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Cadiz Holdings Limited - Acquisition By Cadiz Of Prodigy-Coris Asset Management
(Pty) Limited ("PC") And Shareholders" Loans To PC
Cadiz Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/007258/06)
Share code: CDZ ISIN: ZAE000017661
("Cadiz")
ACQUISITION BY CADIZ OF PRODIGY-CORIS ASSET MANAGEMENT (PTY) LIMITED ("PC") AND
SHAREHOLDERS" LOANS TO PC
1. Introduction
The directors of Cadiz advise that, with effect from 1 April 2003 ("the
effective date"), Cadiz has acquired the entire issued share capital of and
shareholders" claims against PC from Coris Capital Limited ("CC") for a
consideration which is directly related to the future management fee stream and
which amounts to approximately R52 million payable over a period of 7 years.
2. The acquisition
2.1 Business overview
Prodigy Asset Management ("Prodigy") was formed in early 1998 as part of a
joint venture between Union Alliance Holdings and Metropolitan Life and was
positioned as a specialised empowerment asset manager. On 1 July 2002, Prodigy
acquired the asset management business of CC in a reverse take-over share based
transaction that resulted in the formation of PC. PC has a broad client base
consisting mostly of large governmental, parastatal and corporate retirement
funds. The current funds under management are approximately R8 billion.
2.2 Terms of the acquisition
The purchase price is directly related to the future management fee stream
earned by PC over the next 7 years. Based on current assets under management,
fee rates and pension funding requirements, the consideration payable over this
period will amount to approximately R52 million. The consideration will be
reduced should there be any reduction subsequent to the effective date in either
the rate of fees earned or assets under management other than as a result of
market performance. The purchase price will also be reduced on a Rand-for-Rand
basis by all liabilities of PC in existence at the effective date.
2.3 Rationale for the acquisition
Cadiz Specialised Asset Management ("CSAM"), a wholly-owned subsidiary of
Cadiz, has focussed primarily on developing and managing innovative investment
solutions that strive to deliver superior long-run risk adjusted returns. In
successfully promoting this investment philosophy, assets under management have
grown to some R4.5 billion. PC has earned a reputation as a structured
investment asset management house. The acquisition therefore has synergies with
CSAM and will therefore enable CSAM to grow its client and asset base and to
elevate its market presence. It will provide an enlarged footprint from which
CSAM can extend its well proven investment philosophy. In particular, a
requirement of this transaction was that a significant portion of the assets
being managed by PC was to be invested in CSAM"s funds. The funds are tailored
to meet the client"s specific risk, return and liquidity requirements,
delivering a minimum guaranteed return within a dynamic capital preservation
framework. For the last seven years this investment philosophy has contributed
to CSAM"s existing portfolios delivering superior risk-adjusted returns.
2.4 The resolutive conditions
The following conditions need to be fulfilled on or before 15 April 2003,
failing which the agreement will terminate:
* the satisfactory conclusion of the right-sizing process currently being
undertaken by PC;
* the amendment of certain investment mandates to ensure that the provisions of
this transaction can be implemented; and
* the shareholding of the minority shareholders of PC, amounting to
approximately 26% of the issued share capital of PC is transferred to Cadiz.
2.5 Financial effects of the acquisition
In the short term the acquisition is not expected to result in any material
increase in Cadiz"s earnings per share, headline earnings per share and net
asset value per share. However, in the medium to long term, significant benefits
are expected to materialise as a result of:
* the economies of scale and other synergistic benefits arising from the
significant increase in assets under management from R4.5 billion to R12.5
billion;
* the expansion of the client base and related enhancement of CSAM"s market
profile;
* the opportunities that will be created for other business units within the
Cadiz group.
Cape Town
1 April 2003
Sponsor
Investec Securities Limited
Member of the JSE
(Registration number. 1972/008905/06)
Corporate Advisor
CADIZ CORPORATE SOLUTIONS
Attorneys
CLIFFE DEKKER
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