| Tue 27 May 2003, 17:58 | | Amb / Amb Partners - Firm Intention Announcement |
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Amb / Amb Partners - Firm Intention Announcement
Release Date: 27/05/2003 17:23:43 Code(s): AMB APP
AMB / AMB Partners - Firm Intention Announcement
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. AMB"s 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 AMB"s 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 AMB"s 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. AMB"s 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 AMB"s 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)
Headline earnings per linked unit ("HEPU") 118(4) 86(5) (27,1)
Earnings per linked unit ("EPU") 118(4) 86(5) (27,1)
6.2 The table below sets out the pro forma financial effects of the scheme on
a scheme participant who accepts the deferred scheme consideration:
Before After
the scheme the scheme Change
(cents) (cents) (%)
Market price
* 11 November 2002(1) 950 1 300 36,8
* 30 day weighted average(2) 950 1 300 36,8
* 21 May 2003(3) 1 165 1 300 11,6
NAVU 1 606(4) 1 300 (19,1)
Tangible NAVU 1 606(4) 1 300 (19,1)
HEPU 118(4) 94(6) (20,3)
EPU 118(4) 94(6) (20,3)
Notes:
1. The closing price of the linked units on the last trading day prior to
publication of the first cautionary announcement, being 12 November 2002.
2. The weighted average traded price of linked units over the 30 trading days up
to the publication of the first cautionary announcement, being 12 November 2002.
3. The closing price of the linked units on the last practicable date prior to
the finalisation of all relevant documentation, being 21 May 2003.
4. Extracted from the published annual audited financial statements of AMB
Partners for the year ended 30 September 2002.
5. Calculated as if the scheme had been implemented on 1 October 2001, and on
the basis that the initial scheme consideration of R12,25 per linked unit in
cash had been invested at a post-tax interest rate of 7% for the twelve month
period ended 30 September 2002.
6. Calculated as if the scheme had been implemented on 1 October 2001, and on
the basis that the deferred scheme consideration of R13,00 per linked unit in
cash had been invested at a post-tax R153 rate of 7,17% on the first promissory
note and 7,52% on the second promissory note for the twelve month period ended
30 September 2002.
7. PRO FORMA FINANCIAL EFFECTS - AMB
7.1 The pro forma financial effects calculations are based on the published
consolidated audited financial statements of AMB for the year ended 30 September
2002 and the published consolidated audited financial statements of AMB Partners
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 effect of the transaction.
7.2 The pro forma financial effects of the transaction are illustrated in the
table below:
Before(1) After(2) Change
(cents) (cents) (%)
Loss per share ("LPS") (141) (141)(3) -
Headline loss per share ("HLPS") (125) (110)(3) 12,0
Net asset value per share ("NAV") 906 906(4) -
Tangible NAV 906 807(4) (10,9)
Fair value NAV 906 1 034(5) 14,1
Notes:
1. Extracted from the published consolidated audited financial statements of AMB
for the year ended 30 September 2002.
2. The pro forma financial effects have been calculated on the following bases
and assumptions, namely that:
* no potential deferred tax asset arising from the transaction was
recognised;
* negative goodwill arising from the transaction was not amortised due to the
immaterial effect of such amortisation;
* to determine goodwill arising from the transaction, it was assumed that the
book value of the assets and liabilities of AMB Partners approximated fair
value; and
* the financial effects of the repurchases of AMB shares as set out in the
announcement published by AMB on 29 April 2003 were not taken into
consideration.
3. The calculations of the pro forma LPS and HLPS have been based on the
following assumptions, namely that:
* the transaction was effective from 1 October 2001;
* the interest forfeit in respect of the first payment was calculated at a
post tax interest rate of 7%;
* the interest payable on the promissory notes was calculated using the
applicable interest rates on a post tax basis; and
* the group financial results of AMB Partners were consolidated with those of
AMB from 1 October 2001.
4. The calculations of the pro forma NAV and tangible NAV have been based on the
following assumptions, namely that:
* the transaction was effective on 30 September 2002; and
* the group financial results of AMB Partners were consolidated with those of
AMB at 30 September 2002.
5. The calculation of the pro forma fair value NAV has been based on the
following assumptions, namely that:
* the transaction was effective on 30 September 2002; and
* the company financial results of AMB Partners reflecting the fair value of
AMB Partners" investments, were consolidated with those of AMB at 30 September
2002.
8. WORKING CAPITAL STATEMENT
The directors of AMB are of the view that for a period of at least twelve
months after implementation of the transaction:
* AMB and the AMB group will be able in the ordinary course of business to
pay their debts;
* the assets of AMB and the AMB group will be in excess of the liabilities of
AMB and the AMB group;
* the ordinary capital and reserves of AMB and the AMB group will be adequate
for the purpose of AMB"s and the AMB group"s businesses, respectively; and
* the working capital of AMB and the AMB group will be adequate for their
requirements.
9. RECOMMENDATIONS, OPINIONS AND UNDERTAKINGS
9.1 KPMG Services (Proprietary) Limited, as the independent financial adviser
to the AMB Partners" board of directors, has advised the board of directors of
AMB Partners that it has considered the terms and conditions of the scheme and
is of the opinion that the terms and conditions of the scheme are fair and
reasonable to scheme participants.
9.2 The independent members of the board of directors of AMB Partners have
considered the terms and conditions of the scheme and are of the unanimous
opinion that the terms and conditions of the scheme are fair and reasonable to
scheme participants. Accordingly, the independent members of the board of
directors of AMB Partners recommend that linked unitholders vote in favour of
the scheme. The directors of AMB Partners who are linked unitholders intend to
vote in favour of the scheme in respect of the linked units that they hold.
9.3 In terms of the Listings Requirements of the JSE and the rules of the
SRP, AMB and the Remaining Investors will not vote at the meeting of AMB
Partners linked unitholders to be convened for the purposes of considering the
scheme ("the scheme meeting"). Irrevocable undertakings to vote in favour of the
scheme have been obtained from linked unitholders holding in aggregate 83,8% of
the linked units which are eligible to be voted at the scheme meeting.
9.4 The board of directors of AMB is unanimously of the opinion that the
terms and conditions of the transaction are fair and reasonable to the AMB
shareholders. Accordingly the board unanimously recommends that AMB shareholders
vote in favour of the resolutions to be proposed at the general meeting to be
convened to approve and implement the transaction ("AMB meeting"). Each of the
directors of AMB intends to vote in favour of the resolutions to be proposed at
the AMB meeting in respect of all of the AMB shares held by them and which they
are entitled to vote in their personal capacity. Irrevocable undertakings to
vote in favour of the transaction have been obtained from the holders of 44,1%
of the issued share capital of AMB.
10. SALIENT DATES AND TIMES
2003
Last day to trade AMB Partners linked units on the JSE in
order to be recorded in the register on the record date of the
scheme meeting (which will entitle a linked unitholder to
vote at the scheme meeting) Thursday, 19 June
Record date of the scheme meeting Thursday, 26 June
Last day to lodge forms of proxy for the scheme meeting
(by 08:30) (Date and time subject to Court approval) Friday, 27 June
Last day to lodge forms of proxy for the AMB meeting
(by 10:00) Friday, 27 June
Scheme meeting held (at 08:30) (Date and time subject to
Court approval) Monday, 30 June
AMB meeting held (at 10:00) Monday, 30 June
Publish results of scheme meeting and AMB meeting on
SENS (expected date) Monday, 30 June
Publish results of scheme meeting and AMB meeting in
the press (expected date) Tuesday, 1 July
Court hearing to sanction the scheme meeting (at 10:00 or
as soon thereafter as Counsel may be heard in the
High Court of South Africa (Witwatersrand Local Division))
(expected date) Tuesday, 8 July
Publish results of Court hearing Thursday, 10 July
Expected last day to trade linked units on the JSE in
order to be recorded in the register on the record
date of the scheme Friday, 11 July
Expected date of suspension of AMB Partners listing on the
JSE (commencement of business) Monday, 14 July
Expected date on which scheme participants will be required to
elect to receive deferred scheme consideration (by 12:00) Friday, 18 July
Expected record date of the scheme (at close of business) Friday, 18 July
Expected operative day of the scheme (implementation date) Monday, 21 July
Expected date from which the scheme consideration will be
made available or posted to certificated scheme participants
(if documents of title are received on or prior to the record
date of the scheme) or, failing that, within five business days
of receipt of the relevant documents of title by the transfer
secretaries Monday, 21 July
Dematerialised scheme participants will have the scheme
consideration credited to their account at their
CSDP or broker Monday, 21 July
Expected date of delisting of AMB Partners from the JSE
(from the commencement of business) Tuesday, 22 July
Notes:
1. Any variation of the above dates and times, approved as necessary by the JSE,
will be advised by notification on SENS and in the press.
2. Dematerialised AMB shareholders and AMB Partners linked unitholders recorded
in the register for voting must provide their CSDP or broker with their
instructions for attendance or voting at the AMB meeting or the scheme meeting,
respectively, and in the case of AMB Partners linked unitholders, with their
instructions regarding whether they wish to receive the deferred scheme
consideration, in the manner stipulated in the custody agreement governing the
relationship between such AMB shareholders and/or AMB Partners linked
unitholders and the CSDP or broker. These instructions must be provided to the
CSDP or broker by the cut-off time and date advised by the CSDP or broker for
instructions of this nature.
3. No dematerialisation or rematerialisation of AMB Partners certificates will
take place after Friday, 11 July 2003.
11. AMB MEETING
A general meeting of AMB shareholders will be convened to be held at AMB"s
registered offices, situated at 18 Fricker Road, Illovo, Sandton on Monday, 30
June 2003 at 10:00, at which the resolutions necessary to approve and implement
the transaction will be considered. A circular containing full details of the
transaction and incorporating a notice of general meeting will be posted to AMB
shareholders on or about 5 June 2003.
12. SCHEME MEETING
A scheme meeting of AMB Partners linked unitholders will be convened by the
Court at a date and time to be approved by the Court, at which the resolutions
necessary to approve and implement the scheme will be considered. A circular
containing full details of the scheme and incorporating a notice of scheme
meeting will be posted to linked unitholders in due course.
27 May 2003
Illovo
Corporate adviser and joint sponsor
AMB Advisory Services Limited
Registration number 1996/016470/06
Lead sponsor
Deloitte & Touche Sponsor Services (Pty) Ltd
(Incorporated in the Republic of South Africa)
(Registration number 1996/000034/07)
Legal adviser
Webber Wentzel Bowens
Independent adviser to the AMB Partners board of directors
KPMG
Auditors and reporting accountants
Deloitte & Touche Chartered Accountants (SA)
Registered accountants and auditors
