends that Gencor shareholders vote in favour of the
resolutions necessary to implement the proposed unbundling.
9. General share repurchase
A special resolution will be proposed at the general meeting to grant Gencor
general approval, subject to the provisions of the Companies Act, 1973 (Act 61
of 1973), as amended and the Listings Requirements of the JSE, to acquire
ordinary shares in the Company"s issued share capital from time to time and to
grant the Gencor directors a mandate and general authority to give effect to
that general approval.
10. Salient dates and times
2003
Last day for lodging of forms of proxy for the Thursday, 24 April
general meeting by 10:00 on
General meeting of Gencor shareholders to approve Friday, 25 April
the proposed unbundling and general share
repurchase at 10:00 on
Results of the general meeting published on SENS Friday, 25 April
on
Results of the general meeting published in the Tuesday, 29 April
press on
Last day to trade in Gencor shares on the JSE in Friday, 16 May
order to participate in the proposed unbundling
Gencor shares trade ex-rights to the Implats Monday, 19 May
distribution shares
Transfer of sector Monday, 19 May
Record date to participate in the proposed Friday, 23 May
unbundling
Announcement of final unbundling ratio and Tuesday, 10 June
apportionment of base cost for CGT purposes
Shareholders entitled to trade the Implats Tuesday, 10 June
distribution shares (in anticipation of receipt
of the Implats distribution shares
on Wednesday, 18 June 2003)
Implats share certificates will be posted by Wednesday, 18 June
registered post to certificated shareholders or
credited to their safe custody accounts at their
Central Securities Depository Participant
("CSDP") or broker in the case of dematerialised
shareholders, on
Dematerialised Gencor shareholders should note that they will not be able to
sell their entitlement to Implats distribution shares between Monday, 19 May
2003 and Monday, 9 June 2003, both days inclusive. Certificated Gencor
shareholders should note that they will not be able to sell their entitlements
to Implats distribution shares until they receive their Implats share
certificates and have them dematerialised. This is due to the fact that the
Implats distribution shares will only be posted by registered post to
certificated Gencor shareholders or credited to the safe custody accounts of
dematerialised Gencor shareholders recorded in the register on the record date,
on Wednesday, 18 June 2003. Gencor shareholders who wish to sell Implats shares
during this time will be required to borrow Implats scrip for settlement from
alternative sources.
Notes:
1. All times indicated above are South African times.
2. The above dates and times are subject to change. Any such change will be
published on SENS and in the press.
3. Gencor share certificates may not be dematerialised or rematerialised
between Monday, 19 May 2003 and Friday, 23 May 2003, both days inclusive, due to
the administration requirements of the unbundling process.
11. Documentation
A circular, setting out full details of the proposed unbundling, will be posted
to shareholders today, 1 April 2003.
Johannesburg
1 April 2003
Merchant bank
Investec Corporate Finance
Sponsor
Investec Bank Limited
Attorneys
Webber Wentzel Bowens
Reporting accountants and auditors
Pricewaterhousecoopers Inc
Communication
Baird"s
