| Tue 27 May 2003, 17:51 | | AMB / AMB Partners - Firm Intention Announcement |
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AMB HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/003054/06)
Share code: AMB ISIN code: ZAE000029682
(AMB or the Company)
AMB PRIVATE EQUITY PARTNERS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/015329/06)
Share code: APP ISIN code: ZAE000026936
(AMB Partners)
FIRM INTENTION ANNOUNCEMENT REGARDING:
* the proposed acquisition by AMB of approximately 40% of the linked units of
AMB Partners by way of a scheme of arrangement (the scheme) in terms of
section 311 of the Companies Act, 1973 (Act 61 of 1973), as amended (the Act);
and
* the subsequent delisting and restructuring of AMB Partners.
1. INTRODUCTION
Further to the joint cautionary announcement published on 2 April 2003, AMB
Advisory Services Limited is authorised to announce that AMB intends to propose
the scheme between AMB Partners and its linked unitholders, other than AMB and
certain linked unitholders (being Sanlam Life Insurance Limited, South African
Eagle Insurance Company Limited and Transnet Pension Fund, who collectively hold
approximately 25,4% of the issued capital of AMB Partners and are hereinafter
referred to as the Remaining Investors) who have committed to remain invested
in the restructured AMB Partners. The implementation of the scheme is subject to
the fulfilment of the conditions precedent set out in paragraph 5 below.
AMB shall, pursuant to the scheme, acquire the linked units of AMB Partners,
each unit comprising one ordinary share of 0,01 cent each and two debentures of
500 cents each, inextricably linked for purposes of transfer (linked units),
from the holders of linked units, other than AMB and the Remaining Investors,
(scheme participants) in exchange for a cash consideration of R12,25 per
linked unit (the initial scheme consideration), or a deferred consideration of
R13,00 per linked unit, payable as set out in paragraph 4.2 below (the deferred
scheme consideration). Both the initial scheme consideration and the deferred
scheme consideration are hereinafter referred to in the alternative as the
scheme consideration.
2. THE TRANSACTION
Following the implementation of the scheme, all of the linked units will be
delisted from the JSE Securities Exchange South Africa (JSE), and the assets,
liabilities and businesses of AMB Partners shall be sold to three new en
commandite partnerships which have been established by AMB Partners and the
Remaining Investors (the Partnerships) for a purchase consideration based on
net asset value. Thereafter, AMB Partners will implement a repurchase of the
linked units held by the Remaining Investors, with the effect that the interests
in the Partnerships shall be held by AMB (through its then wholly-owned
subsidiary AMB Partners) and the Remaining Investors pro rata to their linked
unitholdings subsequent to implementation of the scheme.
The scheme, the sale of the AMB Partners businesses to the Partnerships and
the repurchase of the linked units described above are hereinafter collectively
referred to as the transaction.
3. RATIONALE FOR THE TRANSACTION
AMB has identified private equity as a strategic area of business and wishes
to increase its exposure to private equity investments held through unlisted
vehicles. AMB is of the opinion that it has the expertise and experience to
exploit and develop private equity investments in order to maximise the returns
accruing to the investors in such assets. AMBs primary motivation in proposing
the scheme is to increase its interest in private equity activities and provide
liquidity for those linked unitholders wishing to exit.
Private equity investments generally have long life spans between investment
date and realisation, during which period assets are recorded at cost or an
appropriate valuation. This may create the impression of no or low growth within
the asset base of the private equity fund over the investment period. The long
term nature of investment in, and disinvestment of, private equity assets is not
suited to review on a short term asset management basis, where performance is
measured quarterly. Furthermore, from an operational perspective, conducting
private equity investment activities in an unlisted environment provides for
more flexibility. It is therefore clear that private equity funds are more
suited to an unlisted environment.
A main objective for the listing of AMB Partners had been to assist AMB
Partners to raise capital for further investments and expansion and to provide
liquidity in the linked units. Due to the depressed equity markets, which have
persisted since 1999, and the illiquid nature of the linked units, these
objectives have not been achieved. The listing on the JSE has furthermore
created a degree of investment inflexibility, which coupled with the costs of
listing, has impaired the overall value of linked unitholders investments.
Accordingly, it is considered appropriate for AMB Partners to delist, with the
scheme providing an exit opportunity for a large portion of AMB Partners linked
unitholders.
4. THE SCHEME
Subject to the fulfilment of the conditions precedent set out in paragraph 5
below, AMB intends to propose the scheme between AMB Partners and its linked
unitholders, excluding AMB and the Remaining Investors. Pursuant to the scheme,
AMB intends to acquire 20 623 634 linked units, representing 39,7% of AMB
Partners issued capital, from the scheme participants for a total consideration
calculated on the basis of the deferred scheme consideration of R268,1 million.
This will increase AMBs interest in AMB Partners to 74,5%. The proposed terms
of the scheme are set out below.
4.1 The scheme participants will (unless they validly and timeously elect to
receive the deferred scheme consideration) receive the initial scheme
consideration consisting of a cash payment of R12,25 per linked unit, to be
discharged as follows:
4.1.1 an amount of R4,00 per linked unit will be paid by AMB in cash (the
first payment) on or about the date of implementation of the scheme
(implementation date), which is expected to be Monday, 21 July 2003; and
4.1.2 an amount of R8,25 per linked unit (the discounting consideration)
will be paid by AMB in cash on or about the implementation date. AMB will access
this amount from Nedbank Limited (Nedbank) in consideration for the sale of
the first promissory note and the second promissory note, as defined in
paragraph 4.2 below, and as described in more detail in paragraph 4.5.
4.2 If scheme participants validly and timeously elect by 12:00 on the record
date of the scheme not to receive the initial scheme consideration described in
paragraph 4.1, they will instead receive the deferred scheme consideration of
R13,00 per linked unit, to be discharged as follows:
4.2.1 an amount of R4,00 per linked unit will be paid by AMB in cash on or
about the implementation date, such amount being the first payment as defined;
4.2.2 an amount of R4,50 per linked unit, plus interest accruing thereon
at an interest rate equal to the weighted average yield to maturity on the
Republic of South Africa Government Bond Code R153 as quoted on the Reuters /
Safey screen for the record date of the scheme, nominal annual compounded
annually in arrears (notwithstanding that such rate is quoted as a nominal
annual compounded semi-annually rate) (R153 rate), for the period from the
implementation date to the payment date, will be paid by AMB on 30 September
2003 (the second payment). The obligation to effect this payment will be
evidenced by a promissory note issued by AMB (first promissory note); and
4.2.3 an amount of R4,50 per linked unit, plus interest accruing thereon
at the R153 rate plus 50 basis points, over the period from the implementation
date to the payment date, will be paid by AMB on 30 September 2004 (the third
payment). The obligation to effect this payment will be evidenced by a
promissory note issued by AMB (second promissory note).
The first promissory note and the second promissory note are
hereinafter collectively referred to as the promissory notes.
4.3 It is a term of the scheme that in the event that no valid election is
made timeously by a scheme participant, such scheme participant will be deemed
to have elected to receive the initial scheme consideration.
4.4 Scheme participants who elect to receive the deferred scheme
consideration should note that the obligations of AMB to make payment in terms
of the promissory notes are secured. The security structure utilised involves a
guarantee issued by Main Street 135 (Proprietary) Limited (Main Street 135), a
wholly-owned subsidiary of AMB, to the holders of the promissory notes in
respect of AMBs obligations thereunder. AMB has in turn provided Main Street
135 with an indemnity against any claims instituted by the holders of the
promissory notes under the guarantee. AMBs obligations in terms of the
indemnity are secured by a cession and pledge of up to 49,9% of the issued
linked units of AMB Partners, and such additional assets as are necessary to
provide the holders of the promissory notes with one times cover calculated on a
net asset value basis. Should there be a default on the payment of a promissory
note, the effect of this security is that the holders of the promissory notes
will be entitled to receive the proceeds from the realisation of the pledged
linked units and such other additional assets as have been ceded or pledged on a
pro rata basis.
Scheme participants who elect to receive the deferred scheme consideration
should be aware that, as a result of the nature of the security described above,
enforcing such security may be a time consuming (and not straightforward)
exercise. The circular to AMB Partners linked unitholders, referred to in
paragraph 12 below, will contain detailed information regarding the security
arrangements in respect of the promissory notes.
4.5 Nedbank has agreed to provide a once-off discounting facility on the
implementation date to scheme participants who do not validly and timeously
elect to receive the deferred scheme consideration, and to discount the first
promissory notes and the second promissory notes for a consideration of R8,25
per linked unit payable in cash. AMB has entered into a separate agreement with
Nedbank regarding the security to be granted to Nedbank for AMBs obligations in
terms of the promissory notes held by it, with the result that the promissory
notes held by Nedbank are not subject to the security arrangements set out in
paragraph 4.4 above.
4.6 Nedbank has provided the Securities Regulation Panel (SRP) with written
confirmation that it has sufficient cash resources available to satisfy the
discounting consideration. AMB has provided the SRP with written confirmation
that it has sufficient cash resources available to make the first payment.
4.7 Subject to the fulfilment of the conditions precedent, application will
be made to the JSE for the delisting of the linked units with effect from the
commencement of business on the day following the date on which the scheme is
implemented, which date is expected to be Tuesday, 22 July 2003.
5. CONDITIONS PRECEDENT
The scheme and the transaction are subject to the fulfilment of the following
conditions precedent:
5.1 the ordinary resolutions necessary to approve and implement the
transaction being approved by the requisite majority of AMB shareholders in
general meeting;
5.2 the scheme being approved at the AMB Partners scheme meeting by a
majority representing not less than 75% (three-fourths) of the independent votes
exercisable by the scheme participants, present and voting either in person or
by proxy, at the scheme meeting;
5.3 the Court sanctioning the scheme;
5.4 a certified copy of the Order of Court sanctioning the scheme being
lodged with, and registered by, the Registrar of Companies in terms of the Act;
5.5 any other regulatory approvals or consents necessary to implement the
transaction being obtained, including but not limited to approvals and consents
from the JSE, the SRP, the Competition Commission and the Exchange Control
Department of the South African Reserve Bank; and
5.6 the relevant signed agreements regulating the transaction other than the
scheme (including sale, partnership, management, security and discounting
agreements) becoming unconditional.
6. PRO FORMA FINANCIAL EFFECTS - AMB PARTNERS
The pro forma financial effects have been based on the published audited
results of AMB Partners as a company for the year ended 30 September 2002. The
pro forma financial effects have been provided for illustrative purposes only,
and because of their historical nature, may not be a true reflection of the
effects of the scheme. The pro forma financial effects have not been provided on
a consolidated basis, as it is believed that, due to the nature of AMB Partners
operations, this would not accurately reflect the effects of the scheme on
scheme participants.
6.1 The table below sets out the pro forma financial effects of the scheme on
a scheme participant who accepts the initial scheme consideration:
Before After
the scheme the scheme Change
(cents) (cents) (%)
Market price
* 11 November 2002(1) 950 1 225 28,9
* 30 day weighted average(2) 950 1 225 28,9
* 21 May 2003(3) 1 165 1 225 5,2
Net asset value per linked unit (NAVU) 1 606(4) 1 225 (23,7)
Tangible NAVU 1 606(4) 1 225 (23,7)
