| Thu 15 May 2003, 15:48 | | Investec Limited - Acquisition By Black Economic E |
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Investec Limited - Acquisition By Black Economic Empowerment ("Bee") Parties Of
25,1% In Total Of The Issued Share Capital Of Investec And An Issue Of Shares
For Cash
Investec Limited Peu Investment Group TisoGroup (Pty) Ltd
(Incorporated in RSA) (Pty) Ltd (Incorporated in RSA)
(Reg number (Incorporated in RSA) (Reg number
1925/002833/06) (Reg number 1999/10875/07)
JSE Share code: INL 1996/03899/07)
ISIN: ZAE000040531 ("Tiso")
("Investec") ("Peu")
ACQUISITION BY BLACK ECONOMIC EMPOWERMENT ("BEE") PARTIES OF 25,1% IN TOTAL OF
THE ISSUED SHARE CAPITAL OF INVESTEC AND AN ISSUE OF SHARES FOR CASH
INTRODUCTION
Investec, Peu and Tiso ("the Parties") hereby announce that agreement has been
reached in terms of which Peu and Tiso, together with a broad-based
Entrepreneurship Development Trust ("the Development Trust") and an Investec
employee share trust ("the Employee Trust"), will acquire in total a 25,1%
interest in the issued share capital of Investec ("the proposed transaction").
The Public Investment Commissioners ("PIC") have agreed to provide funding to
facilitate the proposed transaction.
The proposed transaction, which will be effective from 1 April 2003, will result
in the recognition of Investec as a black empowered company in terms of the
guidelines set out in the recent Department of Trade and Industry Position Paper
on BEE. The Parties believe that the proposed transaction represents an
important milestone in the ongoing development of Investec that will
significantly enhance the company"s growth prospects for the benefit of its
current shareholders and its new BEE shareholders.
PARTIES TO THE PROPOSED TRANSACTION
Peu
Peu is a wholly black-owned and managed investment holding company led by Mr
Peter Malungani. The company was incorporated in 1996 and has to date pursued
strategic investments in financial services, information technology and fleet
management. Key investments include an effective 10,4% interest in Capital
Alliance Holdings Limited ("Capital Alliance"), 30% of Fleet Africa
(Proprietary) Limited (a subsidiary of Super Group Limited) and 50% of Lazarus
Motor Company (Proprietary) Limited. Peu has since inception pursued a strategy
of being operationally involved in its major strategic investments, and has for
example seconded members of its management team to senior executive positions in
certain of its investee companies.
Peu also has a strong entrepreneurial culture, which it has demonstrated by
creating a number of its underlying businesses, including Masana Technologies
(Proprietary) Limited, an operational information technology company created and
wholly-owned by Peu that has grown significantly since its inception in 1999,
and Peu Capital (Proprietary) Limited, a wholly-owned financial advisory
business. In addition to the above, Peu has a number of portfolio investments,
the most significant of which is a 6% investment in Aspen Pharmacare Limited.
Staff and management currently own approximately 70% of Peu. In order to broaden
equity participation in Peu beyond its staff and management, Peu set up two
discretionary trusts in 2000 with the objective of facilitating the development
of black entrepreneurs. Consequently, the Intsika Enablement Trust and the
Intsika Investment Trust hold 30% of Peu.
Tiso
Tiso is a majority black-owned and managed natural resources, financial services
and industrial services group created in 2001 by Fani Titi, Nkululeko Sowazi and
David Adomakoh with seed capital from Investec. Tiso"s natural resources
interests, in which Tiso participates as a lead partner in broad-based
consortia, include an anchor empowerment partnership with Kumba Resources
Limited and a 25% participation right in the R1,7 billion Two Rivers platinum
project. With regard to financial services, Tiso has created two businesses;
namely TisoCapital Partners, a R200 million private equity fund, and TisoCapital
Advisers, a financial advisory business that has advised on a number of Tiso"s
internal transactions as well as on external transactions such as the South
African Airways" US$2 billion Fleet Revitalisation Programme and the recent R5
billion Medium Term Note Programme by Telkom SA Limited.
Staff and management currently hold 56% of the issued share capital in Tiso,
with Investec holding 24% and The Tiso Foundation, a public benefit organisation
chaired by Bishop Dandala, head of The Methodist Church in South Africa, holding
the remaining 20%. Tiso created the Tiso Foundation in 2002 with the purpose of
ensuring broad-based equity participation in Tiso beyond that of its employees.
It is intended that all income generated by The Tiso Foundation from its
shareholding in Tiso will be distributed to projects promoting leadership and
career development that are chosen by the foundation in terms of its mandate.
The Development Trust
The Parties are committed to ensuring that a broad base of beneficiaries will
participate in the proposed transaction and have accordingly agreed to include
the Development Trust in the proposed transaction. The Development Trust, which
will be governed by an independent board of trustees, will have as its key
objectives the promotion of entrepreneurial development, leadership development
in both the private and the public sector and rural economic development. It is
intended that the cash flows that are generated by the Development Trust from
its investment in Investec will be distributed, at the discretion of its
trustees, to organisations meeting the broad objectives of the Development
Trust.
Employee Trust
The directors of Investec believe that it is important for the employees of
Investec, and in particular the black employees of Investec, to participate
meaningfully in the proposed transaction. Accordingly, 1,9 million existing
Investec ordinary shares that are currently held by existing Investec staff
share schemes will be set aside for allocation to the proposed Employee Trust
which will then hold 4,7% of the issued share capital in Investec on a long-term
basis.
Resultant Investec shareholding
Investec"s shareholding structure after implementation of the proposed
transaction will be as follows:
see press for details
Upon conclusion of the proposed transaction, broad based beneficiaries will hold
approximately 60% of the 25,1% shareholding to be acquired in Investec.
BACKGROUND TO THE RELATIONSHIPS BETWEEN THE PARTIES
Peu and Tiso have each developed strong and mutually beneficial relationships
with Investec over several years. Accordingly, a key rationale for the proposed
transaction is to formalise and entrench, on a long-term basis, the existing
relationships of Investec with each of Peu and Tiso for the benefit of their
respective shareholders. Features of the relationships that currently exist
between the Parties are summarised below:
Mr Peter Malungani, Executive Chairman of Peu, is a member of the board of
directors of Investec, Investec Plc and Investec Bank Limited, while Mr Fani
Titi, Chief Executive Officer of Tiso, is a member of the Investec Bank Limited
board of directors. Over and above their responsibilities as directors of
various companies in the Investec group, Mr Malungani, Mr Titi and certain of
their respective senior executives work closely with Investec management and
regularly provide advice and assistance on a number of strategic issues
impacting on Investec; and
Investec has advised on, facilitated and financed a number of transactions in
which each of Peu and Tiso have been involved, such as the acquisition by a Tiso
led consortium of 4,8% of Kumba Resources Limited and Peu"s acquisition of an
effective 10,4% interest in Capital Alliance.
INVESTEC"S APPROACH TO BLACK ECONOMIC EMPOWERMENT
Investec"s approach to BEE has been developed over several years by its
Empowerment Forum, which consulted widely with a number of interested parties,
including relevant officials in several government departments and a number of
the commissioners of the Black Economic Empowerment Commission. In developing
Investec"s approach to BEE, however, the Empowerment Forum has been influenced
by Investec"s strong entrepreneurial culture, which is embodied in all aspects
of the company"s activities and the manner in which it conducts itself.
Investec"s BEE strategy reflects the company"s entrepreneurial culture and is
reflected, as illustrated below, in its approach to business, employees and the
society within which it operates.
see press for details
Business commitment
Investec is committed to using the resources under its control to further black
economic empowerment, whether by financially supporting black entrepreneurs to
create significant black controlled business or using its purchasing power and
other resources to develop black owned small, medium and micro enterprises
("SMMEs"). With regard to building black controlled businesses, Investec has a
proven track record of helping entrepreneurs to create sustainable business
platforms and continues to seek opportunities to replicate such platforms, with
particular emphasis on creating sustainable black businesses. With regard to
black owned SMMEs, Investec is committed to allocating 30% of its defined
procurement spending to black empowered companies by 2008. In addition,
Investec"s commitment to supporting and encouraging emerging entrepreneurs is
manifested in Investec"s founder sponsorship of the Business Place initiative,
which comprises a cluster of services where over 3000 black entrepreneurs
receive advice, training and services every month.
Employee commitment
The key principle underlying Investec"s commitment to its employees is to
`inspire the entrepreneur within" and stimulate exceptional performance. This is
achieved by promoting a workplace environment that is characterised by a flat,
non-hierarchical management structure where employees are encouraged to seek
innovative and entrepreneurial solutions for clients and where there is
significant share ownership by all employees at all levels of the business. A
key focus area for Investec with regard to its employees has been to focus on
promoting diversity and achieving an equitable work place. This strategy has
been driven by effective implementation of Investec"s comprehensive employment
equity plan.
Social commitment
Entrepreneurship and education is also at the core of Investec"s social
investment strategy. Investec"s initiatives in this area are focused on the
development of business and entrepreneurial skills at all levels of our society.
Investec"s flagship initiative in this area is its founder sponsorship of CIDA
City Campus, a highly acclaimed, low-cost and fully accredited university
providing a quality education from Investec"s former head office in Johannesburg
to over 1600 students from disadvantaged backgrounds. Investec"s contribution to
CIDA extends beyond financial and infrastructural support, to the efforts of
certain of its employees who teach several courses at CIDA and participate in
other related projects. Investec"s business education initiatives, which include
support for a number of degree programs at universities around South Africa,
also include support for the Investec Asset Management Client & Resource Centre
in partnership with the University of Cape Town"s Graduate School of Business, a
centre that has to date trained over 2000 trustees of pension funds. In terms of
its other social commitments, Investec has to date focused on supporting rural
entrepreneurship infrastructure projects, which include helping to build
infrastructure for rural schools and providing infrastructure to facilitate the
creation of projects such as poultry farms and furniture factories.
RATIONALE FOR THE PROPOSED TRANSACTION
Investec has for some time recognised the importance of introducing BEE into its
ownership structure to complement its approach described above and believes that
the proposed transaction will provide the required catalyst to sustain and
promote further advances in each component of Investec"s broader BEE strategy.
The proposed transaction provides an opportunity to strengthen and entrench
Investec"s long-standing relationships with each of Peu and Tiso, which have
been developed in the context of Investec"s broader BEE strategy described
above, for the mutual benefits of each of the Parties.
From the perspective of Peu, Tiso and the Development Trust, the proposed
transaction presents an attractive opportunity to secure a material interest in
Investec. In addition, the proposed transaction allows for active, sustainable
and meaningful participation by each of Peu, and Tiso in a South African-based,
international financial services company with critical mass and scale and
therefore creates an opportunity for them to grow the business of Investec and
increase the value of their investment.
From Investec"s perspective, the proposed transaction has the potential to
position Investec as an entity with the profile and capacity to successfully
deliver quality services to key segments of the South African business
community, including corporates, government and parastatals. The Parties also
believe that the proposed transaction demonstrates not only Investec"s
continuing commitment to growing its business in South Africa, but also its
commitment to meaningful transformation at all levels of the business.
Accordingly, the Parties believe that the proposed transaction helps to create
an internal environment that will be conducive to continuing to attract and
retain high quality professionals, and in particular black professionals. In
this regard, each of Peu and Tiso will actively assist in attracting senior
black professionals to Investec.
Further to the above, the Parties have agreed that, post implementation of the
proposed transaction, each of Peu and Tiso will become more intimately involved
in the business of Investec in terms of representation on additional boards of
directors and sub-committees within the Investec group, as well as participation
in a number of relevant internal forums where the expertise and input of
executives from each of Peu and Tiso would be highly beneficial to Investec.
MECHANICS OF THE PROPOSED TRANSACTION
Each of Peu, Tiso, and the Development Trust have secured funding from the PIC
to acquire 3 million shares each in Investec at a price of R90 per share. The
combined shareholding of 9 million shares by Peu, Tiso and the Development Trust
will be equivalent to 20,4% of Investec. The 9 million shares will be acquired
as follows:
5,6 million shares pursuant to an issue of shares for cash by Investec, details
of which are set out in paragraph 7 below; and
3,4 million shares that will be purchased at a price of R90 per share from
Investec Employee Benefits Limited.
The 1,9 million shares that will be held by the Employee Trust are currently
unallocated shares that reside in existing Investec share schemes.
The 8-year funding structure is designed to ensure that each of Peu, Tiso and
the Development Trust can retain an unencumbered equity participation in
Investec at the end of the funding period. A key focus of the funding structure
is to ensure the perpetuation of a long-term partnership between the Parties and
discourage a short-term investor type of relationship. The structure is also
designed to fully align the commercial interests of Peu, Tiso, and Investec with
regard to ensuring the financial success of the proposed transaction.
ISSUE OF SHARES FOR CASH
7.1 Details of the issue of shares for cash
The board of directors of Investec has proposed, in accordance with the general
approval for the issue of shares for cash obtained from Investec shareholders at
the annual general meeting held on 20 November 2002, to issue 5 600 000 Investec
ordinary shares of 0,1 cents each ("the issue of shares"). The issue of shares
will be made at R90 per ordinary share and will represent approximately 14,58%
of the issued share capital of Investec and increase the capital base of the
company by approximately R504 million.
7.2 Rationale
The proposed issue of shares is pursuant to the proposed transaction.
7.3 Financial Effects
On the assumption that the proceeds of the issue of shares had been available
for the 6 months ended 30 September 2002, the effects of the issue would have
been as follows:
Before After %
change
Net asset value per share (rands) 70.8 71.6 1.2
Earnings per share (cents) 116.6 129.4 11.0
Headline earnings per share (cents) 1 967.5 (3.6)
004.0
The pro forma financial effects ("After") above are calculated based on
Investec"s unaudited consolidated results (incorporating the results of Investec
plc) in South African GAAP for the six months ended 30 September 2002, and the
combined total number of shares in issue for Investec and Investec plc, assuming
that the proceeds of the issue had been invested over the period at rates
equivalent to money market rates.
Before After %
change
Net asset value per share (pounds) 3.9 4.0 2.0
Earnings per share (pence) 3.2 4.4 34.8
Headline earnings per share (pence) 47.6 46.1 (3.0)
The pro forma financial effects ("After") above are calculated based on
Investec"s unaudited consolidated results (incorporating the results of Investec
plc) in UK GAAP for the six months ended 30 September 2002, and the combined
total number of shares in issue for Investec and Investec plc, assuming that the
proceeds of the issue had been invested over the period at rates equivalent to
money market rates.
7.4 Listing of the new Investec shares
Application will be made to the JSE Securities Exchange South Africa to list the
5 600 000 new Investec shares.
CONDITIONS PRECEDENT
The proposed transaction is subject to the following:
The finalisation of legal documentation;
The issue of 5,6 million shares for cash by Investec Limited and the approval of
the JSE Securities Exchange South Africa ("JSE") to list the new ordinary
shares;
Approval of shareholders, to the extent required;
Approval of the JSE, to the extent required; and
Approval by the relevant regulatory authorities, to the extent required.
DUAL LISTED COMPANY ("DLC") ISSUES
In terms of its DLC structure, Investec holds the Southern African interests of
the broader Investec group, while London-listed Investec plc holds most of the
offshore interests of the group. The two companies are separate legal entities
with separate listings, but are bound together by contractual agreements and
mechanisms. They have unified boards and management and operate as a single
unified economic enterprise with its group headquarters based in South Africa.
Shareholders in the two companies have common economic and voting interests as
though Investec and Investec plc were a single company. See paragraph 6 of Part
XI of the Investec listing document dated July 2002 for further details of the
DLC structure.
As Investec is issuing 5,6 million shares for cash, the proposed transaction
does not require a matching action under the DLC structure. See paragraph 6.2 of
Part XI of the Investec listing document dated July 2002 for further details of
matching actions.
Sandton
15 May 2003
Merchant bank to Financial Advisers to Financial Advisers to
Investec Peu Tiso
Investec Corporate Peu Capital (Pty) TisoCapital Advisers
Finance Limited
Lead sponsor to Joint sponsor to
Investec Investec
Ernst & Young Sponsors Investec Securities
(Pty) Limited in Limited
association with
Jowell Glyn & Marais
Inc.
Date: 15/05/2003 03:00:08 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
